An Overview Of The Policy Design, Underwriting, And Planning Process
The policy design process is where I design a custom life insurance policy for you. The underwriting process is where you and I (and the insurance company) figures out whether you qualify for life insurance and, if you do, how much. Once completed, your custom life insurance policy will be incorporated into your existing financial plan.
It all starts with underwriting.
Underwriting involves both financial underwriting (to determine your income, assets, and ability to pay premiums) and also medical underwriting (to determine whether you are healthy enough to have insurance and what risk rating will be applied to your policy). This underwriting process is also where I design your custom life insurance policy and incorporate that policy into your existing financial plan in a way that makes sense for you.
Before you start the underwriting process, please understand... you are under no obligation to become a client. In fact, I want to get to know you first before committing myself.
So, if you haven't already joined my email list, please start by doing that. You can sign up here.
Since life insurance (and all of financial planning, really) creates a long-term commitment on both your part and my part, I want to know that we'll work well together before I offer you my services. I also want you to get to know me first before you buy a policy from me, and the best way to do that is for you to get acquainted with me via my daily email list, the Monegenix® Media Learnistic app, and my Babbleon Social Lair forum.
Don't want to join my daily email list? Don't want to get to know me? Just want a simple quote for some cheap term life insurance? That's fine, too. There are plenty of other life insurance agents in the U.S. who don't care about that sort of thing, and will sell a policy to anybody.
I am not one of them.
So, assuming you're already on my email list, and you want to know more about the underwriting process, here's what you can expect when doing business with me...
The First Meeting (Fact-Finder, Initial Planning, and Field Underwriting Process)
The first step in the life insurance planning process is for me to get to know you a bit by asking you some questions about your finances and your short and long-term financial goals. Next, I'll figure out your Human Life Value and how much life insurance you need to buy (as well as how much premium you need to fund your policy with) to achieve long-term financial security. Finally, I'll do some field underwriting with you to get a sense of what you might qualify for.
From there you can decide how much you want to insure your life for, along with how much premium you want to pay into your policy.
If the general idea sounds good to you, we move onto the next step.
What life insurance companies do I use?
For custom high cash value whole life insurance policies, I will generally choose among the 4 old mutual life insurers in the U.S. that allow independent brokers to write business with them:
- Penn Mutual
- The Guardian
- Mass Mutual
- New York Life
The Custom Whole Life Policy Design Process
Because of the time involved in designing custom whole life insurance policies, I no longer offer free quotes or policy designs. If you're looking to "shop around", that's fine. There are a lot of life insurance agents still offering free quotes these days. But, it's not the way I do business.
Where To Get Additional Information About The Custom Whole Life Policies I Sell And See "The Numbers".
You can get an idea of how my custom whole life policy designs work and function by watching the Life Insurance AmateurClass video series, available exclusively on the Monegenix Media Learnistic app (for iOS and Android devices). Access to the Monegenix Media app is free when you join my email list. The Life Insurance AmateurClass contains a comprehensive sample policy illustration walkthrough (timestamped) as well as a comprehensive sample life insurance contract walkthrough. Combined, it is the most comprehensive information about custom whole life insurance available anywhere on the Internet.
Once you've decided to buy a custom whole life policy from me, I'll start the policy design process and set up the online application for you.
Access to this online application will be given to you via a special secure email. The email will contain a link you must click on. Once you click on the link in the email, it will take you to a registration page where you will register for a policyholder client portal, and then fill out the application.
You will have an opportunity to review your application, as well as the initial custom policy design, before signing and submitting it to the life insurance company.
Once the application has been filled out, I will review the application and then send it back to you to digitally sign. Once you've signed, it will be sent to me to sign and then it will be submitted to the life insurance company for processing.
Applications are processed every day. An initial underwriting assessment by the life insurance company will be made, usually within hours of submitting the application. This initial assessment may be a conditional approval (which will be formally approved, usually within the week and sometimes the same day), a notification that further underwriting is needed, or a rejection.
If your application for life insurance is approved as applied for, you still have an opportunity to reject the policy for any reason. The life insurance company may also make a counteroffer, which usually involves either a better-than-applied-for rating, or a worse-than-applied-for rating, including a substandard rating. Either way, some adjustments may need to be made based on the underwriting that was done. For example, if I quote you a standard rating, but you're approved as preferred or as substandard, then I will adjust your policy accordingly to reflect your risk rating.
