Nationwide Pacific Life Principal Protective Prudential Transamerica. Financial Underwriting

Transcription

1 Client Information Carriers Selected Tools Permanent Products Selected Term Products Selected AIG Life Brokerage Accordia Life AXA Genworth Financial ING John Hancock Lincoln Financial MetLife Investors Nationwide Pacific Life Principal Protective Prudential Transamerica Financial Underwriting Client Information Permanent Products Selected Term Products Selected Filters Bankruptcy Buy/Sell Charitable Estate Planning Income Protection Juvenile Coverage Keyman Loan Protection Venture Capital

2 Income Protection AIG Life Brokerage Accordia Life Axa Term Perm Term Perm Term Perm Ages Factor x Income Income Factor Income Factor <40 25x Ages Factor x Income Ages Factor x Income x <30 25x <30 25x x x x Ox x x x x x 71+ Individual Consideration x x * Income multiples for personal 65+ 7x 65+ 7x insurance are guidelines only. Use earned income plus Use earned income plus half of Consider the income multiple for half of any unearned any unearned income if each age range as the maximum income if investment investment portfolio amount for which an individual portfolio management is management is dependent upon might qualify. The maximum dependent upon the the proposed insured. If portfolio income factor may not be proposed insured. If management is not dependent appropriate for all applicants in a portfolio management is upon proposed insured, use particular age range. not dependent upon earned income only. For a nonworking spouse, we proposed insured, use will match the working spouse's earned income only. coverage up to $1 million in-force and applied. Ages Factor x Income <40 25x x x Ox x 71+ Individual Consideration * Income multiples for personal insurance are guidelines only. Consider the income multiple for each age range as the maximum amount for which an individual might qualify. The maximum income factor may not be appropriate for all applicants in a particular age range. For a nonworking spouse, we will match the working spouse's coverage up to $1 million inforce and applied. Amount: Ages Factor x Income x x x x x x 80+ Individual Consideration Requirements: Working Individual -All sources of earned income,including salary, bonus or other deferred compensation or Gross Annual Earned Income Non- Working Spouse, Co-Breadwinner, and Other Dependent Adults -To determine if any amount is available, require income information and amount of Amount: Ages Factor x Income x x x x x x 80+ Individual Consideration Requirements: Working Individual -All sources of earned income,including salary, bonus or other deferred compensation or Gross Annual Earned Income Non- Working Spouse, Co-Breadwinner, and Other Dependent Adults -To determine if any amount is available, require income information and amount of

3 insurance on breadwinner Unemployed -To determine if any amount is available, require information regarding past earnings, current assets, past and future occupation contemplated insurance on breadwinner Unemployed -To determine if any amount is available, require information regarding past earnings, current assets, past and future occupation contemplated Estate Planning Estate Conservation need is based on the taxable value of the estate. Provide estate conservation analysis with the application. Maximum allowable growth rate is 6 percent up to a maximum limit of double the current gross estate. Estate Conservation need is based on the taxable value of the estate. Provide estate conservation analysis with the application. Maximum allowable growth rate is 6 percent up to a maximum limit of double the current gross estate. Use 55% of the client's current net worth, projected according to the following guidelines. (*Estate growth may not be justified in all situations.) Age Projection to 54 6% for 15 Years % for 10 Years % for 5 Years 71-Up 6% for 2 Years Use 55% of the client's current net worth, projected according to the following guidelines. (*Estate growth may not be justified in all situations.) Age Projection to 54 6% for 15 Years % for 10 Years % for 5 Years 71-Up 6% for 2 Years Amount: 50-75% life expectancy x appropriate estate growth factor x applicable tax rate Requirement: Need clear figure of net worth. Amount: 50-75% life expectancy x appropriate estate growth factor x applicable tax rate Requirement: Need clear figure of net worth. Charitable carrier carrier Amount: Replacement of past contributions Requirement: Cover letter explaining past interest in the Amount: Replacement of past contributions Requirement: Cover letter explaining past interest in the

