RESOURCES - UNderwriting
Financial Underwriting

The following information is intended to provide you with a basic overview of the most common financial situations and the methods used for calculating a justified amount of coverage. Every case should be accompanied by a detailed cover letter. The Cover letter should explain the need for coverage and how the amount was determined.

Example: Key Man coverage should be accompanied by a cover letter explaining why the client is a key person, and include total compensation and details of the employment contract. Details of coverage on other key staff should also be included.

Purpose of Insurance – Personal – replacement of income
The following guide should be considered:
Age 20–35 Factor of earned income 20 to 30
Age 36–40 Factor of earned income 15 to 25
Age 41–45 Factor of earned income 14 to 20
Age 46–50 Factor of earned income 12 to 20
Age 51–59 Factor of earned income 10 to 15
Age 60–64 Factor of earned income 7 to 10
Age 65–70 Factor of earned income 4 to 10
Age 70+ Factor or earned income 4 to 5

Non-Working Spouse
Up to 50% of working spouse coverage with a maximum of $1 million. Some carriers are more liberal.

Children’s Coverage
Up to 50% of parents’ coverage.

*Some carriers only offer maximum of $250,000.

Personal Debt Protection
100% of home loan. 50% to 75% of loan balances for other credit vehicles.

Business Debt Protection
50% to 75% of loan balance.

Key Person
Up to 10 times annual income.

Buy/Sell
Percent of ownership multiplied by the corporate (fair market) value

Estate Planning
Estate value appreciation at 6% for one-half the greatest life expectancy or 8 to 10 years.