If further customizations are needed to optimize your policy's performance or the flexibility of the policy, I will make these adjustments once you have been approved by the insurance company.
The final policy design will give you significant control over how much premium you pay and will also allow you to temporarily stop or reduce premiums. It will also include a provision to stop paying premiums at any time and elect a paid-in-full policy. Your policy will also include non-forfeiture options that will prevent your policy from lapsing as long as there is cash value available to pay the minimum required premium payment. Finally, your custom whole life policy will have a "nuclear option" which will automatically use the remaining cash value in the policy to create a paid-in-full policy if premiums cannot be paid by any other method.
These design elements are there to protect you, and to keep your insurance policy in force forever, no matter what happens to me or you.
This custom whole life insurance policy may go through several iterations and will change (improve) over time after you own it (just like a nice bottle of wine). Typically, the majority of changes occur in the first few years of your policy, and may include switching premiums from monthly premium mode to annual mode. Changes may also include dropping certain riders or activating certain riders to allow the policy to function as it was originally intended.
This is why the questionnaire, and resulting policy design process, is so important.
The more information I have, the better your life insurance plan will be. My whole life insurance contracts generally require extensive customization and planning both before the policy is issued, and after. But don't worry. I do all of that behind the scenes. You just sit back and enjoy the ride.
Term insurance plans require periodic monitoring, which I do for free for as long as you're a client. I also monitor the term insurance conversion option to help you recover as much of your premiums as possible if you outlive your term plan.
Once the custom design process is finished, the policy illustration will be uploaded to a document gateway that is accessible to you during the application process. It will also be available to you after the policy is issued via your client portal.
The Formal Underwriting And Application Process
I always set up a digital application for my clients. Everything is filled out and submitted online. There are two basic parts to most applications that you are responsible for filling out. The first part is a series of general information collection forms. The second part is a health or medical questionnaire.
Part I of the application will ask you about the basics: your name, age, telephone number, Social Security Number, address, date of birth, your sex, marital status, and where you work or what you do for a living.
The application also asks you about the amount of insurance you want to buy, the type of policy, the name of your beneficiaries, and other insurance policies you own or applications you have pending with other insurers.
The insurer may also ask about your hobbies and whether you engage in any dangerous activities like auto racing, cliff diving, sky diving, rock climbing, and so on. The insurer wants to know if you travel a lot, if you are a pilot, or if you're currently on active duty in the military.
And… oh yes… they want to know if you smoke or use tobacco products of any kind.
The second part of the application is about your health and will ask you about your health history, your family's health history, and about any medical problems you are currently being treated for. It will ask about medications you're currently taking as well as any vitamins or other supplements you're taking.
Most clients of mine use an accelerated underwriting and application process. Accelerated underwriting is different from "simplified underwriting."
Kinda of sounds like you're cheating on your insurance company with another insurance company, doesn't it?
Back dating allows you to be underwritten as though you are a younger age than you really are. The insurance company allows you to back-date a policy up to 6 months or even a year. This means if you just had a birthday or if your birthday is coming up in a few months, you can ask the insurer to underwrite you as though you were a year younger.
This gets you a lower premium for the rest of your life, but it can also potentially improve cash value and death benefit growth of your policy.
But, nothing is free.
You must pay all back-due premiums and then pay your next premium on the policy anniversary date. So, if it is the end of June, and you back-date your policy 6 months, you will owe 6 months of premiums. Additionally, your next premium will be due every year in January, since you back dated your policy to January (6 months from the end of June).
If you're paying monthly, your policy anniversary is now in January and you pay 6 months of back dated premiums, then pay current premiums to December, and then start making the next year's premiums in January.
Accelerated underwriting is a fully-underwritten policy where the insurance company uses advanced data analytics and artificial intelligence to predict your risk of death, and any other risks you may pose to other policyholders of the insurance company.
Usually, this results in a faster (as fast as 24 hours) and more accurate risk assessment than traditional underwriting. There is no formal medical exam, no blood and urine collection, and no attending physician's statement, and no waiting for a result. Meaning, your policy can be underwritten and issued in as little as one day (24 hours).
