The Life Insurance Application Process

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[00:00:12] John Perrings: Episode number 59, the IBC application process. In today's episode we're gonna talk about what it's like to apply for life insurance for the purposes of implementing the infinite banking concept. Quite a few things that go into this, we'll talk about, Getting synced up with your agent or advisor.

[00:00:35] John Perrings: How to qualify, what are the qualifications to get life insurance? We'll talk about the actual application itself. We'll talk about underwriting the timeframes and the amounts and the delivery of life insurance. So stay tuned.

[00:00:51] John Montoya: Awesome. We'll also to include there, making sure that you're also working. infinite banking authorized practitioner because [00:01:00] that's really important as we'll talk about later on in the episode too.

[00:01:03] John Perrings: Absolutely, you can go to www.infinitebanking.org and that's where you'll find all the actual authorized infinite banking practitioners. Super important. And so as we talk today about the application process one of the things. To understand is first of all, why do you even have to apply for it?

[00:01:21] John Perrings: And it's one of those assets because of the actuarial nature of the, of this type of asset. It's so powerful that you can't just buy it. You have to qualify for it. And that's one of the important things that I think, people, I don't know, it, a lot of people really just overlook how powerful life insurance is.

[00:01:41] John Perrings: And we've talked. Ad nauseum, how you know, all the benefits of life insurances. So you can check out our other episodes to get that information. But the fact is it can just do, it does so many things that no other financial asset can do, that you have to qualify for it, and you have to qualify for it with your health and your wealth.

[00:01:59] John Perrings: And [00:02:00] so that's what we're gonna talk a little bit about today in terms of how that works.

[00:02:05] John Montoya: Yeah. So to begin, are you in good health because. What the life insurance companies are looking for, especially when it comes to a whole life policy, which you know, they are undertaking to accept premium from you for really decades. These contracts go out to age 1 21, so they wanna know with as much clarity as possible, are you in good health?

[00:02:32] John Montoya: Are you a good risk for them? To hold onto that premium, invest it for the long run because with a whole life contract, they know they are providing you with an exchange, your premium for a guarantee that there's gonna be a death benefit there to be paid out to your beneficiaries. So you gotta be in good health.

[00:02:53] John Montoya: You wanna make sure you're taking care of yourself. And the, there, there's that adage, the best time to get started was 20 [00:03:00] years ago. Second best time is. Today, and if you're one of those people who you know are really unsure about your health or you've got a family history of certain chronic illnesses, take advantage of today.

[00:03:15] John Montoya: Make sure that you take care of your priorities, your financial priorities, and you. Go through this process to qualify. So number one you gotta be in good health. The second thing is what is your source of premium? Because if you're committing to this contract and it is a contract, there's really one side of the equation that you have to focus on, and that is funding your policy each year with premium.

[00:03:43] John Montoya: And you want to make sure that the source of premium. Matches the funding period. That's something that we've talked about in previous episodes. If you're making, let's say, a hundred thousand dollars a year, $200,000 a year, How much are you setting aside for tomorrow? [00:04:00] What is your standard?

[00:04:00] John Montoya: Everybody should have a standard savings amount that they are sticking with each year in order to build wealth. And there should be a portion of that is part of your premium. The underwriter's gonna want to know what is your source of premium and that could. From income, it can be also from a portion of your assets as well.

[00:04:21] John Montoya: And then the last thing the last question that we would ask as practitioners is, Who benefits - cui bono? Who is the insurable interest? Because if there is no insurable interests, the underwriter's gonna come back to us and they're gonna say who, who is this death benefit for? So it makes me think of the janitor policies that you say be underwritten in the corporate side where the best example is Walmart.

[00:04:50] John Montoya: Walmart which they used. Ensure even their janitors. And these were, the lowest paying employees on their payroll [00:05:00] and Walmart would pay the premium on their policies for them. And these people wouldn't never even know that the corporations took out these policies. But who benefits Walmart, right?

[00:05:10] John Montoya: When it comes to individual policies, who benefits? It should be someone who has an insurable interest in your life. If you were no longer around. Who would benefit from the death benefit? So to sum up our young, good health, what is the source of your premium and who benefits?

