Premiums to Income Ratios

[DHK]

I've been doing a bit of internet research on various company's premium to income ratios... and perhaps how it directs their agents in how and when to present permanent life insurance.

I was quite surprised with the low ratios allowed by MassMutual without requiring further explanation by their underwriting department. Granted, it was a 2008 underwriting guide... but I doubt they changed much in the last few years.



Almost everybody else I've found... have FAR higher premium to income ratios allowed. I've attached Penn Mutual, Principal, Met Life / Brighthouse, Lincoln Financial Group, and Midland/NA.

This one is from American National:
I would be curious to see limits from New York Life, Northwestern Mutual, and others.

 

[DHK]

Here are others that I've found for Lincoln Financial, Midland/NA, and Met Life.

 

[Allen Trent]

Minnesota Life-20% of annual income + declining % of liquid net worth transfer at older ages

 

[Life Hawk]

I always thought 10% was a threshold for permanent life, I understand high net worth clients have a different set of circumstances, especially when looking at tax concerns... but 20% for 70 and above ... have I been in the FE business to long?

 

[DHK]

The older one is, the more life insurance is more of a capital wealth transfer vehicle, so premiums are coming from other assets rather than income.

The younger one is, one could use permanent life insurance as a strategic collateralizing and tax-free asset.

So far, about 20% is the allowable amounts of premium to income. I know Mass would also allow it... with an explanation. Van Mueller has his clients explain it to underwriters.

 

[Allen Trent]

Plus, the seniors who have been great savers tend to have a tremendous amount of annual income coming that they cant control at the same time they may have very little monthly expenses. Younger clients many times have way more expenses with mortgages, debt service, raising kids & college. the Seniors sometimes have SS & 401k/IRA checks coming they may not need entirely, so 20% may not be an impact to their budget at all with RMDs flowing they are not using to live on.

 

[Life Hawk]

I have been doing FE for too long... 20% means they wouldn't be able to buy their smokes!

 

[pfg1]

I've seen substantially more than 20% allowed in some situations if explained. Especially older clients utilizing other assets as mentioned.

 

[jboussea]

I have been doing FE for too long... 20% means they wouldn't be able to buy their smokes!

but i thought they were non tobacco ?

 

[Life Hawk]

but i thought they were non tobacco ?

Obviously you enjoy some creative underwriting...