For some policies, accelerated underwriting can take between 2 and 4 weeks.
If the insurance company cannot underwrite you using accelerated underwriting process, they will send it to traditional underwriting for review. At this stage, the insurer may require you to go through the conventional underwriting process.
The Medical Exam And Report
If the insurer requires a medical exam, you can usually take it at a location of your choosing, provided it's done by a qualified healthcare practitioner. The practitioner usually must be either a doctor, nurse, or nurse practitioner. The insurance company pays for the cost of your exam so you never see a bill.
How To Prepare For Your Medical Exam And What To Expect
There are several parts to the medical exam.
The Non-Medical Exam
This exam is basically just a questionnaire and is included as part of the larger overall medical examination. The nurse will collect basic information about your medical history and may include more in-depth questions about the medications you take.
A Paramed Exam
This is where a nurse collects your full medical history, including height, weight, blood pressure, and pulse.
A nurse will check your heart and lung function, draw a blood sample, collect a urine sample, and possibly perform several other tests depending on your age and how much insurance you're applying for.
How to prepare for your exam:
- Make sure you have a good photo ID available (i.e. a driver's license or government ID with photo).For all blood tests, fast for at least 4 hours before the blood draw. Ideally, you would fast for 8 hours - this will give the insurer the most accurate information. Drinking water is fine. No sugared/flavored water. No soda/pop. Not even vitamin water. Just. Water. Plain 'ole water… from a tap or filtered water from a bottle.
- Tell the examiner about any medications or vitamins (or anything else) you're taking. Many years ago, there was a client taking some brand of cough medicine, and they tested positive for cocaine despite never having touched the stuff. So... tell your examiner if you are taking any OTC medications (or anything else, really).
- For all blood tests, fast for at least 4 hours before the blood draw. Ideally, you would fast for 8 hours - this will give the insurer the most accurate information. Drinking water is fine. No sugared/flavored water. No soda/pop. Not even vitamin water. Just. Water. Plain 'ole water… from a tap or filtered water from a bottle.
- For all urine tests, drink a glass of water one hour before the exam.
- Bring a list of any medications (and other vitamins or supplements) you currently take. You need to give the nurse the name, dosage, frequency, and so on. Basically, everything you take, when you take it, and how much.
- Bring the name of your attending physician, his or her address, zip code, telephone number, and the last time you went in for a visit and why.
- Schedule your appointment for the least stressful time of the day. Tests can really freak people out sometimes. Even if you love having your blood drawn and urine collected by a stranger, the best results will come when you're calm and at peace with the world. Early morning is usually best, but choose a time you think will work for you.
- Get a solid 8 hours of sleep before your exam.
- You don't have to take your clothes off. It's… not that kind of exam. But, you should wear a short-sleeved shirt or something that makes it easy to draw your blood.
- I'll try to say this in the most polite way I can… if you are over 300 pounds, please let the testing center know that you'll need a special blood pressure cuff and a scale to measure your weight. It's no biggie, but they have to know beforehand so they can pull the equipment if they don't have it on-site.
- If you are a senior citizen (over age 71), you get a special Senior Exam, which will involve tests for mobility, cognitive ability, and a few other questions.
- Do not drink any caffeine (coffee, soda, tea) for at least 3-4 hours before the exam.
- Do not smoke or chew tobacco for at least one hour prior to the exam.
- Do not drink any alcohol for at least 8 hours before the exam.
- Do not use any nasal decongestants.
- Do not engage in strenuous exercise for 24 hours before the exam.
All of these things can mess up the exam results and give the insurer a false picture of your current health.
Once your medical exam is done, it's sent to the insurance company and is reviewed by the company's medical director or associate.
You can also request a copy of your medical report, usually at no cost to you. This will include your blood, urine, and other medical tests the insurer ordered.
Speaking of medical tests, here's what the insurance company typically looks for:
Blood Profile and Urinalysis (Blood / Urine Exam)
A nurse or nurse practitioner will collect blood and urine from you, label it, and send it to a testing facility.
The insurance company screens you for:
- Cholesterol and other blood lipids,
- Blood sugar (including HbA1c,
- Liver and kidney function,
- Illegal drug use (although they aren't looking to report you to the police… they're interested solely in how it impacts their ability to underwrite you for insurance).
