Application for life insurance is asking for net worth is this normal?

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LesBleus**
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Application for life insurance is asking for net worth is this normal?

Post by LesBleus** » Mon Feb 11, 2019 5:08 pm

The insurance broker provided me with a form to fill out and it's asking for my net worth. What's the purpose of this information and should I provide a ball park figure?

longleaf
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Re: Application for life insurance is asking for net worth is this normal?

Post by longleaf » Mon Feb 11, 2019 5:10 pm

Sounds like a survey question.

I'd leave it blank
Frugality, indexing, time.

mgensler
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Re: Application for life insurance is asking for net worth is this normal?

Post by mgensler » Mon Feb 11, 2019 5:16 pm

Yes. Had this come up before. They want to see if you have assets inline with coverage. Say for example you have 10 million in assets but also 10 million in debt in the form of a personal guarantee. It would make sense to the insurance carrier that you would request 10 million in coverage to pay off your debt in case of death.

Gill
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Re: Application for life insurance is asking for net worth is this normal?

Post by Gill » Mon Feb 11, 2019 5:17 pm

It's a legitimate question to assist the carrier in determining the degree of risk involved with the underwriting. A large amount of debt could indicate a higher risk of potential fraud.
Gill
...just “chiming in” as described by Livesoft

123
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Re: Application for life insurance is asking for net worth is this normal?

Post by 123 » Mon Feb 11, 2019 5:34 pm

It's a routine and necessary question. I was involved in life insurance for a number of years. The insurance company, including their underwriters, need to establish that the amount of insurance is "reasonable" given the person's situation. Net worth is just one metric that could be used. Individual's with a high net worth may have significant liabilities that may need to be settled upon their death. Of course it's also possible that they have no liabilities. It's likely the underwriter would request a credit report as well so it's all part of evaluating that the insurance being sold is reasonable and not a mechanism to speculate in human life.
The closest helping hand is at the end of your own arm.

ResearchMed
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Re: Application for life insurance is asking for net worth is this normal?

Post by ResearchMed » Mon Feb 11, 2019 5:36 pm

Gill wrote:
Mon Feb 11, 2019 5:17 pm
It's a legitimate question to assist the carrier in determining the degree of risk involved with the underwriting. A large amount of debt could indicate a higher risk of potential fraud.
Gill
This ^^^

We faced some similar questions when we wanted an unusually high umbrella policy for a vacation rental property.
All it took was a brief explanation to our agent, who passed the info along to the insurer, and then we were all set with what we wanted. (A couple of years later, they asked again. Same answer. All set, once again.)

They are obviously always on the alert for potential fraud, er, "opportunities", among other concerns.

RM
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ResearchMed
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Re: Application for life insurance is asking for net worth is this normal?

Post by ResearchMed » Mon Feb 11, 2019 5:38 pm

123 wrote:
Mon Feb 11, 2019 5:34 pm
It's a routine and necessary question. I was involved in life insurance for a number of years. The insurance company, including their underwriters, need to establish that the amount of insurance is "reasonable" given the person's situation. Net worth is just one metric that could be used. Individual's with a high net worth may have significant liabilities that may need to be settled upon their death. Of course it's also possible that they have no liabilities. It's likely the underwriter would request a credit report as well so it's all part of evaluating that the insurance being sold is reasonable and not a mechanism to speculate in human life.
Similarly, even for property insurance, they might ask about any recent bankruptcies (or other "credit problems")... again, concerns about potential fraud.

RM
This signature is a placebo. You are in the control group.

Topic Author
LesBleus**
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Re: Application for life insurance is asking for net worth is this normal?

Post by LesBleus** » Mon Feb 11, 2019 5:47 pm

Do insurance brokers make a good commissions from selling you Term life insurance? The person I'm working with isn't pushy but as kinda of a car salesman attitude. Not rude just a bit eager for me to sign up.

go140point6
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Re: Application for life insurance is asking for net worth is this normal?

