Field Underwriting Guide
This guide was developed by GBU Life (GBU) to provide you with some general guidelines on how GBU assesses and considers issuing a life insurance policy. We have provided our most frequently requested information; however, we would be happy to answer any additional questions you may have. Feel free to contact us by phone or email. We look forward to partnering with you on this journey to a successful placement of coverage.
No ratable aviation, avocations, occupations, scuba or foreign travel Scuba diving is only considered if recreational and less than 100 ft.
(BTS)
Blood Pressure
GBU
MVR
Total Cholesterol ≤250
Age ≤ 49: BP 130/80
Age ≥ 50: BP 135/85 No Medication
Age ≤ 49: 135/85 Age 50-69: 138/85 With or Without Medication 145/90 With or Without Medication Build See Build Chart See Build Chart See Build Chart
No history of DWI or Reckless Driving in last 5 years;
No License Suspension in last 3 years;
No more than 2 moving violations in past 3 years
No history of DWI or Reckless Driving in last 5 years; No License Suspension in last 3 years;
No more than 3 moving violations in past 3 years
No history of DWI or Reckless Driving in last 5 years;
No License Suspension in last 2 years;
No more than 4 moving violations in past 3 years
Cholesterol Ratio 5 or less (no previous or current treatment) Cholesterol Ratio 6.5 or less Personal
Family History
Cholesterol Ratio 4.5 or less (no previous or current treatment)
No death from stroke, cardiac, cardiovascular disease or cancer in parents/siblings prior to age 60
No death from stroke, cardiac, cardiovascular disease or cancer in parents/siblings prior to age 60
cancer, diabetes, cardiac or cardiovascular disease
Gender Agnostic: Height and Weight
5 lbs. stretch on high side
NOTE: Underwriting will also assess for applicants who are under a certain weight as certain risks are associated with applicants whose build is less than normal parameters and may represent certain medical conditions.
Age and amount requirements are based on the total amount of insurance applied for and already in force with GBU.
Insurance Exam Tips
When an applicant learns that they need to have an examination completed in conjunction with their life insurance application, a number of things can run through their mind. The most noted question is “will it be like my annual physical exam?” The answer is yes and no. Yes, this exam will check your vitals as in a standard, annual physical exam. However, the questions will be asked by a professional other than the applicant’s personal physician. Ensuring your applicant is prepared for the insurance examination and that the information the applicant provides is accurate and complete improves the likelihood of a more positive outcome.
1. Make sure that the applicant understands the questions that will be asked: The exam questions are usually similar to the questions listed on the application, so make sure that the applicant is not caught off guard and answers the questions honestly.
2. Make sure that the applicant is calm: Anxiety and stress can cause elevations in a person’s blood pressure and heart rate.
3. Limit certain foods: Please make sure that the applicant limits all high fat and salt-laden food for at least 24 hours before the exam. Fasting at least 8-12 hours prior to the exam is recommended.
4. Alcohol: No alcohol should be consumed for a minimum of 24-36 hours before the exam.
5. Smoking and Coffee: The applicant should limit stimulants that may affect blood pressure and heart rate prior to the exam.
6. Drink Water: The applicant will need to provide a urine sample. Suggest drinking water prior to the exam to get kidneys running smoothly to ensure the applicant is not dehydrated.
7. Going to “workout” will not “workout”: Make sure that the applicant does not perform strenuous exercise at least 24 hours before the exam.
8. If your applicant is diabetic: Please make sure that the applicant provides their blood sample at least 2-21/2 hours after a meal and has refrained from eating sugar.
9. If your applicant is hypertensive: Please make sure that there has not been a change in the time and dosage of their meds, and that the meds are being taken at their normal times.
Financial Underwriting
Underwriting manuals and guidelines have a myriad of medical conditions that can affect an applicant’s mortality. However, as an agent, you may not be aware of the severity or significance of your applicant’s medical condition, and you may not be aware of the information that is needed to provide a more accurate pre-assessment and recommendation.
The purchase of life insurance is a financial transaction. It is fundamental that the premium charged is based on a full disclosure of pertinent information regarding insurability and financial condition of the applicant. The amount of insurance issued should commensurate with the amount of loss. However, in today’s environment, we must recognize that there is often an investment component to the product that must be evaluated as well. Those applications that do raise financial questions must be carefully reviewed with detailed, accurate and complete information to assure that the coverage applied for is appropriate.
Insurable Interest
An underwriter must establish that insurable interest exists prior to approval of an application for insurance. Laws have been enacted in most states that try to protect a person against the danger that a policy owner will seek the death of the insured to profit. These laws have defined four types of insurable interest:
• A person has an insurable interest in their own life.
• Parents have an insurable interest in the life of their child(ren).
• Each spouse has an insurable interest in the life of each other.
