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Traditional underwriting

How we look at financials

When it comes to financial underwriting, we specialize in large death benefit applications. We have widespread expertise with aggressive financial guidelines to manage cases well beyond our retention limits.

What is financial underwriting?

Financial underwriting verifies a valid, insurable interest exists and justifies the amount of life insurance applied for. It helps maintain an acceptable level of persistency for all parties.

Insurable interest

  • The death benefit must approximate the financial loss to the beneficiary created by the death of the insured
  • The amount of insurance is based on the financial details of the sale, not by the affordability of the premium
  • Insurable interest is usually straightforward. If you have an unusual situation, call your underwriter

Cover letters

The writing producer is the key source of financial information. A cover letter explaining the sale’s circumstances can help speed the application process.

The letter should include:

  • Background information on how the life insurance sale developed
  • Purpose and need for life insurance coverage
  • Income and net worth of the proposed insured or business
  • Amount of insurance currently in force
  • Applications submitted to other companies, their intended purposes and if you are the representative of record
  • Amount of any coverage being replaced. State the reason for the replacement
  • The total amount of coverage (from all sources)
  • Whether the sale involves premium financing

Coverage amount guidelines

The charts below outline general coverage amounts for various insurance purposes. If you have an unusual case, call your underwriter.

Personal coverage/Income replacement

Age
Factor time income
</=35 35x
36 - 40 30x
41 - 50 25x
51 - 55 20x
56 - 60 15x
61 - 65 10x
66 - 70 5x
>70 Individual consideration*

*Case-by-case consideration, dependent upon planned retirement age, occupation, income, and overall case

Personal loans

  • We allow a face amount up to 70 percent of the outstanding balance of the loan to creditor. Loans must be a minimum of five years
  • We require the details of loan amount, purpose, repayment schedule, interest rate charged

Juveniles

  • We consider up to Preferred Non-tobacco rates for juveniles
  • We consider up to $100,000 of coverage on juveniles without matching parental coverage1 
  • We consider up to $250,000 of coverage on juveniles provided the parents have or are pursuing a similar amount of coverage1 
    • For juvenile coverage exceeding $250,000, we consider juvenile coverage up to 50% of an income-earning parent's in force coverage (whichever parent has greater coverage). This includes group coverage when determining total in force parental coverage.1 
  • We've expanded our consideration for grandparent gifting scenarios by removing face amount restrictions up through $250,000 of coverage1 

Charitable contributions

The average contribution record for the past three years multiplied by 10 if age 65 or younger; or by five if over age 65 (may require third-party financial verification).

Considerations
  • Do you have a third-party verified contribution record for the past three years?
  • Is the charity an irrevocable beneficiary?
  • Who is the owner of the policy and the premium payer?
  • Does adequate personal and estate planning coverage already exist?
  • Have you verified through tax documents that the organization is an incorporated charitable entity?
  • No Premium Financing allowed

Financial suitability of premium

When the client is paying premium from earnings, annual premium should not be in excess of 20 percent of annual income.

When the client is paying premium from asset transfer, aggregate premium and liquid net worth consideration should generally be capped as follows:

  • Under age 59½: Up to 40 percent aggregate premium/liquid net worth. Do not allow qualified plans (401(k), 403(b), 457, IRA or Roth) to be used as a funding source, nor factor them into the liquid net worth
  • Ages 60-69: Up to 30 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized
  • Ages 70+: Up to 20 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized

In cases where client uses qualified plans as a current income stream, consideration of the use of these plans to pay premium may not be appropriate and needs to be viewed on a case by case basis.

Estate conservation

In general, we consider an amount equal to the taxable estate value multiplied by the estate tax rate.

Personal loans

  • We allow a face amount up to 70 percent of the outstanding balance of the loan to creditor. Loans must be a minimum of five years
  • We require the details of loan amount, purpose, repayment schedule, interest rate charged

Juveniles

  • We allow up to 50 percent of amount of insurance in force on an income-earning parent. (The non-income earning parent should also be adequately insured.)1
  • We require a cover letter and an Attending Physician’s Statement (APS) if the amount exceeds $500,000

Charitable contributions

The average contribution record for the past three years multiplied by 10 if age 65 or younger; or by five if over age 65 (may require third-party financial verification).

Considerations
  • Do you have a third-party verified contribution record for the past three years?
  • Is the charity an irrevocable beneficiary?
  • Who is the owner of the policy and the premium payer?
  • Does adequate personal and estate planning coverage already exist?
  • Have you verified through tax documents that the organization is an incorporated charitable entity?
  • No Premium Financing allowed

Financial suitability of premium

When the client is paying premium from earnings, annual premium should not be in excess of 20 percent of annual income.

