![Solving for Aviation Risk & Premium Finance [Case Study]](https://www.figmarketing.com/blog/wp-content/uploads/2022/03/BLOG-03.31.22-AviationUnderwriting-Header2-1170x682.png)
This case study puts a magnifying glass on premium financing for an ultra-high-net-worth (UHNW) individual who has a unique aviation risk.
Read the full case study below or download the PDF version here.
Case Study Background
Samuel is a business owner with a net worth of over $50 million. He needs a life insurance policy that’ll provide asset protection for his business as well as act as a supplemental retirement plan, one that’ll accumulate cash value.
The client wants to premium-finance the policy instead of using his existing capital to pay premiums. He travels for business and pleasure, owns several aircraft, and has had a pilot’s license since the early 2000s.
The main underwriting challenges for Samuel’s life insurance need are twofold: premium finance and private aviation.
Case Study Details
- The client is a 56-year-old male in North Carolina
- Aviation details:
- Visual Flight Rules (VFR) certified
- Private pilot license with 2,600 total flight hours to date
- Flies for business and pleasure
- Three aircraft: Bell Jet Ranger Helicopter, Robinson R-44, and Eurocopter 120-B
- No license suspensions, revocations, or accidents
- Never engaged in hazardous activities or stunt piloting
- Member of Aircraft Owners and Pilots Association (AOPA)
- Needs $20 million death benefit in an indexed universal life (IUL) plan
- Expected premium funding pattern: $900,000 per year over 5-7 years
Related: Should I Replace My Client’s Variable Annuity with an FIA?
Solution: Premium Financing
The advisor provided extensive details surrounding the client’s aviation history and overall health status. Our in-house underwriter compiled a detailed quick quote summary based on those specifics. The case was shopped out to at least 24 carriers to narrow down our options and direct us to the one carrier who could accept the risk with a favorable offer.
The offers received ranged from standard non-smoker with a permanent flat extra to a decline. The permanent flat extras were anywhere from $2.50 per thousand to $10 per thousand. Two carriers came back with offers that didn’t include the flat extra:
- Carrier A: possible non-smoker plus with no flat extra
- Carrier B: possible preferred non-smoker with no flat extra
Carrier B had a great offer and is a solid option for the premium finance element, so we illustrated multiple iterations on their two IUL products. Although the cash value wasn’t quite as good as some competitors, we could still accomplish the client’s goal by blending in term coverage.
The formal application went to Carrier B and the policy was placed in force at preferred non-smoker with a target premium close to $600,000.
Impact of Case Study
The preliminary due diligence on the advisor’s part helped with the success of this case. He provided detailed information on the aviation questionnaire so there were no surprises from that aspect.
The advisor and insured are so happy with the outcome that they’re now applying for an additional $20 million with Carrier B.
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For Financial Professional Use Only
The content within this case study is for educational purposes only and does not represent legal, tax or investment advice. Customers should consult a legal or tax professional regarding their own situation. This case study is not an offer to purchase, sell, replace, or exchange any financial product. Insurance products and any related guarantees, features and/or benefits are backed by the claims paying ability of an insurance company. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.