Based on these initial tests, more tests may be needed.
The medical lab sends all results directly to the insurance company, but again, you may request a copy of those results from the insurer. Results are valid for up to 6 to 12 months, depending on the insurance company, which means you can buy multiple policies within that timeframe and not need another exam.
Your Physical Measurements
Nurse will record your height, weight, blood pressure, and pulse rate. All results are sent directly to the insurance company and you may request a copy of these results.
These results are good for between 6 months and 2 years, so you can use them again for any future life insurance purchases within that timeframe.
The medical examiner or nurse will swab your cheek and gum for 2 minutes to collect fluids for HIV, cocaine, and nicotine screening.
These results are sent directly to the insurance company, you can request a copy of them, and the results are good for between 6 months and 2 years, depending on the insurer.
Resting Electrocardiogram (ECG)
If you are over a certain age, the insurer may request an ECG. It's painless. The nurse simply monitors the electrical activity of your heart and may also do a treadmill stress test.
The results are sent to the insurer, you may request a copy of the results, and they are good for between 6 months and 12 months, depending on the insurance company.
Rx Pharmacy Prescription Check
The life insurance company will run a prescription check with a pharmacy database program to verify all prescription drugs you're currently taking.
The insurer will check the MIB for existing information about you.
No, not the Men In Black.
The Medical Information Bureau (MIB) is where insurers can collect information about your medical history (with your permission). It is a sort of data repository set up by insurance companies. But… it is also a nonprofit agency so they aren't selling your information. It is only used by underwriters at insurance companies.
The stated purpose of the MIB is to help hold down the cost of life and health insurance (including disability insurance) by minimizing and preventing misrepresentation and fraud.
For example, if an insurance company discovers an applicant has a physical illness, the insurer can report this information to the MIB so that other insurers will be notified if that same applicant tries to apply to another insurer. This is especially useful for insurers when an applicant has a terminal or chronic illness which would preclude them from buying insurance.
Financial And Other Special Questionnaires
Sometimes, an insurance company needs more information than what's on the standard application.
Yay! More paperwork.
When necessary, an insurer might require some additional information to verify your income and assets (especially if you have a large estate). You may be asked to fill out a financial questionnaire or maybe a supplemental health questionnaire. The purpose of these special questionnaires is to help the insurer better understand your financial or health status.
Sometimes, the insurer needs to know more about your hobbies, like if you're a pilot or a stuntman or if you have a foreign residence, or if you are in the military.
Some occupations are more dangerous than others and the insurer wants to know what it's getting itself into before it issues a policy.
An inspection report is necessary when you apply for very large amounts of life insurance. Normally, insurers will get these reports from national investigative firms. The insurance company wants to know about your general character and reputation, where you make most of your money, and whether you engage in any unusual or potentially dangerous hobbies.
Most people's insurance needs do not trigger an inspection report.
Credit Reports And Ratings
Basically, the insurance company does not want you to lapse your policy because it actually costs them money (a lot of money) to underwrite you. Generally, an insurer's expenses for issuing a policy cannot be recovered in a few years. In some cases, especially with permanent life insurance policies, it can take 10 or more years for an insurer to realize a profit. Obviously, they cannot afford to have a bunch of policyholders lapse their policies in the first 5 years.
So, if you're a high credit risk, an insurer might decide to either charge you more money or decline your application altogether.
Motor Vehicle Report
The insurance company verifies your driving record by pulling a motor vehicle history report. Why do this? The insurer wants to know if your driving habits are considered "risky." Just another piece of the puzzle.
The insurer verifies all information you and I put down on the application. They do this by doing a supplemental health questionnaire on the phone with you.
These telephone interviews usually don't take too long. Questions are used to verify information you've already put on the application, to collect missing details, and to gather any supplemental information the underwriter needs.
Risk Classes And Table Ratings
Once the underwriter has combed through all this data, he or she assigns you a risk class and makes an offer for life insurance coverage.
"Risk class" refers to a formal classification an underwriter makes when determining your risk profile.
Based on what the underwriter discovers during the underwriting process, you're rated as either a standard risk, a preferred risk, or a substandard risk, and… as either a smoker or non-smoker, and… as a male or female (duh).