When the client is paying premium from asset transfer, aggregate premium and liquid net worth consideration should generally be capped as follows:

  • Under age 59½: Up to 40 percent aggregate premium/liquid net worth. Do not allow qualified plans (401(k), 403(b), 457, IRA or Roth) to be used as a funding source, nor factor them into the liquid net worth
  • Ages 60-69: Up to 30 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized
  • Ages 70+: Up to 20 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized

In cases where client uses qualified plans as a current income stream, consideration of the use of these plans to pay premium may not be appropriate and needs to be viewed on a case by case basis.

Estate planning projection

We offer single-life and second-to-die coverage (using younger insured’s age). The chart below outlines our projected estate growth rates, at various ages.

Age
Years projected
Annual growth rate
</=40 25 6%
41 - 50 20 6%
51 - 65 15 6%
66 - 70 10 6%
71 - 75 8 6%
Over 75 Individual case basis Individual case basis

Personal loans

  • We allow a face amount up to 70 percent of the outstanding balance of the loan to creditor. Loans must be a minimum of five years
  • We require the details of loan amount, purpose, repayment schedule, interest rate charged

Juveniles

  • We allow up to 50 percent of amount of insurance in force on an income-earning parent. (The non-income earning parent should also be adequately insured.)1
  • We require a cover letter and an Attending Physician’s Statement (APS) if the amount exceeds $500,000

Charitable contributions

The average contribution record for the past three years multiplied by 10 if age 65 or younger; or by five if over age 65 (may require third party financial verification).

Considerations
  • Do you have a third party verified contribution record for the past three years?
  • Is the charity an irrevocable beneficiary?
  • Who is the owner of the policy and the premium payer?
  • Does adequate personal and estate planning coverage already exist?
  • Have you verified through tax documents that the organization is an incorporated charitable entity?
  • No Premium Financing allowed

Financial suitability of premium

When the client is paying premium from earnings, annual premium should not be in excess of 20 percent of annual income.

When the client is paying premium from asset transfer, aggregate premium and liquid net worth consideration should generally be capped as follows:

  • Under age 59½: Up to 40 percent aggregate premium/liquid net worth. Do not allow qualified plans (401(k), 403(b), 457, IRA or Roth) to be used as a funding source, nor factor them into the liquid net worth
  • Ages 60-69: Up to 30 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized
  • Ages 70+: Up to 20 percent aggregate premium/liquid net worth and consider qualified plans to be factored into the net worth and utilized

In cases where client uses qualified plans as a current income stream, consideration of the use of these plans to pay premium may not be appropriate and needs to be viewed on a case by case basis.

Older ages

Below are underwriting guidelines for ages 70 and above, when the amount is applied for reasons other than income replacement or estate planning needs.

  • Face amounts over $3 million at age 70 and above require third party financial documentation
  • Death benefit: up to one times net worth
  • Premium: affordability is a key factor. We can consider premium up to 20 percent of income
  • If children are owners and/or premium payers, please provide additional details and further explanation

Non-income earning spouse

We allow $1 million face amount on a non-income earning spouse

  • As long as the income-earning spouse qualifies and has $1 million or more in-force coverage

For face amounts above $1 million on a non-income earning spouse, we allow 50 percent of the income-earning spouse’s in-force coverage

  • Up to a maximum of $5 million, and up to age 50 on the non-income earning spouse

If the amount requested is outside these guidelines, call your underwriter

Buy-sell, partnership buyout, stock redemption

We multiply the percentage of ownership by the market value of corporation.

Key Person

Annual income (salary plus bonus) multiplied by the factor below. Factor will vary depending on circumstances.

The chart below outlines the amount of coverage available in key person sales at various ages.

Age Under 50 51-60 Over 60
Factor  Up to 12x  Up to 9x Up to 5x

Business loan collateral

We consider face amounts up to 70 percent of a business loan amount as collateral.

Deferred compensation

Premium amounts paid toward deferred compensation coverage can be considered part of income when determining amounts for multiples of income guidelines.

We consider face amounts up to 18 times the proposed insured’s income.

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Have questions or need assistance?

1. Not applicable in New York

Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

Product features and availability may vary by state.

Life insurance products contain charges, such as Cost of Insurance Charge, Cash Extra Charge, and Additional Agreements Charge (which we refer to as mortality charges), and Premium Charge, Monthly Policy Charge, Policy Issue Charge, Transaction Charge, Index Segment Charge, and Surrender Charge (which we refer to as expense charges). These charges may increase over time, and these policies may contain restrictions, such as surrender periods. Policyholders could lose money in these products.

These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person's individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its subsidiaries, have a financial interest in the sale of its products.

For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it is accessible to the general public.

DOFU 12-2024

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