Obtaining High Limits of Life Insurance – Understanding When it Makes Sense, and How It’s Done

There are times when individuals may require high limits of life insurance—for example, with estate taxes or key person insurance. While high limits are attainable, the process can be challenging and must be properly managed by qualified and experienced insurance experts.

At American Business, obtaining higher limits of life insurance is a specialty of ours. As part of our commitment to educate trusted partners and their clients on an array of vital life insurance matters, this article will explain when high limits are advisable; who should pursue such policies; and how the process unfolds.

As mentioned, certain individuals may have a need for high limits of life insurance. Obtaining higher limits may be advisable in the following cases:

  • To pay future taxes
  • To insure the proper value for the business


How the Process of Obtaining Higher Limits Works

At American Business, we manage the entire process of obtaining high limits of life insurance from inception through completion. The process begins with one insurance professional from American Business making a preliminary inquiry. We do this to ensure we don’t pollute or lock up the reinsurance market. Additionally, we work within the binding and retention limits of selected insurance companies.

Following the preliminary inquiry, the insured will undergo a medical exam (only one is required, which includes blood work, urinalysis and a resting EKG), as well as submission of medical records, which we will obtain. The underwriting file is then accompanied by a detailed cover letter we work with the insured to create. This letter is designed to clearly outline the ultimate desired coverage and articulate the specific reasons behind the request.

It’s important to note that, since American Business is in possession of all medical and financial information during this process, we maintain strict HIPAA compliance throughout all phases. We have a medical doctor on staff to help us package the case medically to the underwriters. We also utilize that doctor to speak directly to the insured's doctor to help reword reports when appropriate. Additionally, we order our own MVR reports and pharmaceutical check, so we are not surprised by anything.

To achieve high limits of life insurance, it’s necessary to stack multiple policies from different insurance companies. The mix will be based upon cost efficiencies and product choices. Diversification of carriers spreads risk as does product mix to diversify possible product volatility. Once all relevant information is developed and/or obtained, American Business selects several lead carriers based on strong financials, large capacity, product availability, state domicile, retention and cost structure. We provide required information to insurance carriers. All carriers are instructed to only offer up to their retention limits. No reinsurance pool is allowed to be contacted or utilized.

As we receive preliminary offers, we negotiate on the insured’s behalf to obtain the best rate class. We then review our findings together with the insured and select carriers, amounts and order of submission of formal applications. We negotiate directly with the head underwriter at each company, since they have the “power of the pen” in many circumstances. At this point, we decide which reinsurance carriers they are allowed to contact to not “pollute the insurance pool.”

We have obtained a “broker letter” from the insured/owner giving us the exclusive right to negotiate and obtain coverage. This enables insurance carriers to be sure that they will be dealing with a clear process through one channel.

For more difficult medical or other underwriting cases, we are permitted to approach a leading reinsurer to present our case directly. In these circumstances, the reinsurer will submit a formal offer letter to our carriers of choice informing them of the offer and the amount the carrier is willing to commit. American Business is among a very select few insurance organizations that possess this capability and undertake this process.

Finally, the most attractive underwriting offer we receive on behalf of the insured would be bound to secure the first block of coverage. Once that block of coverage is secured, additional policies will be stacked on top, based on factors that include underwriting, pricing, reinsurance treaties and maximum retention. Sizable retention could be a company that retains $20 million. We would then move toward companies at $10 million retention levels, then $5 million levels and on. Existing life insurance can limit overall total capacity that is available.


Trusted Insurance Partners Can Help Clients Navigate the Pathway Toward High Limits of Life Insurance

Obtaining high limits of life insurance is a prudent strategy to address specific needs. That said, it can be a complex, multistep endeavor that takes experience, expertise and insight to successfully engineer. At American Business, one of our primary goals is to educate trusted partners and their clients on life insurance matters that can better inform their decision-making when it comes to life, long-term care and disability insurance protection. We hope this article helped you understand the circumstances that could merit high limits of life insurance for your clients, and the process by which we work to obtain it for them. We appreciate the opportunity to highlight this topic, and help you and those close to you navigate the complex and evolving life, long-term care and disability insurance landscape. 

Do you have questions about high limits of health insurance, or other life, disability and long-term care insurance matters? Please contact American Business at 212-359-4400 or email cpainfo@amerianbusiness.com.