Updated: September 5, 2023, at 4:11 PM
I’m sure underwriters ask you for cover letters…and cover letters…and more cover letters.
I was once at an underwriting conference with 20 or so carriers, and the individual carrier underwriters kept talking about cover letters. But all that talk doesn’t necessarily tell you how to write a life insurance cover letter.
When I was a home office underwriter, I learned that well-written cover letters are essential. How else could I understand the context of the application? Where else was I going to get necessary information that didn’t fit on the forms? At the same time, I didn’t appreciate cover letters that were poorly written or full of extraneous information.
Now that I’m in a position to write cover letters myself, here are the three main underwriting factors I think about to make sure I give the underwriter what he or she needs.
1. Is it Needed?
As important as cover letters are, not all cases need them. Say a young individual making $50,000 a year at an office job, with no medical history, comes in for a $100,000 term for the purpose of income replacement. In that scenario, no extra information is necessary.
Underwriters already read a lot so they don’t appreciate being given unnecessary material. Look at the information you’re sending. If it tells a complete story by itself, you don’t need a cover letter. If it doesn’t, or if there’s some facet of the applicant’s situation you want to stress, then it’s best to write a letter.
2. Purpose of Coverage
Your life insurance cover letter should focus on explaining the need and justifying the face amount, especially in cases where the need may be outside normal underwriting guidelines.
For example, say the case involves business key person insurance at 15 to 20 times the applicant’s compensation. Since key person insurance is generally only five to ten times compensation, you have to make a strong case of why your client’s employer would suffer a loss of the applied-for amount.
If your client has a difficult medical situation, you could have a hard time securing the rate you want. You’ll have to use your cover letter to address all potential roadblocks and pull out every favorable factor about the client’s medical history to lobby for the best rates.
That’s a lot easier if you have the complete medical records in front of you. If you don’t, do the best you can based on the application itself. And use the information obtained during your fact-finding.
3. Writing the Cover Letter
Now that you know whether to write a cover letter and what to put in it, be sure to write it well; meaning keep it short, clear, and to the point—with no unnecessary information.
No cover letter should ever be over one page in length, and most should be shorter. Also, be realistic. If your client had three heart attacks before the age of 40, don’t recommend him or her for Super Preferred. You’re not going to get it, and pretending you are is a good way to quickly lose credibility with an underwriter.
Again: write a clear, succinct, and realistic letter that makes both the need and amount clear to the underwriter and highlights the favorable factors of your client’s medical history. That letter is your best bet to secure the best possible rates for your client.