4 charity and how the amount was determined. charity and how the amount was determined. Keyman Coverage financially protects the company from adverse financial impact if a key employee suddenly dies. The policy would provide funds to find recruit and train a replacement, help replace any lost profits, and strengthen the balance sheet to assure creditors the business will continue. Maximum of 10 times total compensation. In some circumstances (e.g., age, time to retirement, industry and location, etc.), 3 to 5 times compensation will be considered as an appropriate maximum. Coverage financially protects the company from adverse financial impact if a key employee suddenly dies. The policy would provide funds to find recruit and train a replacement, help replace any lost profits, and strengthen the balance sheet to assure creditors the business will continue. Maximum of 10 times total compensation. In some circumstances (e.g., age, time to retirement, industry and location, etc.), 3 to 5 times compensation will be considered as an appropriate maximum. A typical measure of an individual's value to a business is usually 5-1O times the annual compensation, including any bonus or extra compensation. This can be modified up or down due to considerations such as age, years in business, and promotional ventures. A typical measure of an individual's value to a business is usually 5-1O times the annual compensation, including any bonus or extra compensation. This can be modified up or down due to considerations such as age, years in business, and promotional ventures. Amount: 10 x compensation (salary plus bonus) Requirement: Cover letter describing how amount was determined Amount: 10 x compensation (salary plus bonus) Requirement: Cover letter describing how amount was determined

5 Buy/Sell Coverage is limited to the market value of the proposed insured's portion of the business as detailed in the Buy-Out or Buy-Sell agreement, or third party financials. Coverage is limited to the market value of the proposed insured's portion of the business as detailed in the Buy- Out or Buy-Sell agreement, or third party financials. The amount of insurance must be related to the true value of the business. All partners must be insured for their share of ownership. When using the market value of the business, explain the basis for market value assumptions. The amount of insurance must be related to the true value of the business. All partners must be insured for their share of ownership. When using the market value of the business, explain the basis for market value assumptions. Amount: Percent ownership x market value of business Requirement: Confirmation that buy-sell agreement has been executed, information regarding business partners applied in like manner. Amount: Percent ownership x market value of business Requirement: Confirmation that buy-sell agreement has been executed, information regarding business partners applied in like manner. Loan Protection Minimum 5 years remaining on the loan, coverage limited to 75 percent of loan, prorated per each owner's percent share of the business. Business will be the owner and beneficiary with collateral assignment to the debtor. Venture capital is limited to 50 percent coverage, prorated as above. Minimum 5 years remaining on the loan, coverage limited to 75 percent of loan, prorated per each owner's percent share of the business. Business will be the owner and beneficiary with collateral assignment to the debtor. Venture capital is limited to 50 percent coverage, prorated as above. The maximum amount is 75% of the outstanding loan balance. Proof of 5 years or greater contractual loan obligation is required. Line of credit or shortterm loans are generally not considered. The maximum amount is 75% of the outstanding loan balance. Proof of 5 years or greater contractual loan obligation is required. Line of credit or shortterm loans are generally not considered. Personal Amount: Loan duration at least 5 years - 100% of loan amount Requirement: Copy of loan agreement Business Amount: Loan duration at least 5 years - 100% of loan amount x percent ownership of Personal Amount: Loan duration at least 5 years - 100% of loan amount Requirement: Copy of loan agreement Business Amount: Loan duration at least 5 years - 100% of loan amount x percent ownership of

6 business Requirement: Cover letter regarding amount of loan, loan duration, date loan committed, name of lender and collateral pledged to secure loan business Requirement: Cover letter regarding amount of loan, loan duration, date loan committed, name of lender and collateral pledged to secure loan Juvenile Coverage Amount: ¼.to ½ amounts on parent or payor. Special rules apply in NY Requirements: Equal amounts on all children Provide coverage information on application Total life insurance in force or pending in all companies on the juvenile and on the applicant or child's Amount: ¼.to ½ amounts on parent or payor. Special rules apply in NY Requirements: Equal amounts on all children Provide coverage information on application Total life insurance in force or pending in all companies on the juvenile and on the applicant or child's

