If your clients rock climb, scuba dive, travel to dangerous places for work or even drive long distances (compared to the average person), they’re considered higher-risk individuals.
With a higher-risk lifestyle comes a unique set of risk management and insurance needs. As a good advisor, you’ll have to assist your client in building a comprehensive plan that gives them proper coverage. Here are some tips.
Understand and manage risk
Extreme sports enthusiasts aren’t the only clients with coverage that may not be cutting it. High-risk insurance applicants include:
- political figures;
- business moguls;
- professional athletes;
- hazardous chemical workers;
- deep-sea divers; or
- firefighters, military and those in the police force.
The lifestyles these people lead often include exotic, international travel or more frequent access to high-risk activities. In some cases, their affluence and high profile puts them at higher risk of kidnapping, death threats, or travel to natural disaster areas or war-torn regions.
The greatest hazard is an accident, and you don’t want to find out your client’s policy won’t cover him after such an event. In your first meeting, have a conversation about what his job entails, travel habits, and what activities he enjoys. Taking detailed notes about any risky activities, including qualifications and the frequency of participation, will better prepare you to advise him on additional coverage or how to adjust a policy.
If a specific extreme activity is not named in a policy, it’s not covered. Rock climbing, for example, may be excluded from a standard policy. If a client chooses to purchase a rider to cover such an activity, the rider will specifically name the activity and any additional guidelines. Additional costs can typically range from a 25% to 600% surcharge.
Individual life insurance offers two options for applicants participating in avocations like rock climbing. The policy can be rated from $2.50 extra per thousand, to $10.00 extra per thousand, to an outright decline or offer to be issued with an exclusion (no coverage) for this activity. Participation in more than one hazardous activity may suggest a reckless lifestyle, and so the application is carefully underwritten, and that type of risk may not be considered insurable.
Another unusual risk that is relevant for high-profile clients is kidnapping. Clients who live with this type of risk should be directed to specialty kidnap and ransom insurance, which provides a safety net and allows for any such situation to be resolved with help from a specialized company.
Know their policies
The biggest mistakes clients make are is not reading a policy, misunderstanding what is covered, and assuming they are covered for high-risk activities. Walk through the policy with them, pointing out any important stipulations and flagging activities that would not fall within their coverage. For instance, they may not know the difference between a rating and exclusion. If clients take policies with exclusions, their premiums will not rise commensurately. If certain things on the policy are excluded, inform them and find out if they require additional coverage for those activities.
If the client needs additional travel insurance coverage (or knows he will be engaging in a certain activity, such as skydiving), you may advise him to purchase a rider. Help your client understand the options and coverage offered through additional riders for the activities in which he participates. Your client will likely develop a habit of calling you prior to participating in high-risk activities, so that he can purchase appropriate additional coverage. This may increase the rating, especially if he does the activity regularly, and therefore increase the premium. But, your client will have a more comprehensive policy that matches his lifestyle.
Current underwriting of activities requires identification and mitigation of excess risk by examining factors, including what equipment is used, safety precautions taken, frequency of participation, and experience and/or qualifications, along with medical impairments. For example, scuba diving can be standard risk if participation is limited to vacation and daytime dives, and is no deeper than 100 feet. If the client participates in deeper dives, night dives, cave or shipwreck dives, however, the risk increases and the activity may be explicitly excluded. Other activities, such as bungee jumping, are automatically considered high-risk. Many high-risk activity companies require you to sign a waiver before participating, but that waiver only protects the business and won’t affect individual insurance policy and coverage.
Amateur thrillseeker or a highly skilled participant?
Regarding preparedness for risky activities, travel underwriters won’t look at safety equipment. Check your client’s life insurance policy to see what is covered and what may be excluded. Aside from regulation and training, a key determination is whether the participant is an amateur thrillseeker or a highly skilled participant. This is developed during the underwriting process, with activity-specific questionnaires, medical reports, motor vehicle reports and outside consumer reports, including Google searches. If your client’s designated as a professional athlete, or involved in an association related to a risky activity, he may not be insurable.
Cross-reference an employer’s coverage
When evaluating clients with higher-risk careers, make sure they’re aware of what their employers’ insurance covers. Most group insurance plans have some out-of-province coverage, but it could be basic and will likely have restrictions around higher-risk activities.
If your thrill-seeking client is travelling outside his home province, or leaving Canada entirely, make sure he consults you first. Travel insurance or additional riders may be required to ensure all aspects of his career are covered.
Disability insurance may also be a good addition, due to the physical risk involved with some activities. This typically requires extensive documentation and interviews, and may specifically exclude risky activities, such as heli-skiing or skydiving.
Similarly, members of the media or those in medical fields may be required to travel to areas where travel health advisories are in place. Many travel policies will exclude coverage in areas deemed high-risk by the Canadian government. Make sure these clients are aware before they travel.
by Grant Ostir, president and COO of Western Life Assurance.