Standard risk is, more or less, what it sounds like. It is a "normal" or "average" risk for the insurer. Most people who buy life insurance are standard risks and thus receive the standard risk class and premium rates.
A preferred risk is a better than average risk… meaning the insurance company takes less risk than a standard risk by insuring this person. And… the person being insured pays a lower than average premium for the life insurance policy.
Insurance companies often have different sub-classes in the preferred risk classification. These include (but are not limited to):
- Preferred Plus
- Preferred Plus Select
- Ultra Preferred
A substandard risk is a risk that is riskier than a standard risk. Most life insurance companies rate substandard risks using specialized tables. These tables might be ordered "A" through "J" or "1" through "10".
Each substandard rating corresponds with an increase in the premium rate over the standard rating.
Here are some example substandard risk ratings (your actual rating may differ from this if you are rated):
|Table Rating||Standard Rating + (%)|
|Table A (1)||+ 25%|
|Table B (2)||+ 50%|
|Table C (3)||+ 75%|
|Table D (4)||+ 100%|
|Table E (5)||+ 125%|
|Table F (6)||+ 150%|
|Table G (7)||+ 175%|
|Table H (8)||+ 200%|
|Table I (9)||+ 225%|
|Table J (10)||+ 250%|
Smoker vs Non-Smoker
Pretty simple. If you use tobacco products of any kind, the insurance company will rate you as a smoker. However, if you do not test positive for nicotine, the insurer will classify you as a non-smoker. This can happen if you only smoke very infrequently or smoke cigars on special occasions.
For example, some insurers will rate cigar smokers as "non-smokers" as long as they smoke less than 10 cigars during the year. Other insurers don't consider cigar smoking a tobacco rating regardless of the number of cigars you smoke, while other insurers will rate you a smoker if you've smoked just 1 cigar over the past 12 months.
If you smoke very infrequently, tell the paramed nurse and please let me know if you haven't already. Also, include this information on your insurance application.
Non-smokers enjoy lower rates than regular smokers.
Regular smokers in their 30s typically pay 2 to 3 times as much for premiums as non-smokers. And, smokers in their 40s and 50s pay 3 to 5 times as much as non-smokers.
Protip: if you smoke or use tobacco products… quit smoking and using tobacco products.
If you currently smoke, you can still get insurance quite easily, but you'll pay a higher premium. That's the bad news. The good news is you can quit at any time, and get re-rated 12 to 24 months later as a non-smoker.
A Word On "Teaser" Rates
Large online brokerages love to throw out "teaser rates." A teaser rate is a rate that's very, very, low and probably not one you qualify for. I do not show teaser rates. I almost always quote a standard rating for insurance. If you are comparing quotes for term insurance, keep this in mind.
Changing Your Risk Class After Initial Underwriting
Some insurers will rate you a standard risk if you have high blood pressure or on cholesterol meds as long as your condition is stable. Others will rate you substandard no matter how well your condition is managed.
However… most underwriting decisions are not final.
You can almost always go back later and have the underwriter re-rate you, usually at no cost to you. In order to get a better rating, however, something has to have changed since your initial rating.
If you are rated standard because of your "height and build," it means the underwriter believes you are probably a bit overweight and need to lose weight to qualify for a better risk class.
If you are rated for smoking, and you want a non-smoker rating, then you must quit smoking and avoid using any tobacco products (including nicotine patches and other cessation devices containing nicotine) for at least 12 months and sometimes 24 months, depending on the insurer.
If you received a table rating for diabetes, you can potentially get a standard rating if you are compliant for a certain period of time and your condition improves.
If you have high cholesterol, and are rated for it, you may be able to get a standard rating or a preferred rating if you eliminate the need for medication and your cholesterol returns to normal ranges.
Once the underwriting process is done, the insurance company will make you an offer you can't refuse - no, just kidding. You can refuse it if you want to (just see my caveat above about backing out on commitments with me before you do).
Assuming you accept their offer, you will receive an email asking you to log into your online application and document hub area.
Delivery And First Premium
Policies are delivered digitally. No paper. You'll log into your client portal, sign the delivery receipt for your policy, and download your policy (it will also be permanently stored in your client portal so you can access it there any time you want).