• A person has an insurable interest in the life of another where there is a reasonable expectation of financial gain from continued life and a monetary loss resulting from the premature death of the other person.
Trust Ownership
A Certificate of Trust must be submitted prior to underwriting approval whenever a trust is listed as policy owner or beneficiary. This is required to maintain insurable interest that is not available or would be lost if the trustee has the ability to move assets to a person or entity that would not incur a monetary loss at the applicant’s demise.
The assessment of financial justification is broken into two categories: Business and Personal Consideration.
Financial Underwriting Purpose of Coverage for Business Insurance
Key Person Coverage
The amount of coverage on a key person in a business should be equal to the monetary loss incurred upon the premature death of the employee. In the absence of unique circumstances, a reliable indicator of the insured’s worth to a company is the compensation received.
If the amount applied for is more than five times the gross annual remuneration, the additional loss to the business should be substantiated. It is important, in calculating the yearly compensation, to take salary, regular bonuses, stock options and other executive remuneration into account. Senior officers or principals in exceptionally large businesses or with employment contracts of long duration may be allowed a significant increase in the five times multiple. Particular care should be taken if the business appears to be faltering, if equal coverage is not carried on all key employees or if the insured is nearing retirement age.
FACTORS TO REVIEW: Applicant’s income, responsibilities, hiring process for replacement
CALCULATION: 10 x Applicant’s Income
Stock Purchase/Partnership
The purpose of this coverage is to enable surviving stockholders or partners to acquire the insured’s portion of the business and retain control of the business entity. It is important that the amount of insurance be proportionate to the percent of ownership and the worth of the business. All major stockholders or partners who are insurable should be covered. On cases involving significant amounts or questionable circumstances, it is sometimes helpful to obtain copies of stock repurchase or partnership buy/sell agreements along with financial statements stipulating the worth of the business. The market value of the business needs to be determined in all cases.
FACTORS TO REVIEW: Ownership percentage, coverage of partners, agreement details, business valuation by third party
CALCULATION: Percentage of Ownership x Net Worth of Business
Creditor Insurance
Creditor insurance for a business debt should only be on the lives of active principals in the business whose loss would hamper the functioning of the business and thus the timely repayment of the loan. Coverage coincides with key person coverage since most business loans are collateralized by business assets and will be repaid as a general expense. Coverage for the full amount of the loan is generally not justified, even though many financial institutions will request it. If the business is a sole proprietorship or a subchapter S corporation, consider the creditor coverage as personal insurance.
FACTORS TO REVIEW: Loan parameters, amount of loan (carriers will consider up to 70-80% of loan value max)
CALCULATION: 70-80% of Loan Value
Financial Underwriting Purpose of Coverage for Business Insurance, continued
Buy/Sell Agreement
The buy/sell agreement guarantees that the insured’s family will receive a fair price for the interest of the deceased stockholder. The buy/sell agreement contains a valuation of the business upon which the insurance amount is based. It is usually binding on all parties. Benefits are paid by the insurance company to the business to fund the agreement. The business then pays the insured’s heirs. The agreement protects the personal wealth of the insured by providing a buyer for the business at an agreed-upon price, thus avoiding a forced sale under potentially unfavorable conditions.
FACTORS TO REVIEW: Agreement details, business valuation
CALCULATION: Percentage of Ownership x Market Value of Business
Split Dollar Coverage
Split dollar coverage is an employer-purchased type of deferred compensation. An employer advances the life insurance premium and upon death, recovers an amount equal to the premiums paid. Employer and employee both have an economic interest in the life insurance policy. Employee pays for the economic benefit (IRS tax table PS 58, cost of life insurance) received each year, that is, current life insurance protection, and the employer pays the rest. Both parties must give up some rights in the policy. Provides a tax-exempt life insurance benefit to the employer and employee’s beneficiary. Permits employer and employee to share income-tax-free cash value buildup within the policy. This will provide equity to pay for the employee’s retirement assuming employee lives to retirement age. Upon the employee’s passing, the employer receives their contribution with the balance of the proceeds being paid to the employee’s beneficiary.
FACTORS TO REVIEW: Applicant’s employment benefits/package
Charitable Beneficiary
Coverage provided with this beneficiary designation should be consistent with an established pattern of support for the charity. Though some latitude may be permitted, amounts should be in line with an amount equal to the present value of anticipated contributions during the lifetime of the insured.
Another factor that should not be overlooked is the tax benefit. As allowable by law, charitable contributions are tax deductible. In most instances, the organization will be a public charity acknowledged under U.S. Tax Code Section 501(c)(3). However, gifts to some non-public charitable institutions or private foundations may also be deductible.