7 parent AND reason if there are any other children in the family insured for a lesser amount parent AND reason if there are any other children in the family insured for a lesser amount Bankruptcy BANKRUPTCY* PERMANENT Insurance - Chapter 7 We can consider coverage immediately upon discharge of the bankruptcy: If the discharge was less than 12 months ago, the proposed insured must be employed full time and provide us with a current pay stub (or tax return) that documents an income. Appropriate for the amount of coverage in force BANKRUPTCY* TERM Insurance -All Chapters (7, 11, 12, 13) Single Bankruptcy: We will not consider coverage until the bankruptcy has been discharged for at least 24 months (2 years), and financial data supports the total line of coverage to be in force. TERM INSURANCE - Multiple Bankruptcies: We will not consider coverage until the most recent bankruptcy has been discharged for at least 60 months (5 years), and financial data supports the total line of coverage

8 and applied. For applicants that have had a Chapter 7 bankruptcy discharged more than 12 months ago, no current pay stub or tax return is required in most cases, however, financial justification for the amounts in force and applied will be required. to be in force. * Credit report required on all cases; Tax Return Transcript may be required as well at the discretion of the underwriter PERMANENT INSURANCE Chapters 11, 12, and 13 We will consider permanent insurance coverage for applicants currently in Chapter 11, 12, or 13 bankruptcy once the applicant is making regular debt payments and financial data supports the total line of coverage to be in-force. Note that we will reduce the amount of income we consider the applicant to make by the amount of the debt payment made, as per court direction. Copies of court papers directing repayment will be required for

9 amounts of $5 million and up. PERMANENT INSURANCE - Multiple Bankruptcies No offer until discharged from last bankruptcy for at least 24 months and financial data supports the total line of coverage to be in-force. * Credit report required on all cases ; Tax Return Transcript may be required as well at the discretion of the

10 underwriter Venture Capital Minimum 5 years remaining on the loan; coverage limited to 50% coverage of the loan amount Minimum 5 years remaining on the loan; coverage limited to 50% coverage of the loan amount

11 Income Protection Genworth ING John Hancock Term Perm Term Perm Term Perm Proposed Insured s Age and Maximum Factor Ages 21-40, up to 30 x income Ages 41-50, up to 20 x income Ages 51-60, up to 15 x income Ages 61-69, up to 10 x income Ages 70 and over, Individual consideration Proposed Insured s Age and Maximum Factor Ages 21-40, up to 30 x income Ages 41-50, up to 20 x income Ages 51-60, up to 15 x income Ages 61-69, up to 10 x income Ages 70 and over, Individual consideration Maximum Coverage Ages Factor X earned Income and over Individual Consideration Information Required Gross annual earned income How amount of insurance was determined Purpose of coverage 4506Tez required for face amounts of $3,000,001 and above; ages 18 to 85. Maximum Coverage Ages Factor X earned Income and over Individual Consideration Information Required Gross annual earned income How amount of insurance was determined Purpose of coverage 4506Tez required for face amounts of $3,000,001 and above; ages 18 to 85. Age Factor x Earned Income 18-30: 30x 31-40:25x 41-50:20x 51-60: 15x 61-65: 10x 66-74: 5x 75+:individual consideration For individuals whose personal income is low but future earnings potential is high, it may be possible to consider higher amounts Social security, pensions and annuities are not considered earned income Age Factor x Earned Income 18-30: 30x 31-40:25x 41-50:20x 51-60: 15x 61-65: 10x 66-74: 5x 75+:individual consideration For individuals whose personal income is low but future earnings potential is high, it may be possible to consider higher amounts Social security, pensions and annuities are not considered earned income Estate Planning Usually based on Projected Net Worth x 55%. Projected Net Worth based on current net worth grown at 6% annual rate, for lesser of 15 years or life expectancy. Coverage in excess of guideline Usually based on Projected Net Worth x 55%. Projected Net Worth based on current net worth grown at 6% annual rate, for lesser of 15 years or life expectancy. Coverage in excess of guideline Estate appreciation at reasonable interest rate % (4-6% range) X 20 years or remaining life expectancy (whichever is less) X 50% (max tax Estate appreciation at reasonable interest rate % (4-6% range) X 20 years or remaining life expectancy (whichever is less) X 50% (max tax rate) Usually based on Projected Net Worth x Estate Tax Rate (55%) Maximum Projections Based on a growth Usually based on Projected Net Worth x Estate Tax Rate (55%) Maximum Projections Based on a