Once you've signed for your policy, you set up your premium payment and billing. Premiums are payable monthly, quarterly, semi-annually, or annually. You may pay your premium however you wish, but you must choose the billing option at this stage and set up your payment before the policy is considered "in force" and active.
Once I've confirmed receipt of your policy, and also confirm the first draft of your life insurance premium, you're good to go. You are now a client.
Every insurance policy has a free-look period. You are encouraged to read over your life insurance policy and… If you change your mind and don't want the policy anymore, you may send it back to the life insurance company during that free-look period and get a full refund of all premiums paid (again, keep in mind my caveat above about backing out on commitments with me before you do).
This process should not take more than 5 or 10 minutes of your time.
How Long Does The Entire Process Take?
From the first meeting you have with me, to your first premium payment, it may take anywhere from a week to 4 months (4 months is unusually long). A few factors will impact the timeline. Regardless of the timeline, I will give you my best guess estimate of how long your particular case may take.
For Accelerated Underwriting
The good news is accelerated underwriting is becoming more common. As mentioned before, accelerated underwriting is fully underwritten life insurance. It uses advanced artificial intelligence and data analytics to help underwriters dramatically speed up the underwriting process.
Straightforward cases can be done in 24 hours. More complex cases can be done in as little as a week or as long as 3-4 weeks.
For Traditional Underwriting
Traditional underwriting for most life insurance policies can take anywhere from 1 month to 3 or even 4 months. The more life insurance you buy, the more complex the life insurance plan is, or the more complex your health conditions are, the longer the underwriting process will take.
Ongoing Service And Education
The life insurance industry has a customer service problem. You are typically faced with one of 2 scenarios:
1) A life insurance agent sells you a policy and then steps out of the picture completely. You're left (mostly) on your own to get service from the life insurance company, with no real working knowledge of how your policy works.
2) The insurance agent provides "world class service", and does everything for you, but he also leaves you helpless and dependent on him for everything. You have no real working knowledge of how your policy works. If something happens to your agent, you're up a creek without a paddle.
I provide ongoing support via phone, email, and video meetings. The only limitation here is I only provide service for policies I have designed and sold to you. There is no extra charge for this service. But, unlike most other life insurance agents, I also provide ongoing education and training so you can learn (over time, at your pace) how to manage your own life insurance policy. Ultimately, the best scenario is for you——as a policy owner——to take full ownership and control over the day-to-day management of your own life insurance policy and rely on me as a consultant, agent, and advisor to help you resolve problems as they arise.
This is how it was always meant to be done, anyway. Life insurance companies always ask for the policyholder's approval on any policy changes. And, even though an insurance agent can assist, the insurance company is beholden to the policy owner/policyholder, not the agent.
A practical benefit to this is that you are not dependent on the agent to manage your policy for you, and you're not vulnerable and helpless if your insurance agent dies or retires. You have more control over your money, and learn more about the basic functions of your policy, including how to initiate policy loans and schedule loan payments, make changes to premium billing, change beneficiaries, change policy owners, perform partial surrenders, and make other less common changes to your policy.
As your insurance agent, I'm always here to help. I also make recommendations when I feel it's appropriate to upgrade, downgrade, or switch coverage and provide supplemental policy servicing at no additional charge for as long as you're a client in good standing. A client in "good standing" is a client who pays their premiums on time, and never engages in any deceptive or dishonest behavior.
While most insurers are good to my clients, I also act as an advocate for you after policy issue. In other words, I will step in and fight for you if you ever have any problems, concerns, or challenges with your insurance company, regardless of how long you've been a client.
And that's it. That's the process.
It's simple, most clients say it's painless, and most clients tell me they feel a sense of relief when it's done. They also feel more financially secure and comfortable, more in control of their future, and more "at peace" with themselves, if that makes sense.
Is Life Insurance Planning Right For You?
Hopefully this guide has helped you better understand the policy design process, underwriting, and whether life insurance planning is right for you. If you are already on the email list and you're ready to make a life insurance plan, schedule a meeting to talk about life insurance planning. If you're not on the email list yet, please join the email list before scheduling a meeting.
If you're not ready to join the email list just yet, keep reading about the different types of life insurance and which policy type is best for you...
Life Insurance Types