[00:05:29] John Perrings: Yeah. And the insurance is an indemnification against loss. And so when you, when we talk about the source of premium, there has to be an income or there has to be assets there to. Protect and replace. And in the early years what you're doing is you're replacing your income if you were to die prematurely so that your family doesn't have to change their lifestyle.

[00:05:52] John Perrings: We're indemnifying your family against the loss of your income, and then in the case of whole life insurance, [00:06:00] The insurance becomes asset protection so that we can replace the value of all the other assets that you were able to accumulate over the course of your life so that you can use and enjoy more in retirement without worrying about not leaving any for the next generation.

[00:06:16] John Perrings: So there has to be that income there and there has to be that source of premium. And speaking of source of premium John Montoya has a pretty crazy story about . Premiums for what we saw with another potential client and an advisor that he talked to.

[00:06:35] John Montoya: Correct. And it potential advisor. So we had someone reach out to us through the podcast and had learned about infinite banking through another advisor and I. Did the introduction, learned a little bit more about his interest in IBC, figured out where his education level was in terms of, what he knew about IBC.

[00:06:57] John Montoya: And he was really gungho on getting started. In fact[00:07:00] he had gotten started yesterday, so to speak. In fact, the previous week he had submitted an application. The person who had introduced him to IBC, but he really wanted to learn about IBC from an expert, in fact, potentially become a practitioner himself.

[00:07:16] John Montoya: So that's how he reached out to us. And so I went through my normal process and I was asking questions about, his background, what he does for a living, and come to find out that the application that. Submitted for life insurance for an infinite banking policy. The previous week it it didn't make any sense.

[00:07:40] John Montoya: And I was talking to him about, if you're gonna be a practitioner, you have to have integrity. You need to submit good business because ultimately when you submit bad business you. You're not gonna stay in the business for too long and life insurance companies really aren't gonna work with you.

[00:07:56] John Montoya: Here's what happened. Married, [00:08:00] couple kids. He's got an income of around a hundred thousand. The wife works too. Income is twice his amount. And what I come to find out is that the premium on the application that was submitted was for $200,000 a year. And I asked them where's the source of this premium coming from?

[00:08:20] John Montoya: Because this is twice your income. And I come to find out. The wife is also going to contribute. And I said okay. Help me make sense of this. Does your wife have any life insurance? No. Is she applying for any life insurance? No. Okay. Tell me where this, where the red flag is. You tell me your income is this amount.

[00:08:45] John Montoya: You're applying for coverage with premium that's twice your annual. and yet your wife has no application in process, so cui bono who benefits, right?[00:09:00] These should be simple questions that are answered and unfortunately, it's not very difficult for people to come into this industry.

[00:09:11] John Montoya: But it's very challenging for them to stay in this industry long term. And so that's why we mentioned, you wanna really find out who is an authorized I B C practitioner and who isn't. Because with just some simple questions, we're able to pull the rug, pull the curtain back and see that, okay, this individual, you might have learned about infinite banking from this person, but they weren't looking out for your best interests.

[00:09:38] John Montoya: They. In this situation based on income your financial situation, overall assets, there's some big holes that need to be filled here, and they're not being serviced in the way that they should be. And it's just, a matter of answering some simple questions. But this is why you want to talk to an [00:10:00] Authorized IBC practitioner because we gotta find out, we have to ask really pertinent question.

[00:10:06] John Montoya: To get the best possible solution, not just for you, but for your entire family.

[00:10:13] John Perrings: Yeah. And to become an authorized practitioner, you go through a significant vetting process and so you know, everybody that you find on that site has already been vetted. And, going back to John Montoya's story here, the reason why the premium is a problem, we talked about an indemnification for loss.

[00:10:32] John Perrings: And so if you make a hundred thousand dollars, the insurance company's not going to indemnify your family for $200,000 a year. They're going to indemnify your family for a hundred thousand dollars a year. So the fact that this per this agent, wrote a $200,000 a year. Premium , it just they're not doing this.

[00:10:53] John Perrings: They're not basing that on just basic insurance methodology. Like where on earth would this [00:11:00] person who's making a hundred thousand dollars come up with twice his income to fund a policy? The general rule of thumb which is also appropriate to this conversation is the life insurance company will let you fund about 25% of your annual Income .

