Do CEO’s Pay Too Much For Life Insurance?

The CEO or President of a company, other than having more responsibility than most, is just like everyone else in this great country of ours. When it comes to life insurance they are subject to the same unscrupulous or poorly equipped life insurance agents and agencies whose focus is to land that case and pocket that commission. Even when an executive seeks the protection of big names like New York Life Insurance, Northwestern Mutual or USAA, they are often treating themselves to a dose of adverse selection because, while household names, their underwriting for minor impairments like sleep apnea or a slip up like a DUI, render them uncompetitive to the likes of Prudential and Lincoln Financial.

That is compounded by business life insurance policies often being larger face amounts, $5 million to $100 million and up, and the average CEO or President of a company being over age 50, a lot of them over age 60 and 70. The cost of the life insurance is going to be higher just because of those simple factors and when you complicate that with the fact that an underwriting difference between two very good companies could result in a price per thousand difference of 60%-70%, having someone who can shop multiple top of the line life insurance companies accomplishes what every company holds dear, more bang for the buck.

Compounding the issue even further  is an insatiable appetite of big name whole life insurance companies to sell cash value policies even for short term needs like a business loan collateral life insurance policy. While they might have the ability to jack the premium high enough that you end up getting your premiums back at the end of 10 years, it’s not a stretch to know that the cash back idea is likely to cost ten times what a term life insurance policy would cost. These agents love whole life insurance and aren’t likely to show you the term insurance alternative unless forced to and when your CFO has been in bed with the likes of New York Life agent for a while, well, let’s just say they’ve swallowed the Kool-Aid. The bottom line gets blurred by a relationship with an agent or a company that, while always there for you, well, aren’t necessarily really there for you.

And, while any life insurance agent can take an application and bind the company maximum so you can show the bank or the board of directors that there is a good faith effort underway, the company maximum for temporary insurance is usually only $1 million. And there is no guarantee that the policy will be approved or approved at the price you were expecting, which can lead to the proverbial fart in church when you find out a week before closing on a loan or executing a large business agreement that you won’t be able to produce the required life insurance or high limit disability income. Very few agents or agencies have the weapon in their arsenal to fix that unexpected bomb. Those of us that do get to pick up the pieces and put life insurance in force within 3-5 days. Of course those of us that make our living from impaired risk life insurance and business life insurance mostly use those policies as a rescue for an executive that has been left high and dry by another agent. But even without being in a bind think of the leverage if you knew you could put up to $100 million in life insurance in force in 5 days. Without even a blink at the negotiating table you could just answer in the affirmative and recommend that everyone move ahead and get the deal done.

Bottom line. There aren’t that many good impaired risk life insurance agents in the country and if you combine that with an expertise in business life insurance, you’ve reduced the pool dramatically. With close to 200 CEO’s and executives holding their business life insurance with me, and knowing that your bottom line, just like a family’s budget, really means a lot, the choice becomes, if not clear, certainly worth a discussion. If you have questions on how much a life insurance impairment is hurting your company bottom line, or it you need life insurance right now to bind a business deal, call or email me directly. My name is Ed Hinerman. Let’s talk.