12 amounts on individual consideration basis. amounts on individual consideration basis. rate) rate of 5-7% based on historical growth - higher or lower growth rates subject to individual consideration General Guidelines Individual: -Up to 75% of life expectancy to a maximum of 20 years Survivorship: -Based on the younger or healthier life -Up to 75% of life expectancy up to a maximum of 20 years For policies with increasing face amount riders that are issued by John Hancock's approved financing programs, the rider portion of the coverage will be justified based growth rate of 5-7% based on historical growth - higher or lower growth rates subject to individual consideration General Guidelines Individual: -Up to 75% of life expectancy to a maximum of 20 years Survivorship: -Based on the younger or healthier life -Up to 75% of life expectancy up to a maximum of 20 years For policies with increasing face amount riders that are issued by John Hancock's approved financing programs, the rider portion of the coverage will be justified based

13 Charitable The average of the last 3 years' history of charitable gifts x the lesser of 50 years or remaining life expectancy. Coverage in excess of guideline amounts on individual consideration basis. The average of the last 3 years' history of charitable gifts x the lesser of 50 years or remaining life expectancy. Coverage in excess of guideline amounts on individual consideration basis. Average of 3 year's history of gifts X lesser of 10 years or remaining life expectancy; Personal insurance needs must be fully met before charitable giving purchases are addressed. Information Required To qualify for higher amounts, need multiyear history of giving to the benefiting charity, documented by receipts or income tax returns Average of 3 year's history of gifts X lesser of 10 years or remaining life expectancy; Personal insurance needs must be fully met before charitable giving purchases are addressed. Information Required To qualify for higher amounts, need multiyear history of giving to the benefiting charity, documented by receipts or income tax returns on 100% life expectancy. Face Amount = present value of future contributions to o/.. of life expectancy Provide contribution record to establish pattern of support and involvement in the charity. Also, include details of any volunteer work with the charity to demonstrate the strength of the relationship. on 100% life expectancy. Face Amount = present value of future contributions to o/.. of life expectancy Provide contribution record to establish pattern of support and involvement in the charity. Also, include details of any volunteer work with the charity to demonstrate the strength of the relationship. Keyman 5-10 x annual wages (depending on involvement in the business operations and circumstances) Higher amounts will be considered on an individual basis. Up to 100% of non-wage benefits may be included, at the underwriter's discretion x annual wages (depending on involvement in the business operations and circumstances) Higher amounts will be considered on an individual basis. Up to 100% of non-wage benefits may be included, at the underwriter's discretion. Up to 10 times annual income Information Required Verification of income; List of other key executives and their coverage Up to 10 times annual income Information Required Verification of income; List of other key executives and their coverage 5-10 x Income (depending on circumstances) Following information may be required: income, role in organization, specialized skills, experience 5-10 x Income (depending on circumstances) Following information may be required: income, role in organization, specialized skills, experience

