Key Person Life Insurance

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Key Person Life Insurance

In early 2008, Petersen International Underwriters (PIU) received a quote request for Key Person life insurance coverage for the CEO of a large oil company. The client was requesting a $100 million benefit to cover outstanding liabilities that could leave his company in financial ruin if something were to happen to him. We reacted quickly and approved the case within one week for two options for coverage, each with a sum insured of $100 million: 1) Key Person Contingent Life and/or 2) Accidental Death and Dismemberment.

We only required the client to submit a simple one-page application and medical records, which the broker had previously obtained. We were pleased to provide the offer to the broker, who then presented it to the prospective client, only to find that the client was dissatisfied with the price. We then learned that the client currently had applications in with three other carriers, who were proposing to provide only $75 million of coverage on a slightly lower unit price basis. The client was so concerned with pricing that the additional underwriting time the other carriers were requiring (which at the time was estimated at a couple of months) did not seem too concerning to the client. Instead of submitting premium and placing coverage in force with us immediately, the firm chose to await approval from the other carriers.

Unfortunately, time was of the essence on this case. A few weeks after the client decided not to pursue the coverage that had been offered; the broker called to formally close the case and reported that the client was recently killed in a helicopter crash while on business in Southeast Asia. The client was only insured for $10.5 million.

This sad ending is not an isolated case. When one determines a need, procrastination should not interfere. We want to be sure to use this lesson and remind ourselves that we are all striving to provide the best coverage for the best possible price. Unfortunately, there are other circumstances that need to be considered in our search to do so. The two options offered by Petersen International Underwriters would have kept this company strong after the loss of the CEO. It would have adequately protected the company against the client’s many outstanding liabilities. Since the tragic event, the company is struggling
to rebuild and keep the company in business. We strive to prevent situations such as this.

Petersen International is dedicated to the task of providing alternative solutions to peoples’ problems and to react quickly to clients’ needs. The agony of time delayed underwriting procedures is recognized. We did our response in one week; the other offer was two months in process and 25% less than the requested coverage. The client does not always benefit from the lowest price, especially in a case such as this. Petersen International Underwriters had fully procured coverage for the liability that was of utmost concern to the client.

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