FACTORS TO REVIEW: Donation schedule/amount, participation in charity
Financial Underwriting Purpose of Coverage for Personal Insurance Income Replacement
A major portion of a comprehensive personal insurance program is to provide for loss of earnings due to the insured’s premature death. Generally, the amount of coverage is determined as a multiple of present earnings and should not exceed the present value of future earnings. In determining income, include all sources of earned income, including base salary and regular cash and stock bonuses. One-time or infrequent bonus payments or stock options should be excluded. Also, include unearned investment, rent and royalty income if it is clearly a result of the insured’s personal management expertise. If the proposed insured’s income fluctuates from year to year, use a reasonable average. More liberal consideration should also be given to young professionals with anticipated high future earnings. The total premium for personal insurance must also be reasonable and in line with the income. With the current, inexpensive products available, this usually does not present a problem, however, the total premium should not exceed 20% income. FACTORS
NOTE: Earned income includes income from salary, commission and bonuses. It does not include investment pending, interest, retirement or rental income.
Financial Underwriting Purpose of Coverage for Personal Insurance, continued
Estate Planning (Estate Taxes)
Effective estate planning minimizes the impact of federal and state inheritance taxes. Life insurance provides liquidity in comprehensive estate-planning programs. The amount of estate taxes on life insurance depends upon prevailing tax laws, and each application must be considered on its individual merits and needs. Last-to-Die products generally provide the coverage for estate taxes. When the amount requested for estate conservation appears excessive, request that the producer provide a cover letter clarifying how the amount of coverage was developed and provide appropriate third-party financial statements.
FACTORS TO REVIEW: Make sure estate value is enough to incur estate taxes (excluding exemption amount)
CALCULATIONS: Net Worth x ½ Life Expectancy x 4-6% (depending on type of assets)
Homemakers
When considering the appropriate amount of insurance for the stay-at-home spouse, you run into a highly subjective area of financial underwriting. There is no income factor to fall back on. In most circumstances, there is no net worth to be considered. Some points to consider when deciding what the proper face amount should be
• Income and insurance in-force on the working spouse
• Proposed insured’s age
• Number of children
• Ages of children
• Proposed insured’s education or training prior to leaving the work force
A person working at home is not easily replaceable. Would the surviving spouse need to leave work to care for the children? Would a childcare worker need to be hired to care for the children? How long would the surviving spouse need to hire people to help raise the children? Use common sense to determine a proper amount based on overall need.
FACTORS TO REVIEW: Consideration should not exceed the coverage of the income-producing spouse
Juvenile Insurance
Usually, coverage is applied for in anticipation of future insurance needs or as part of an educational savings program. Though future needs can only be estimated, this coverage should be part of a well-prepared family insurance program with adequate coverage on both parents and similar coverage on all siblings.
FACTORS TO REVIEW: Coverage amount should not exceed ½ of parents’ coverage, as well as all children should be covered for like amounts
Tobacco
Recreational* Marijuana
Medicinal Marijuana
• No tobacco in past 36 mos.
• Occasional cigar not to exceed 12 per year and negative urine specimen
• No tobacco in last 24 mos.
• Occasional cigar not to exceed 12 per year and negative urine specimen
Use less than 5 per month
• No tobacco in last 12 mos.
• Occasional cigar not to exceed 24 per year and negative urine specimen
Use less than 10 per month
Meets all other Preferred criteria but positive for nicotine product
Does not meet Preferred criteria and positive for nicotine product
Based on underlying cause of use
*If amount per use does not exceed amount that can be legally consumed.
Military Consideration Guidelines
GBU has been a firm supporter of our military and those who serve to protect our country. We must adhere to all governmental guides and state regulations associated with active-duty personnel and their status, benefits and other limitations that may be linked to their assignment.
GBU will consider all active military branches, including reserves, on an individual basis except for the following:
• Has not been alerted for and not on orders to serve outside the United States or Canada
• Duties involving long-term exposure and handling of hazardous devices/materials
• Duties involving handling, transportation, evaluation, maintenance or development of explosives
• Duties involving designation war-zone areas
• Duties involving recognizance or rescue of military targets or captives
• Duties that involve heights that are excessive and do not fall under air activity participation
• Duties that involve Army Rangers, USAF Special Warfare, Green Berets or Navy Seals
Consideration will be based on the applicant’s
A. Duty status
B. Rank and branch of service
C. Location (past and present)
D. Alert capabilities
E. Occupational specialties
The GBU New Business and Underwriting Promise
GBU Underwriting knows and understands that the underwriting and submission process can be challenging. We are committed to making the process as easy as possible while providing the comprehensive risk assessment that you would want and expect from GBU.
GBU Life is the marketing name for GBU Financial Life. Life insurance is underwritten by GBU Financial Life (GBU), 4254 Saw Mill Run Blvd., Pittsburgh, PA 15227. Products and features are subject to approval and may vary by state.