Financial Justification: The Other Underwriting Hurdle
Situation: A financial representative called DBS seeking coverage for two very healthy married insureds, both medical students. The male insured had approximately $200,000 of student loans, and the female $100,000. The male expected to graduate and start his residency in a year, and at a starting pay of $45,000. The female took leave from medical school to care for their children.
Problem: An underwriter’s review of a case file includes an assessment from both medical and financial standpoints. While a favorable medical rating is an important first step toward the issuance of a case, the case can still be lost during the underwriting process by failing to meet the financial parameters. Typically, when the insurance is for personal needs, underwriters have leaned heavily on the income multiple tables. However, the income multiple tables don’t always work. When this happens, conflict and confusion can arise from the differing perspectives on face amount.
Solution: When a case falls outside the norm, it can help to have a cover letter explaining how the amount requested was determined, and to run the case informally by multiple carriers. DBS sent the above situation to several carriers and received the following results:
- Carrier A – Declined
- Carrier B – $100,000 on each
- Carrier C – $200,000 on each
- Carrier D – $500,000 on the male and $250,000 on the female
- Carrier E – $500,000 on each
- Carrier F – 30 times his projected income of $45,000 ($1,350,000) on each, provided the insureds can afford the premiums
Result: An astonished, but happy representative. Applications taken!