[00:11:15] John Perrings: Into a policy in the form of premium. And so you can see that having 200% of your annual income. That's a pretty big jump. And I think, and then the problem is they were using his wife who earned $200,000. They were saying that she could fund the rest of it, but then it also goes against.

[00:11:38] John Perrings: Basic protection principles of why would you want to ensure the husband for $200,000 of premium and whatever death benefit that bought, and not ensure the wife who earns twice as much as the husband, right? So it's like that spouse needs. Even more protection than the original spouse.

[00:11:55] John Perrings: So a lot of problems going on with that. And [00:12:00] unfor, what unfortunately happens sometimes is when people, first learn about I b C, they forget, or they just glo they gloss over the importance and. and the fact that we're dealing with life insurance, like this isn't, it's not like a magical thing here.

[00:12:14] John Perrings: We're using a specific financial instrument to perform some very specific things, and we can't just make it do stuff that insurance can't do, if that makes sense. Man, that's a really good story in my opinion of What to really look out for in the underwriting process. And if you're seeing stuff like that, , it's probably a good clue that there's a red flag there to maybe look in some other directions.

[00:12:42] John Montoya: Yeah, and it brings home the point. You can't just buy it. You have to qualify for.

[00:12:47] John Perrings: Yeah. And that guy definitely would not qualify for a $200,000 a year premium.

[00:12:51] John Montoya: Yeah. It it, it really, it's great to have that enthusiasm, but everything's gotta make sense.

[00:12:57] John Perrings: That's right. That's right.

[00:12:59] John Montoya: So let's [00:13:00] talk about the actual application process. And there's two methods these days. There's paper or electronic and they're really both pretty easy for a seasoned professional. One is definitely.

[00:13:15] John Montoya: Simpler and easier than the other. It just depends on, which life insurance company is being used and what their process is. And,

[00:13:23] John Perrings: And what state you're in,

[00:13:25] John Montoya: correct.

[00:13:26] John Perrings: you happen to be in New York State, you're most likely doing a paper application.

[00:13:29] John Montoya: Yeah, there's one state out of all of 'em that definitely makes life a little bit more challenging than the rest of the states, and that would be New York. But aside from them, Yeah, paper, electronic. And obviously, coming outta covid electronic is the easiest way. Cause I think most everyone is gotten used to doing a Zoom appointment.

[00:13:53] John Montoya: In fact, it's been I can't think of the last time where I had an appointment and the person had [00:14:00] yet to do a Zoom appointment. Even that withstanding, if it has to be done entire, Over the phone or prehistoric, in person. Nothing wrong with that. But these days, everything is so conveniently done with the use of the internet.

[00:14:16] John Montoya: Life insurance companies are making the move to, to handling this process, the application process electronically. It's great to have more and more life insurance companies take advantage of what's available.

[00:14:30] John Perrings: Yeah. As a side note, I started in this business in New York most of my earliest clients were all New York clients. So I did a lot of paper applications, a lot of scanning and signing and scanning again. But it, again, it also does depend on the carrier and either way the application. Is still pretty straightforward and it's usually no matter which way you do it, as John Montoya mentioned it's usually pretty easy. The only thing that you really need to have ready is just [00:15:00] your basic information, like driver's license, address, income, all that stuff. And then most importantly all of your medical information.

[00:15:07] John Perrings: So if you have any, medical stuff going on, you need to have your prescription information ready, medical history ready, doctor information ready, and they're gonna ask for all of that info on the application.

[00:15:22] John Montoya: Yeah. I would say from start to finish, it will take on average, I've done it as quickly as 10 minutes. But depending on how much health information that needs to be provided can take anywhere, an additional 15 to 20 minutes beyond that. But it's not a burden burdensome type of, Issue or challenge.

[00:15:46] John Montoya: It's just it is what it is. An application must be filled out. It must be filled out completely. And you are testing Yes, exactly. You are testing that everything that you are answering is true and [00:16:00] correct to the best of your knowledge. So you wanna make sure that you're not leaving anything out because we live in the information age and you.

