Growing Pains: Life Insurance & Startups
Situation: A business case goes south, despite a healthy insured who wants and can afford the coverage. The proposed insured is the owner of newly established business that develops apps for smartphones and tablets and was previously a senior executive at a large tech company earning a 6-figure income.
Problem: The carrier will not issue the face amount requested. Typically, carriers will not offer key person or buy-sell coverage for a business in the first few years of operation because the majority of new business startups do not survive in the long term.
Solution: The DBS advanced marketing resource reached out to the financial representative to discuss the difficulty involved with underwriting life insurance for a newly established business. Specifically, that such cases usually require a detailed cover letter in which you must effectively sell the underwriter on the viability of that business. The content of the cover letter often needs to include a bio of the insured and the business, as well as the business marketing plans. Essentially, the kind of financial information needed by a carrier to underwrite a life insurance case for a new business is very similar to the type of information needed to acquire a business loan from a bank.
Gathering sufficient data to financially justify a new business start-up case can be difficult, but the DBS resource suggested an alternative solution. Specifically, that a carrier often finds it easier to approve personal insurance coverage for the family’s benefit.
Result: The client agreed to proceed using the personal insurance approach, and the carrier approved the coverage.