14 For the state of New York, please contact your underwriter for special requirements For the state of New York, please contact your underwriter for special requirements Buy/Sell Complete the Business portion of the Financial section of the application Part 1 Complete the Financial supplement for all buy-sell applications A copy of the buy-sell agreement will be required if the requested coverage is over $5 million. If between $3M-$5M, in lieu of an actual agreement, we may allow written confirmation that a completed buy-sell agreement is in place and that the owner and beneficiary listed on the application are consistent with that agreement. This confirmation must be signed by the owner or their legal or tax counsel. If under $3M and over $500k, Complete the Business portion of the Financial section of the application Part 1 Complete the Financial supplement for all buy-sell applications A copy of the buy-sell agreement will be required if the requested coverage is over $5 million. If between $3M-$5M, in lieu of an actual agreement, we may allow written confirmation that a completed buy-sell agreement is in place and that the owner and beneficiary listed on the application are consistent with that agreement. This confirmation must be signed by the owner or their legal or tax counsel. If under $3M and over $500k, we may allow written confirmation % of ownership X value of company (typically 5-15 X earnings depending on the industry) Information Required Details as to how the amount was determined ;Corporate financial statements (income statement and balance sheet); Percentage ownership in company; Details regarding buy/sell agreement; Market value of business % of ownership X value of company (typically 5-15 X earnings depending on the industry) Information Required Details as to how the amount was determined ;Corporate financial statements (income statement and balance sheet); Percentage ownership in company; Details regarding buy/sell agreement; Market value of business Percentage Ownership x Fair Market Value of the business plus a modest growth factor Require percent ownership, fair market value of business, information as to whether other partners are insured. Percentage Ownership x Fair Market Value of the business plus a modest growth factor Require percent ownership, fair market value of business, information as to whether other partners are insured.

15 Loan Protection we may allow written confirmation to be met if the applicant s legal or tax counsel verifies in writing that the parties have an oral agreement and that a buy-sell agreement is being drafted, (Note that this lesser confirmation cannon be accepted if only attested to by the owner.) If $500k or under, and all of the parties are either owners of the business or the business itself, and we have sufficient documentation to support the requested valuation, no verification of an agreement is required unless the underwriter determines that additional documentation is needed due to the circumstances of the case. Coverage is not separately underwritten for personal debt repayment purposes. Business debt repayment coverage can be considered in addition to Key Person coverage, but cannot exceed 100% of the debt and cannot exceed 50% of the amount allowed by key person multipliers. to be met if the applicant s legal or tax counsel verifies in writing that the parties have an oral agreement and that a buy-sell agreement is being drafted, (Note that this lesser confirmation cannon be accepted if only attested to by the owner.) If $500k or under, and all of the parties are either owners of the business or the business itself, and we have sufficient documentation to support the requested valuation, no verification of an agreement is required unless the underwriter determines that additional documentation is needed due to the circumstances of the case. Coverage is not separately underwritten for personal debt repayment purposes. Business debt repayment coverage can be considered in addition to Key Person coverage, but cannot exceed 100% of the debt and cannot exceed 50% of the amount allowed by key person multipliers. This is for a personal loan 50-75% of outstanding loan balance Information Required Amount, duration, purpose of loan; Collateral l pledged; Repayment period - minimum 5 years This is for a personal loan 50-75% of outstanding loan balance Information Required Amount, duration, purpose of loan; Collateral l pledged; Repayment period - minimum 5 years This is for a personal loan 100% of outstanding loan balance to creditor with remainder to life insured's estate subject to collateral assignment This is for a personal loan 100% of outstanding loan balance to creditor with remainder to life insured's estate subject to collateral assignment

