Life Insurance for Pilots

[22 others]

The bank says I need life insurance as collateral for a loan.  So...it's time I got life insurance.  I hear it costs more for us pilots?  For you guys that have worked through this, what was the method that worked for you?  Anything to avoid? Anything to mitigate the costs? 

[carusoam]

Sounds odd...

Can you share the value of the loan?

I assume they are interested in knowing that you will pay it off even if you are not alive.

In the past, you would pay a down payment of about 10%.  This would cover them selling at 90% of actual market value.

apparently your lender has taken the route of not caring if there is a market.

Theoretical question: depending on if you have family or not, what would happen if you croak?

It is a pretty well thought out idea to have life insurance to pay off all your debts upon your demise.  Especially if you are leaving partners and family behind...

PP ideas.  I am not a financial expert or know anything about insurance.

Best regards,

-a-

[mooniac15u]

I was able to find a policy without aviation exclusion through a local agent. YMMV.

AOPA offers a term life plan for pilots. Just go to the insurance link on their homepage. 

[22 others]

About the Loan.... it's a business loan and I'm a dentist.  The life insurance requirement is par for the course, and like you said.. I probably aught to have it for my family anyhow.

Before I go wandering off getting quotes, I expected some of you guys might have some helpful thoughts. There's a lot of knowledge in this place.

[TWinter]

When I first moved here the I was looking for a business equipment loan. The bank said they would do the loan, but required that I have a life insurance policy. I thought that was odd. Never had a bank require that. That was many years ago and at the time I had no prior relationship with this bank. I just bought a generic policy and it sufficed.

Many years later and after several other loans over the years I've never had them ask me if the policy was current or still existed. I think they are just protecting their interest.

 

-Tom

[Seth]

This is actually a common practice for business loans, especially in this day an age where the lender needs to ensure they'll recover the asset in case there is no collateral or if the borrower does not want to sign a personal guarantee on top of a business loan.  If the business is an LLC/corporation/entity and goes belly up, the bank does not get its capital back.  Should the borrower sign a personal guarantee, then personal assets are at stake.  However, if the borrower passes away, and it's a small company with that individual as the "key man" then it is difficult to come after the estate, even though it can be done.  To forgo that, life insurance can be and is used often.

 

The good news is that separately I am a Full Wealth Manager and Financial Advisor, I created my firm, Ascent Finaicial Management specifically to assist pilots.  "File Your FINANCIAL Flight Plan!"

Only about 8% of my clients are pilots and aircraft owners at this time, and my first piece of advice usually is to sell your airplane  which I won't do either, as it's a passion, but I understand our love for aviation. Only one client has really needed to sell their airplane - and he did.

I'll PM you contact information and we'll chat.  Pricing all depends on what you need, medical history, and flight experience.  I'm independent so I shop dozens of carriers to get you the best  quality bang for your buck.  

Take care,

-Seth

[N601RX]

So if the business owner died would the insurance money not go to his beneficiaries and not his estate? Does the bank want to be listed as a beneficiary?

[Seth]

Exactly - the beneficiary would be the lender.  Just like a car loan and auto insurance policy.

 

[Hank]

I bought life insurance before I began flying. Seems they asked if I was, or would soon become, a pilot. Answered no,mad it wasn't possible at the time. However, one job change and relocation, a year to settle in, and bammo! Hello, flight lessons!

[Seth]

Yes - as long as you don't become a pilot for 2 years after in most cases, the policy holds.  Rarely do they come back and say you lied, but after two years, usually it's a non issue.

Some companies charge a flat extra fee, some treat you as if you are not as healthy and thus a higher risk, and some depending on your experience, consider you not a pilot when conducting their ratings.

If anyone wants me to go over specific information, PM me!  This is what I do!

-Seth

[Guest]

In Canada it was harder to find affordable life insurance as a pilot. Most companies had aviation exclusions, I bought through the national pilots group, COPA and got reasonable rates.

Clarence

[DrBill]

I got new Life insurance after I retired.  Found that most "pilot" friendly policies are meant for commercial pilots, not private pilots so they tend to be expensive.  I ended up with a great deal from Minnesota life for term ins.   Still keep it renewed.   Shop around.

Bill

 

[Seth]

On May 21, 2016 at 9:28 PM, DrBill said:

I got new Life insurance after I retired.  Found that most "pilot" friendly policies are meant for commercial pilots, not private pilots so they tend to be expensive.  I ended up with a great deal from Minnesota life for term ins.   Still keep it renewed.   Shop around.

Bill

 

A few companies depending on experience and other factors don't charge a flat fee and rate you as if you are not even a pilot.  Others (meaning most) use it as an excuse to pile on more dollars.

Minnesota Life is one of the most pilot friendly policies out there even as a private pilot.  However their underwriting is tough unless you are 30 years old and in perfect health.

Prudential is another good policy for pilots.  Their underwriting tends to be a breeze even for those with medical histories, however their polices cost more than other companies price point wise.

But, Prudential will give you their second or third best rating where Minnesota life will rate you equal to a smoker with liver issues, so even though Minnesota Life is better priced at a similar rating, you'll get a better overall price at prudential's higher rating since.  

These are examples, but occur over and over again when I work with pilots.

PM me anytime and I'll work up an informal quote for you to find out real life costs.

"File your FINANCIAL Flight Plan."

-Seth