Case Study

How Modern Life secured $30 million in coverage for a high-risk client

Estimated 4m read
Case Study

How Modern Life secured $30 million in coverage for a high-risk client

Case Study

How Modern Life secured $30 million in coverage for a high-risk client

Estimated 4m read
Case Study

How Modern Life secured $30 million in coverage for a high-risk client

Estimated 4m read
Case Study

How Modern Life secured $30 million in coverage for a high-risk client

Estimated 4m read
Case Study

How Modern Life secured $30 million in coverage for a high-risk client

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By Modern Life
June 27, 2024
By Modern Life
Jun 27, 2024
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Summary
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Background

An advisor approached Modern Life for help securing substantial coverage for a client, a 42-year-old man who was seeking a total of $30 million in coverage–$10 million for personal estate planning and $20 million for business policies (key person and buy-sell).

The client had a complex medical history, which included Lynch Syndrome, anemia, and Major Depressive Disorder, making him a high-risk candidate for insurers. These health conditions typically result in limited coverage options, high premiums, or denials.

Challenges faced

In addition to his medical conditions, which increased his underwriting risk, the client faced financial underwriting challenges. The client’s business valuation and income fell short of the carriers’ multiples requirements—financial metrics used to assess capital adequacy and the ability to cover liabilities–for the key person and buy-sell coverages. The carrier had determined that instead of the client’s desired $20 million in buy-sell coverage, only $14 million was needed.

Our approach

To address these challenges, we adopted an approach that combined strategic negotiation with the carrier, innovative valuation methods for the client’s business, and repositioning the client’s medical history.

Negotiated valuation

We presented evidence supporting a more accurate valuation of the business based on industry comparisons, highlighting that its initial 409A valuation was not representative of the company's true market value. 

Reevaluated income

We advocated for a comprehensive view of our client's income by including both equity compensation and traditional salary. We also factored in the market salary for an outside CEO, which would be necessary if the founder, who is primarily compensated through equity, were to be replaced. This approach highlighted how non-traditional income components significantly contributed to his overall financial standing.

Repositioned medical history

Our brokerage team utilized their extensive experience and strong carrier connections to present the client's health profile in the most favorable light, highlighting his proactive management and stability of medical conditions.

For Lynch Syndrome, we emphasized his regular colonoscopy follow-ups and the absence of any symptoms, identifying two carriers that view this condition more favorably. Regarding his depression, we obtained a detailed narrative from his psychiatrist that illustrated a positive outlook, adherence to medication, and his ability to successfully manage a multi-million dollar business. Additionally, we convinced the underwriter to consider his anemia as mild, preventing any additional debits.

The results

Our strategy produced exceptional results, exceeding industry expectations and securing the desired coverage for the client:

  • We secured the client’s desired $30 million coverage at standard rates.
  • We established a precedent with carriers for interpreting business valuations in complex scenarios.

Next steps

This case study underscores our expertise and commitment to delivering exceptional outcomes for advisors and their clients. 

Schedule time with us to learn more about Modern Life's underwriting capabilities or get a second opinion on a challenging case.

All registrants will receive a calendar invitation and link to join the webinar via Zoom. Can't make it live? Register anyway and we'll send you a recording of the presentation the next day.

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