• Look for a plan. Is there legal or financial involve - ment? Figure out the value of all estates involved and follow the money. • What is the timing of the distributions of any trusts involved? • Watch for coverage on other family members such as grandparents, parents, other siblings, etc. • If the inheritance is years down the road, this is a riskier proposal as family dynamics can change. Business valuations for start-ups can be tricky: • Are they covering an investment? A loan? Whom are they paying back? • Do they have a current business plan and pro forma financial statements? What is their prior experience in this field or business? Do they have any special skills or patents? • What is the nature of the funding? Equity vs. debt. If it is a loan, what are the details of the loan agreement? We usually think of the purpose of life insurance in its traditional sense of a financial loss. However, now it is not just about financial loss. There are tax advantages as well, including assets and wealth transfer. Things to consider:
• Breakdown of individual assets including liquid assets. • Assets that are not needed for other purposes such as living expenses. • If the case is rated, check the new premium. Does the case still make sense? As individuals are living longer and life expectancy is increasing, we are seeing more older age underwriting cases. These can be challenging to underwrite and can include several co-morbid conditions in many of these cases. Some considerations when underwriting the older ages: • Age and timing of the sale. Why are they applying now? What is their life expectancy? • Affordability. In some of these cases, there will be additional mortality charges as they go up with age and if table-rated. Is this still an affordable transaction for the applicant? • Who is the beneficiary, owner and payor? Are the children paying the premium? If so, why? Can the applicant afford the coverage? In conclusion, we need to do our due diligence in these scenarios and many times think outside the box when underwriting these non-traditional underwrit- ing needs.
About the Authors Tracy Sundstrom, FALU, FLMI, CLU, ACS, AIAA, is an Executive Underwriting Consultant for Prudential in Minneapolis, MN. Anne Bunkers works at Prudential Insurance Company, serving as an Executive Underwriting Consultant. Anne is a Certified FALU and has obtained her FMLI, ACS and ARA designations. She currently serves as co- education representative at her company and is on the Education Committee for AHOU. She is active in the local Twin Cities Home Office Underwriters Association and attends various medical presentations in her area. Anne lives in Bayport, MN, with her husband and has two adult children. She is a cribbage player and an avid quilter, having donated quilts to various charities and organizations. She enjoys spending free time with family and friends from the St. Croix Valley.
ON THE RISK vol.40 n.3 (2024)
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