16 Require details of loan which include source, amount,purpose, repayment schedule and interest rate Require details of loan which include source, amount,purpose, repayment schedule and interest rate Juvenile Coverage Up to 50% of amount of personal coverage on the highest insured parent or legal guardian, but not more than the amount of coverage on the least insured parent or legal guardian. Up to 50% of amount of personal coverage on the highest insured parent or legal guardian, but not more than the amount of coverage on the least insured parent or legal guardian. Up to 50% of largest amount of insurance on either parent's (or guardian's) life; (In New York, issue age 0-4, up to 25% of the insurance on the parent's life.) Risk amounts $1,000,000+ require Individual Consideration. Information Required All children in family should be insured for similar amounts. If not, an explanation is needed. Need and purpose of insurance (cover letter required on any apps over $100,000). Up to 50% of largest amount of insurance on either parent's (or guardian's) life; (In New York, issue age 0-4, up to 25% of the insurance on the parent's life.) Risk amounts $1,000,000+ require Individual Consideration. Information Required All children in family should be insured for similar amounts. If not, an explanation is needed. Need and purpose of insurance (cover letter required on any apps over $100,000). Coverage should not usually exceed 50% of amount on parents -Amount requested should be reasonable relative to insurance on parents and siblings(similar coverage) -For face amounts over $100,000 or related to estate planning needs, gifting, or inheritance, approval will be on individual consideration basis taking into account all financial details Coverage should not usually exceed 50% of amount on parents -Amount requested should be reasonable relative to insurance on parents and siblings(similar coverage) -For face amounts over $100,000 or related to estate planning needs, gifting, or inheritance, approval will be on individual consideration basis taking into account all financial details

17 -Application must be signed by parent or guardian with whom the child resides -New York has legal restrictions on the amount of life insurance allowed on juveniles -Washington has special legal restrictions for juveniles. Please contact your underwriter for details. - your underwriter for other special rules -Application must be signed by parent or guardian with whom the child resides -New York has legal restrictions on the amount of life insurance allowed on juveniles -Washington has special legal restrictions for juveniles. Please contact your underwriter for details. - your underwriter for other special rules Bankruptcy Coverage is available after bankruptcy has been discharged for greater than one year. Individual consideration can be given on cases where we have received details of reorganization/ payment plan. Coverage is available after bankruptcy has been discharged for greater than one year. Individual consideration can be given on cases where we have received details of reorganization/ payment plan. carrier carrier Venture Contact carrier with details. Contact carrier with details. Face amount Face amount

18 Capital should not exceed key person limits when key person is the primary purpose. If loan, use creditor guidelines. May required capital needed profitability, projections, product/service descriptions, product cost/pricing, salability, and experience/skills of management team. should not exceed key person limits when key person is the primary purpose. If loan, use creditor guidelines. May required capital needed profitability, projections, product/service descriptions, product cost/pricing, salability, and experience/skills of management team.

19 Income Protection Ages Factor x Income Up to 30x Up to 25x Up to 20x Up to 10x 66+ Up to 5x Lincoln Financial MetLife Investors Nationwide Term Perm Term Perm Term Perm Ages Factor x Income Current income multiplication Up to 30x factors for determining the Up to 25x maximum amounts of insurance Up to 20x in force and applied for in all Up to 10x companies for the proposed 66+ Up to 5x insured. For non-working spouses, consider the same amount as on the working spouse. For non-working spouses, consider the same amount as on the working spouse. Current income multiplication factors for determining the maximum amounts of insurance in force and applied for in all companies for the proposed insured. Income Factor Ages Factor x Income Up to 40 30x x x x x x 80 + Individual Consideration Income Factor Ages Factor x Income Up to 40 30x x x x x x 80 + Individual Consideration Age Income multiplier (maximum) x x x x x 71+ 5x Age Income multiplier (maximum) x x x x x 71+ 5x Estate Planning Under Age 70: Using ¾ of standard life expectancy apply a growth rate of 6% to the current net worth. Then multiply that number by 55%. The maximum number of years we use for estate growth is 25 years. Refer to the Financial Underwriting Under Age 70: Using ¾ of standard life expectancy apply a growth rate of 6% to the current net worth. Then multiply that number by 55%. The maximum number of years we use for estate growth is 25 years. Refer to the Financial Underwriting Worksheet for Guidelines for determining the maximum amounts of insurance in force and applied for in all companies for the proposed insured. The future value of the proposed insured's Guidelines for determining the maximum amounts of insurance in force and applied for in all companies for the proposed insured. The future value of the proposed insured's estate should generally be projected at a rate of 7% for a maximum We base coverage levels for estate protection on applicable state and federal estate and inheritance taxes. With rates of 55% and higher, and We base coverage levels for estate protection on applicable state and federal estate and inheritance taxes. With rates of 55% and higher, and