[00:16:09] John Montoya: Maybe, or maybe not. Be surprised. You know what the life insurance companies can pull on you. They're, let's talk about, real quickly what they're gonna pull. They're gonna pull a motor vehicle report. They're gonna do a prescription check. They're going to request your medical records, and they're really going to.

[00:16:31] John Montoya: Look for and see as much as they possibly can to determine if you're gonna be a good underwriting risk for them.

[00:16:38] John Perrings: That's right. And you know, it doesn't look good if you leave some things off or you're not honest about something, that, that can be reflected in the application and the underwriting process. And quite frankly, if we're all doing this to , a, as a fellow owner in a mutual insurance company, we want everyone to be honest like it, if we're gonna be [00:17:00] partners in this same mutual company, I don't want people in there that are, providing inaccurate or false information to the life insurance company, for which we're, doing all this underwriting and using, again, the actuarial science to back up the individual policy. We need people to be honest to when they're filling out the application. And I'll say one more quick thing. There are some reasons that benefit you to be honest on an application. One is what I just mentioned as a co-owner in the mutual insurance company. Every policy owner is a, is an owner of the company, right?

[00:17:35] John Perrings: So that benefits you for everybody to be honest. But you also don't want to have any kind of situation where you provided inaccurate information. , and then the person, the insured actually dies, and then that inaccurate in information comes to light, right? We don't, we wouldn't want to have anything like that happen where it could invalidate a death benefit, right?[00:18:00]

[00:18:00] John Perrings: So those are very important. Another thing is that even if you get a suboptimal rating a rating that's less than the best you can get. You can make improvements in your health if it's just something temporary, like you're a little overweight or something like that. You can make improvements in your health and you can have the policy Redone and you can actually have the policy be reissued at your current better health rating, a year down the road and that can lower your premiums and doing these things.

[00:18:33] John Perrings: So nothing is like a totally permanent thing. However, you also don't wanna do it the other way where you're like, oh, my rating's not as good as I wanted. Maybe I'll hold off, right? Because then we don't know if you can qualify at all down the road, which we'll talk about.

[00:18:50] John Montoya: And just to interject, One thing some things are permanent. Meaning if if you have, I actually did run into this there was a person [00:19:00] who really wanted to get started with IBC and he had a brain injury.

[00:19:04] John Perrings: Yep.

[00:19:06] John Montoya: with this type of brain injury, he would forget that he and I would have a conversation.

[00:19:13] John Montoya: And this transpired over four to five years . He would reach out to me like every four to five months and initiate the whole conversation over again. And at a certain point I really just had to take him off my email list and just block his number. So he wouldn't call me anymore because unfortunately he would he would never remember.

[00:19:39] John Montoya: We had these conversations and that he couldn't qualify. There, there are some things that are permanent. And going maybe a step further because cancer is so prevalent in our society you do have to be. 10 years in remission in order to qualify. There, there are some things that are permanent.

[00:19:57] John Montoya: You're not gonna be able to qualify. But there are other [00:20:00] ones, whether it's losing weight that's, one year assessment typically. And on that note, whatever weight that you do lose, let's say you lose 20 pounds. Over a 12 month period. The way that the underwriters are gonna look at it is they're gonna say, okay, you lost 20 pounds.

[00:20:15] John Montoya: We're gonna take half that as weight loss.

[00:20:18] John Montoya: So there, there's different levels to it but. Here's where you want to engage with a practitioner, someone who can provide the answers for you based off your situation on whether you're a good candidate. Now, what needs to be addressed? And, maybe you're not a good candidate for I B C, but there's someone that you know in love who does have an insurable interest in you.

[00:20:43] John Montoya: And so we look at other ways to get you qualified and start that application process. A secondary.

[00:20:53] John Perrings: Yeah. And we probably ought to talk about the other major bifurcation in the health part of a [00:21:00] life insurance. And that's whether or not you're a smoker, right? Tobacco and non-tobacco are two. Macro classifications that you can get. And those make a pretty big difference on the price of the life insurance premium.

[00:21:13] John Perrings: And so a lot of times a question will come up, and by the way, they consider tobacco, that can be vaping packets, smoking all the, patches, they're really looking at nicotine use as opposed to just The smoke. And a lot of people will be, will maybe think they could hold off for a month and quit smoking for a month and then apply.

