A Business Loan Failure to Survive Case Study

Petersen International’s Failure to Survive product provides a simplified-issue death benefit on a term chassis to customers who need coverage quickly or who are not eligible or the right fit for traditional life insurance.  Typical uses of the insurance are for third-party key person situations, to indemnify buy/sell agreements and other business contracts, divorce decrees as well as satisfying lender requirements for business loans.  To provide further insight and understanding of the product line, here is a business loan Failure to Survive case study:

A 47-year-old restauranteur was seeking a $2,500,000 business loan through the SBA (Small Business Administration) to fund the purchase and the build-out of a restaurant space for a new eatery of his own design.  The lender was requiring him to acquire and maintain $2,500,000 of life insurance as part of the loan closing.

The client and his agent sought out life insurance solutions through several prominent domestic insurers, but after weeks of attaining labs, exams, medical records and much back and forth communication between the client, his agent and the various insurance companies, all three carriers ultimately came back with declinations.

Reasons for the declines stemmed from the client’s adverse medical history, his build and his tendency to overuse alcohol.  The client was diagnosed with type II diabetes a couple of years ago which was well-controlled with oral medications.  He was also taking meds to control cholesterol levels and hypertension.  His body mass index measured in at about 40 with a height and weight of 5’9” 276 lbs.  He also had been advised by his physician in the past to curtail any further overindulgence in alcohol.

From a simple underwriting perspective, this client was an impaired risk and certainly a hard-to-place case for the agent.  The loan was set to close in a week and the last requirement to be had was that of the life insurance.  Hoping for a miracle, the agent came to Petersen International with the inquiry.

We were able to deliver, providing the client with a Failure to Survive simplified-issue term policy covering the entire loan amount with contract exclusions for diabetes and alcohol related death.  The policy was issued, and a collateral assignment of benefits completed in less than a week.  Fortunately, the loan closed on schedule and the client was able to move forward with his business dreams.

Don’t let insurance company declinations or underwriting timetables stand in the way of providing your clients with the insurances they need.  Please give us a call at (800) 345-8816 to learn more about the Failure to Survive line of products including business loan indemnification.