20 Worksheet for assistance or contact underwriting. Age Net worth $200,000 - $1,000,000.00: 50% of net worth Net worth over $1,000,000.00: Using ¾ of standard life expectancy apply a growth rate of 6% to current net worth. Multiply that number by 55% to arrive at the face amount. Age Net Worth $200,000 and over: 50% of net worth. assistance or contact underwriting. Age Net worth $200,000 - $1,000,000.00: 50% of net worth Net worth over $1,000,000.00: Using ¾ of standard life expectancy apply a growth rate of 6% to current net worth. Multiply that number by 55% to arrive at the face amount. Age Net Worth $200,000 and over: 50% of net worth. estate should generally be projected at a rate of 7% for a maximum number of years as follows: Up to 60: 75% of life expectancy up to a max of 30 years, ages maximum of 10 years 71 and over: Individual Consideration number of years as follows: Up to 60: 75% of life expectancy up to a max of 30 years, ages maximum of 10 years 71 and over: Individual Consideration future taxes likely to increase, you may calculate the amount of insurance necessary using reasonable estate growth projections: Time horizons of up to 15 years (or your client's life expectancy if it's less) Current interest rates of up to 8% Keep in mind, however, that you should value all estate assets on a current or nearcurrent basis for older clients. future taxes likely to increase, you may calculate the amount of insurance necessary using reasonable estate growth projections: Time horizons of up to 15 years (or your client's life expectancy if it's less) Current interest rates of up to 8% Keep in mind, however, that you should value all estate assets on a current or nearcurrent basis for older clients. Charitable carrier carrier Keyman Will consider up to 10x income for established business, Stock options, bonuses, perks such as housing and auto will be factored into compensation. For key persons over age 60, may Will consider up to 10x income for established business, Stock options, bonuses, perks such as housing and auto will be factored into compensation. For key persons over age 60, may reduce For key person protection, the maximum amount of coverage is typically 5 to 10 times the For key person protection, the maximum amount of coverage is typically 5 to 10 times the

21 Buy/Sell reduce the factor from 10x income based on hours worked, time to retirement, etc. Amount of coverage will equal business or stock ownership percentage based on fair market value outlined in Buy- Sell Agreement. If buy-sell agreement not created provides information on how fair market value was determined and provided 2 years of income statement and balance sheet information or third party business evaluation. the factor from 10x income based on hours worked, time to retirement, etc. Amount of coverage will equal business or stock ownership percentage based on fair market value outlined in Buy-Sell Agreement. If buy-sell agreement not created provides information on how fair market value was determined and provided 2 years of income statement and balance sheet information or third party business evaluation. individual s annual salary. We may consider a higher amount if you attach a full explanation of the need. Additional information you may want to include is the business net worth, the proposed insured s monetary contribution to the business and the inforce coverage on other key personnel. Important partners or shareholders should be insured based on their relative worth to the business. Of course, the overall value for all insured s must be realistic in relation to their respective roles and individual s annual salary. We may consider a higher amount if you attach a full explanation of the need. Additional information you may want to include is the business net worth, the proposed insured s monetary contribution to the business and the inforce coverage on other key personnel. Important partners or shareholders should be insured based on their relative worth to the business. Of course, the overall value for all insured s must be realistic in relation to their respective roles and

