by Your Creative Life Sales Consultants

“You take the good, you take the bad, you take ‘em both and there you have, the facts of life.” Although these simple words are from the theme song of a beloved ‘80s sitcom, they ring just as true when considering all of the information you need to collect and keep straight as a life insurance professional. The facts of the life profession can be complex, confusing and costly if not taken into consideration when submitting cases for placement. Our team of experienced, knowledgeable Life Sales Consultants put our heads together to create this handy reference guide for answering your most frequently asked questions. We’ve got the birds and bees down pat, so call us for further explanation or help at any time.

Q: Can I complete a 1035 exchange from an annuity into a life insurance policy?

A: No. The distribution options for an annuity’s accumulated funds are limited to cash or income; they do not include conversion to a life insurance policy.

Q: Are life insurance forms updated as regularly as annuity paperwork?

A: Generally, life forms remain current longer than annuity forms.

Q: How long does a client have to be a non-smoker to qualify for a non-tobacco rating?

A: Carriers typically require a minimum of 12 months.

Q: Is a paramedical exam required for every client for every policy?

A: Typically, a paramed will be required. However, there are simplified issue and guaranteed issue policies available where that may not be the case.

Q: Are all term policies convertible?

A: No, it depends on the term plan.

Q: I have a client with health issues. Is it still possible for him to get approved for life insurance?

A: Depending on the severity of the issues, the client may indeed still be able to get approval. We’ve built strong relationships with a variety of carriers who each have different requirements for issuing policies at particular ratings, so contact us directly with case specifics for first review, first placement.

Q: Does the insured of a life policy have to be the owner?

A: As long as there is an insurable interest, the insured can be different from the owner.

Q: When are commissions paid on life cases?

A: Almost all carriers will pay out when all deliverables have been received in good order.

Q: How is target premium calculated on universal life (UL) policies?

A: The target premium is calculated using a formula that takes into account the client’s age, gender, risk class and policy face amount. Each carrier has a unique formula for these calculations.

Q: Is overfunding considered part of target premium?

A: No, overfunding will be paid as excess commission, not target.

Q: When do I need to include a cover letter?

A: To improve the underwriting process, receive the best rating for your client and streamline the placement process, you should include a cover letter with every application.

Q: Can I speak to the carrier underwriter directly?

A: It depends. Some carriers allow this, while others prefer you work through your IMO to do so.

Q: How long does the underwriting process take?

A: Carriers must receive everything they have requested in good order to make an offer. If an APS is delayed or incomplete forms are submitted, the carrier will not be able to proceed with the underwriting process.

Q: Can policy changes (e.g. ownership, face amounts) be changed during the underwriting process?

A: Yes, changes can be made but additional paperwork may be required.

Q: What is the difference between whole life and universal life?

A: Whole life generally offers a guaranteed death benefit and cash accumulation with potential dividends. Universal life offers the option of just a guaranteed death benefit, just cash accumulation or both and is designed to be more flexible in premium payments.

Q: What information is used to determine when an attending physician’s statement (APS) is necessary?

A: Carriers will review the medical information bureau (MIB) report as well as a prescription history. The MIB report indicates when a doctor visit was made, but will not include the reason behind the visit. This can lead to unanswered questions that might generate a need for an APS to be ordered.

Q: Why does it take so long to get medical information, such as an APS?

A: The APS is completed at the speed in which the doctor’s office or copy service completes it. Sometimes, if a client contacts the doctor’s office, the office will be unable to pinpoint a completion date because a copy service is handling the request.

Q: Why do carriers order a motor vehicle records (MVR) report when life insurance is only based on the health of the client?

A: Carriers can better assess a client’s propensity for risk by looking at a client’s driving history.

Q: What is a MEC and why is it important?

A: A modified endowment contract (MEC) is a class of life insurance product subject to special tax treatment. If there is cash value in a MEC plan, the cash accumulation is taxable but the death benefit is still available tax free.

Q: What is an ILIT and when is it applicable?

A: An irrevocable life insurance trust (ILIT) is created when a client wants to hold the life asset outside of his estate. This can potentially be a tax-favorable solution for passing on wealth to beneficiaries.

Q: Are there any upfront qualifications for a client looking to use life insurance for charitable planning?

A: Yes, there must be proof of a history of the client gifting to that particular organization for approval.

Q: How can an insurance company guarantee the death benefit when the guaranteed cash value column shows zeros?

A: Some new universal life (UL) policies are designed with secondary guarantees. These secondary guarantees allow for the death benefit to be available for a period of time without cash value being present. A fee from the policy is used for funding the secondary guarantees.

Q: Why can’t you have a guaranteed death benefit and still illustrate withdrawals?

A: Because some policies are designed with secondary guarantees as mentioned above, it may be possible for the death benefit to exist without cash value in the policy. In order for the secondary guarantees to remain in effect, all illustrated premium must be paid on time and no withdrawals are allowed.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 12061 - 2011/11/16