[00:21:34] John Perrings: And again, it gets back to the honesty side of things. They're also probably going to require a paramedical exam which is another. Possible requirement during the application process. And just like John was mentioning with cancer, having a 10 year period before you can qualify again, smoking is depending on the carrier, somewhere around a year where you need to have quit [00:22:00] smoking for about a year before you can qualify as a non-tobacco policy.

[00:22:06] John Perrings: And then really quickly talking about the paramedical exam. Sometimes what's required, and we don't really know when the underwriters determine this and they'll say, Hey, we need to do a paramedical exam, which is just a, usually a blood and urinalysis. Body weight measurements, that kind of thing, a basic physical type of thing.

[00:22:25] John Perrings: And we, those are usually done by third parties and they submit the information to the life insurance company for the underwriters to evaluate. And that helps them make an underwriting decision. A lot of people are already aware of that, but what they may not be aware of is for under certain underwriting amount, Let's just say, 5 million or 3 million depending on the carrier.

[00:22:46] John Perrings: A lot of times they don't even need a paramedical exam anymore to approve you for life insurance which is a pretty big deal because it makes the underwriting process even faster for certain cases.

[00:22:59] John Montoya: [00:23:00] Yeah we're talking about as quickly as minutes from completing the application. That, that's how quickly you can get an automated approval these days if you have a clean prescription history, clean driving record, clean medical history. We've seen it happen and help clients get started.

[00:23:17] John Montoya: Really, it's almost like 24 to 48 hours.

[00:23:20] John Perrings: Yeah.

[00:23:22] John Montoya: taken the application. So the standard underwriting time used to always be four to six weeks because a paramedic exam Was required, we talked a little bit about how life insurance companies are stepping into the 21st century and using technology.

[00:23:38] John Montoya: Thi this really cuts down on the underwriting timeframe. So what used to be four to six weeks standard. Can now be as short as 24 to 48 hours. So you just have to mentally prepare yourself because sometimes, people have experienced qualifying for life insurance outside of IBC, and they're accustomed to it taking four to six weeks, maybe eight [00:24:00] weeks, and they're just not accustomed to hearing, oh, you're approved right after taking the application.

[00:24:06] John Montoya: But that's awesome news to share with people.

[00:24:08] John Perrings: Yes. Yeah, it can happen pretty fast. And so our job is to really get you very comfortable with the principles, the idea, the premium amounts and all of those things so that we're able to narrow things down and that starts to get into the, underwriting amounts. And so one of the things we wanted to talk about, we mentioned, qualifying with your health and your wealth, and.

[00:24:33] John Perrings: How much can you qualify for during the application process? And so there's two primary ways of doing that. And the first one is what's called human life value. And we talked about that. That's indemnifying your family against the loss of your income. And so what they'll do is they'll just take your current income, multiply that times a number of years based on how much, how long you have left in the.

[00:24:55] John Perrings: You're, the working world. So for example, if you're 35, they'll, [00:25:00] and you make a hundred thousand dollars, they'll just say, okay, you've got 30 years left where you're gonna work. So we'll take 30 times a hundred thousand. That's $3 million. And the other way to do it is through assets. It's actually, it's not net worth, it's gross worth.

[00:25:13] John Perrings: And so they'll use an assets based calculation methodology in whichever one is greater. When we, typically, the way that we work is we, during the application process, we try to get you. Qualified for your full human life value. And so meaning we're trying to get you qualified for the maximum amount of insurance that we think you can get.

[00:25:37] John Perrings: And the reason we do this is, because we can always get that maximum approval. And since an application doesn't obligate you to anything, we get you approved for as much as we can, and then we can work down from there based on. what Your requirements are, and the reason we do it that way instead of the other way, is if we start low and try to go high and you actually wanna get [00:26:00] higher than what we got you qualified for, then we have to go back through underwriting to get that additional approval.

[00:26:05] John Perrings: So it's always easier to apply for the max because there's no obligation. It doesn't cost you anything. So we just get you approved for the max and then we work with. , within those parameters to get you what you want based on, your cash flow, your insurance needs, all of those things.

