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Katt & Company is a national fee-only life insurance advising firm. The June 2002 Forbes magazine, and a July 16, 2003 Wall Street Journal article, name Peter Katt as one of only four nationally recognized advisors. The Forbes article states that, "…advisers are well worth the money… These savants are working for no one but you…" For references please contact us. Bearer of Bad News "I prudently assessed Becky's health at the beginning of the case and used the best estimate I could. Every so often this estimate is off and I must deal with the emotions of delivering bad news while continuing to focus on an objective evaluation of the best option for my client." My long time friend Ted called to refer one of his clients, Becky, to me. Ted was updating her estate planning and noticed her trust owned a 1995 $3,000,000 UL policy on her life. As is usually the case for older ULs, Becky's policy was overpriced and underfunded. Based on current pricing the policy was illustrated to terminate at Becky's age 84. The target premium needed to extend this policy to lifetime coverage would have to more than double, from $17,000 a year to $40,000. A far more competitive UL, with intentionally low selling expenses, could replace the existing policy with target premiums of around $18,000 for the policy to continue for life. In addition the existing company's financial strength ratings were only fair compared with the recommended company's top rating from the four major services. The attempted replacement was accepted by Becky, the trustee and Ted. At the beginning of all my cases, including this one, I asked Becky for specific information about her health status. There was nothing of note, so I assumed she would qualify for preferred, and the $18,000 target premium of the new company was based on this. When underwriting was completed Becky qualified for standard instead of preferred due to several minor issues. This raised the target premiums to $24,000 a year from the estimated $18,000. Of course a target premium of $24,000 is much better than the existing policy's $40,000, but not as low if Becky had qualified for preferred as her initial health profile indicated. Delivering the news to a prospective insured that the premium will be higher than estimated is awkward. There is a sense of being misled, it not being fair and some denial of not being in perfect health at 56. We broadened the search, but in the end determined that the original recommended replacement was still the best option, even at standard instead of preferred rates. My role is to provide a sensitive sounding board for the client and advisor's complaints, but to objectively point out that the pricing for a standard policy is essentially the same as for preferred because of the probabilities that the policy will pay off slightly sooner. The reality is that Becky's life expectancy is a few years less than if she were preferred. On average she will pay a few less premiums. I prudently assessed Becky's health at the beginning
of the case and used the best estimate I could. Every so often this estimate
is off and I must deal with the emotions of delivering bad news
while continuing to focus on an objective evaluation of the best option
for my client.
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