Post by go140point6 » Mon Feb 11, 2019 6:31 pm

I'm pretty sure that question is also used to attempt to upsell you at a later date, at least for me it was. My broker (found via term4sale) got me the term I wanted for the wife and me, but I did get a phone call shortly thereafter from him attempting to talk me into some sort of whole life, variable life, something or other. The only reason I listened as long as I did was because he happened to catch me at happy hour and I was a few drinks in... but luckily not enough to forget never to mix insurance and investing! I actually did terminate the call with a statement very similar to that effect. Never heard from him again but his assistant does send my wife and me automated happy birthday emails once a year from his office... :beer

uberdoc
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Re: Application for life insurance is asking for net worth is this normal?

Post by uberdoc » Mon Feb 11, 2019 6:37 pm

When I was looking for term life one broker called me and went on a monologue about some chronic health rider for about 15 minutes. I told him to call back next day to finalize it then blocked his number. I never heard from him again.

cashmoney
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Re: Application for life insurance is asking for net worth is this normal?

Post by cashmoney » Mon Feb 11, 2019 6:59 pm

LesBleus** wrote:
Mon Feb 11, 2019 5:47 pm
Do insurance brokers make a good commissions from selling you Term life insurance? The person I'm working with isn't pushy but as kinda of a car salesman attitude. Not rude just a bit eager for me to sign up.


Of course they are going to be eager because that is how they make a living.Commissions vary could be as low as 50 % to as high as 150% of first year premium but this doesnt effect what you pay for the insurance.life insurance must be transacted by a licensed agent so an agent gets a commission no mater how or where you buy it.

BruDude
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Re: Application for life insurance is asking for net worth is this normal?

Post by BruDude » Tue Feb 12, 2019 2:54 am

Standard underwriting question. If you have a large amount of debt, someone may have a reason to kill you. If you have a negative net worth, limited income, and are applying for a $5M policy, they might not be too keen on that.

uberdoc wrote:
Mon Feb 11, 2019 6:37 pm
When I was looking for term life one broker called me and went on a monologue about some chronic health rider for about 15 minutes. I told him to call back next day to finalize it then blocked his number. I never heard from him again.
Insurance agent here. You could have just told them you weren’t interested in the rider instead, but hey whatever makes you feel good...

BruDude
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Re: Application for life insurance is asking for net worth is this normal?

Post by BruDude » Tue Feb 12, 2019 2:56 am

LesBleus** wrote:
Mon Feb 11, 2019 5:47 pm
Do insurance brokers make a good commissions from selling you Term life insurance? The person I'm working with isn't pushy but as kinda of a car salesman attitude. Not rude just a bit eager for me to sign up.
Most agents know that if it’s a phone sale and the client doesn’t apply right away, it’s unlikey they’ll ever hear from you again. Not to say that’s the right way to do business, but that’s why they’re eager for you to sign up.

Rupert
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Re: Application for life insurance is asking for net worth is this normal?

Post by Rupert » Tue Feb 12, 2019 7:43 am

LesBleus** wrote:
Mon Feb 11, 2019 5:47 pm
Do insurance brokers make a good commissions from selling you Term life insurance? The person I'm working with isn't pushy but as kinda of a car salesman attitude. Not rude just a bit eager for me to sign up.
I think they get a nice chunk of the first year's premium (30-70%, I think) but not much after the first year (only 3-5%, I think, going forward). So it's not a huge money maker for them over the long term.

BruDude
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Re: Application for life insurance is asking for net worth is this normal?

Post by BruDude » Tue Feb 12, 2019 2:20 pm

Rupert wrote:
Tue Feb 12, 2019 7:43 am
LesBleus** wrote:
Mon Feb 11, 2019 5:47 pm
Do insurance brokers make a good commissions from selling you Term life insurance? The person I'm working with isn't pushy but as kinda of a car salesman attitude. Not rude just a bit eager for me to sign up.
I think they get a nice chunk of the first year's premium (30-70%, I think) but not much after the first year (only 3-5%, I think, going forward). So it's not a huge money maker for them over the long term.
A good agent will get 65-140% of the first year premium and most term policies pay nothing on renewals. Depends on their contract and how long the term is.

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