[00:26:23] John Montoya: Well said. The last item, once your application is in, you have the approval, it's gone to issue. There's two ways for policies to be delivered. They can be delivered in person or snail mail. The other way is now electronic delivery. So DocuSign allows for the process to be done basically through your email.

[00:26:47] John Montoya: And because it is something that doesn't create a, something tangible, something in your hand. What I always recommend to people who are doing a electronic delivery is [00:27:00] make sure that once you. DocuSigned for the policy. Once you've paid the premium, you keep a copy of this digital contract. You store the whole contract, keep it as a soft copy, but you also print out the first couple pages and you keep that with all your important paperwork, your birth certificates, your passports.

[00:27:21] John Montoya: Basically wherever you keep your important paperwork, you need to include your contract because. something happen to you, you want to be sure that your loved ones know that you have this life insurance policy, you have this asset, and that a claim needs to be filed. So really important that you, especially if you are doing the electronic delivery, you print out the first couple of pages.

[00:27:47] John Perrings: That's great. I never thought of that. I'm going to definitely add that to my operating procedures for me personally and my policies. So that's an awesome tip. And, It was, it's assumed in what you just said, but I want to just point [00:28:00] out what John Montoya was also saying is, you need to communicate the presence of this life insurance policy to your loved ones or, and or whoever's going to be, in charge of things if you die.

[00:28:10] John Perrings: And when you die, the communication and knowing where everything is. Huge thing when my, when my dad passed, I was, we had to go through all his documents and, this is not an original story by any means but, sifting through things and, we found a couple life insurance policies, actually, they weren't that big, but, we didn't even know they existed.

[00:28:30] John Perrings: And centralizing and backing up and communicating all of your financial plans is super, super important. As we wrap up here we mentioned, the best time to buy life insurance is, 20, 30 years ago. The next best time is today and. That sounds a little cavalier, when you say it, sometimes it's, but it's a good parable.

[00:28:52] John Perrings: Best time to plant a tree is 30 years ago. The next best time is today. But let me put a little context with that as it relates [00:29:00] to life insurance and what we would call more typical type of financial planning. Most of the time if people are bought into the typical financial planning, They're going things maybe a little bit out of order.

[00:29:15] John Perrings: A lot of times people just start investing in things. We talked about this quite a bit, where you go in and you do your HR paperwork at your new job and automatically you have a bunch of money rerouted into these qualified plans where you lose control and use of that for the next 20, 30 years.

[00:29:31] John Perrings: The thing about this is. When it comes to investing or any other type of asset that you could buy real estate, crypto, like whatever it is. Of course there's timing issues in, in the market, but outside of those, market timing things, you can buy that stuff anytime. You can buy it today, you can buy it tomorrow, you can buy it five years from now.

[00:29:50] John Perrings: You can buy it 10 years from now with life insurance. On the other hand, you can buy it today if you qualify. , but we don't know if you could buy it [00:30:00] tomorrow or we don't know if you can buy it five years from now or 10 years from now. And so when we think about the order of operations of things life insurance should be one of the first things that you buy, not only from the protection side of things, but also from the IBC side of things and.

[00:30:19] John Perrings: The acceleration. By having the correct structure in place, it's going to accelerate everything else that you're doing from an investment standpoint, but also it's not something you can put off because we don't know if you'll qualify for it in the future. And so that's something that we wanted to make sure we put out there on this particular episode, talking about applying and qualifying for life insurance.

[00:30:43] John Montoya: That's a golden nugget right there.

[00:30:46] John Perrings: Great talk John. If anybody out there has any questions, as always, you can go to the fifth edition.com and right there you can listen to all our podcasts, you can get transcripts, you can register for our online [00:31:00] course and get a 50% discount. And most importantly, if you wanna see if this is something and find out, have questions for how it could apply in your life specifically.

[00:31:09] John Perrings: You can book a no obligation free 30 minute consultation with one of us and we can have a chat.

[00:31:16] John Montoya: Wonderful. All right everyone. Thank you for listening. We'll connect with you on the next episode.

[00:31:21] John Perrings: Thanks everybody.