An Advisors' Guide to Excess & Surplus Disability Insurance

3 Uses for Accidental Death Insurance Through the Excess Market

Posted Wed, Sep, 16th, 2020
By Exceptional Risk Advisors

When one thinks of Accidental Death & Dismemberment insurance, images of daredevils summiting Everest, deep-sea diving off the coast of Australia, or race-car driving in the hills of Italy are conjured. However, 9 times out of 10 Accidental Death coverage is written for 1) immediate needs while estate planning; 2) business group travel; or 3) business travel to global hot spots. In this post, we’ll explore these three applications for Accidental Death & Dismemberment coverage.

For life insurance advisors, there is no substitute for great advance planning - traditional life insurance provides comprehensive accident and sickness coverage and is often more cost effective to obtain.  However, we often see advisors with clients who have an immediate need for coverage while updating their estate plans. Typically, the client has an overseas trip planned and needs coverage in place prior to traveling while the domestic coverage is being processed.

We recently shared a case study of a widower and single business owner who sold his business for $125M and created an immediate need for coverage to protect his heir's newly established estate tax liability. Due to the client's upcoming travel schedule, the client's family office recommended considering an Accidental Death policy to hedge the tax liability to the client's estate while traditional whole life insurance was being completed. Download the full case study here.

When a company loads their most valuable talent aboard a single aircraft to visit a new facility or embark on an executive retreat, it can result in an insurance need being developed or uncovered with little notice.  For example, an advisor came to us seeking a quick insurance solution for five top executives at a privately-owned company who were boarding a single plane for their annual retreat.  As exceptional revenue generators, if one or all the executives should perish or be dismembered, the effects to the company would be catastrophic. The biggest challenge in this case was protecting the risk that comes with combined travel. Download the full case study here.

Finally, business travel is a key element in how deals are executed, so it's imperative that we mitigate that risk whenever possible, especially when that travel takes your client to global hot spots. Few domestic life and disability insurance carriers can underwrite large risks when there's high-risk exposure to the world's hot zones.

Here is a notable example. A large U.S company recently made a significant investment in a defense contractor. Shortly after the investment closed, the company named a new CEO and sought to acquire $50 millions of key person life and disability insurance. As of the day of request, the insurance advisor had eight business days to secure the insurance before the CEO departed for the Middle East, with stops in Iraq and Afghanistan. Because of the abbreviated time frame, traditional life and disability insurance was not an option. The advisor needed to turn to a specialty underwriter that deals with exceptionally large and complex human capital risks.

Armed with the CEO's itinerary and details of the executive's compensation and equity incentive agreement, the advisor had enough information to present the submission to the underwriters. Within 72 hours, a policy was issued that covered the private equity firm's loss of the CEO directly due to an accidental death or disability, as well as a result of acts of war or terrorism.

Going back to the original Accidental Death imagery, when a high earning individual is about to embark on a safari, partake in race car driving, or helicopter piloting, often times the advisor cannot access sufficient amounts of life insurance from traditional carriers or the avocation is excluded from the policy. A Lloyd's of London Coverholder can "buy-back" these exclusions from the estate plan with a specialty Accidental Death product to provide comprehensive coverage.

Through the resources found at the Excess market, accidental death and dismemberment is a 24-hour worldwide insurance solution with benefit amounts exceeding $100 million per person. The policy terms can be as little as 1 day or up to 3 years.