The one who didn't cancel

Coulda. Shoulda. Woulda. Insurance is protection from Murphy’s Law and a talisman against “I told you so.” It often feels like a waste of money — until that one time we need to use it. Then, it’s the most precious purchase we make.

Every advisor has a story about the one who got away. Mine is about a nice couple about 10 years my senior who almost got away. I met John and Ann when I was fairly new to the insurance profession, and they were in the process of buying a construction company. I ended up booking quite a bit of life insurance with them, something in the ballpark of $5.5 million. But over time, John was hesitant to keep the policy at that level.

He called, so I went up to the house to talk about it. John didn’t think he needed that type of coverage anymore, but I was able to instill some sense into him and remind him why they had it.

The strength of his company lay in the fact that John ran it — he knew the construction business inside and out. “If you die, chances are, the bank will look at your wife, who doesn’t know how to drive a cement truck or run a loader, and your kids, who are young and new in the business, and call all the loans,” I explained to him. “It’s not going to take a risk on them, and you can’t operate in an industry like construction without collateral.”

I reminded him that his business carried $3 million a day in debt because that’s how much he owed on its machinery. If the loans for the machinery were paid off, Ann could hire someone to run the business, and it could continue to operate if something happened to John. His premium was $30,000 per year, and while that may seem hefty, it isn’t when you compare that to $3 million. And it’s collateral loan insurance, so we’re writing that premium off against the revenue of the business.

John’s thoughts of canceling crept back in three times, and on each occasion, I talked him off the ledge. John had a penchant for cars, you see, and with that $30,000 annual premium, he couldn’t spend on his hobby.

John had doubts again as the couple was preparing to set off on a Caribbean cruise for their 35th wedding anniversary. Rather than call and risk getting talked out of his decision, he went behind my back and wrote to the insurance company to cancel the policy before embarking on the adventure.

So, John and Ann set off to sea. They had a lot to celebrate — along with a happy marriage, they were running a thriving business, their kids were nearly grown, and the family was able to live comfortably. But John suffered an aneurysm and had to be medically evacuated from the ship. With her husband unexpectedly on life support, Ann called me in a panic. I arranged for their three kids, ages 17, 20 and 21, to get to the hospital in Florida in time to say goodbye to their father.

As this was unfolding, I had no clue about the cancellation, and neither did Ann, since John didn’t tell her his plans for the policy.

Two days later, my office assistant told me we received an envelope from the insurance carrier containing a surrender form. I’m sure the color drained from my face when I saw the name on the policy. It’s the kind of story that an advisor dreads, but in the case of John and his family, fate intervened once again and the one that could have gotten away actually didn’t.

The form was marked up with notations that read, “This is wrong, this is wrong! Get this corrected. The client needs to initial this.” In his haste to cancel coverage, John had been sloppy and, thankfully, these mistakes caused the termination form to be invalid until he fixed them. His family was still fully insured. I tossed the paperwork in the wastebasket, and the family is still a client to this day.

While the company was doing well at the time John died, the cancellation could have cost Ann the ability to obtain financing. If you don’t have a line of credit to operate, you’re done — you can’t even bid on jobs. The family’s wealth would’ve gone to paying back loans, and their company most likely would have gone under.

Thankfully, it didn’t. Today, Ann is retired, and her children are running the family business. It’s unbelievable the impact that insurance had. If it hadn’t been for that payout 12 years ago, Ann wouldn’t have had the assets that she relied on to get through John’s loss and ultimately transition their business to the kids.

It was his final gift to his family — and it was a huge one.

Michael Haggerty is a 17-year MDRT member. Contact him at michael.haggerty@lsfg.life.