22 Loan Protection percentage of ownership of the business. We ll base the amount of insurance coverage on the reasonable appraised value of the business and the proposed insured s share of it. Typically, the amount of coverage for operating entities is up to 10 times the net income amount. percentage of ownership of the business. We ll base the amount of insurance coverage on the reasonable appraised value of the business and the proposed insured s share of it. Typically, the amount of coverage for operating entities is up to 10 times the net income amount. Juvenile Coverage Parents, Grandparents, or Legal Guardian can own the insurance Signature of parent or legal guardian is required on HIPPA and part I of application All states except New York and Washington, juvenile can have a face amount up to the amount of coverage that is on the parent(s) life up to a maximum of $10 million (depending on Parents, Grandparents, or Legal Guardian can own the insurance Signature of parent or legal guardian is required on HIPPA and part I of application All states except New York and Washington, juvenile can have a face amount up to the amount of coverage that is on the parent(s) life up to a maximum of $10 million (depending on All states other than New York: Amount Ins Inforce & Applied Coverage Needed on Parent/Family Head 0-$1,000,000 Equal amount $1,000,001+ Individual consideration All states other than New York: Amount Ins Inforce & Applied Coverage Needed on Parent/Family Head 0-$1,000,000 Equal amount $1,000,001+ Individual consideration In the state of Washing, the insurance amount on dependent

23 circumstances) New York - Under age 4 years and 6 months, the greater of $25,000 or 25% of the amount of insurance on the person applying for coverage - Age 4 years and 6 months to age 14, the greater of $25,000 or 50% of the amount of insurance on the person applying for coverage. Washington - The amount should not exceed the annual household income (earned and unearned). If an amount greater than the household income is applied for, the additional amount would have to be justified. For example, an additional amount would be justified if the applicant or beneficiary was dependent on the juvenile for income or support. - Amount on the juvenile should be proportional to the amount of insurance issued on other siblings or immediate family members and if not, justification circumstances) New York - Under age 4 years and 6 months, the greater of $25,000 or 25% of the amount of insurance on the person applying for coverage - Age 4 years and 6 months to age 14, the greater of $25,000 or 50% of the amount of insurance on the person applying for coverage. Washington - The amount should not exceed the annual household income (earned and unearned). If an amount greater than the household income is applied for, the additional amount would have to be justified. For example, an additional amount would be justified if the applicant or beneficiary was dependent on the juvenile for income or support. - Amount on the juvenile should be proportional to the amount of insurance issued on other siblings or immediate family members and if not, justification should be provided. In the state of Washing, the insurance amount on dependent child cannot exceed the current household income. Limited amounts of coverage will be available to high school seniors ($50,000), college students ($100,000), and graduate students ($250,000) even if there is no coverage inforce or applied for on the head of household. Primary wage-earner would need to meet the amounts shown in the Dependent Child table above for amounts in excess of these limits. Note: In the state of Washington, consideration of students whose head of household has no coverage is limited to annual household income as noted above. DEPENDENT CHILD: child cannot exceed the current household income. Limited amounts of coverage will be available to high school seniors ($50,000), college students ($100,000), and graduate students ($250,000) even if there is no coverage inforce or applied for on the head of household. Primary wage-earner would need to meet the amounts shown in the Dependent Child table above for amounts in excess of these limits. Note: In the state of Washington, consideration of students whose head of household has no coverage is limited to annual household income as noted above. DEPENDENT CHILD: STATE OF NEW YORK Child Age Amount ins Inforce & Applied Multiple Coverage Needed on Parent/Family Head years over $50k 4x years over $50k 2x

24 should be provided. STATE OF NEW YORK Child Age Amount ins Inforce & Applied Multiple Coverage Needed on Parent/Family Head >14.5 years - $50,001 - $1MM Equal Amount All Ages - $50k or less Equal amount All Ages - $1,000,001 and over Individual consideration years over $50k 4x years over $50k 2x >14.5 years - $50,001 - $1MM Equal Amount All Ages - $50k or less Equal amount All Ages - $1,000,001 and over Individual consideration Bankruptcy Venture Capital

25 Income Protection Pacific Life Principal Protective Life Term Perm Term Perm Term Perm The allowable amount of life The allowable amount of life Formulas and Guidelines Formulas and Guidelines Income Factor Income Factor insurance is a function of insurance is a function of earned (Maximum Coverage) (Maximum Coverage) Ages Ages Factor x Ages Factor x earned income multiplied income multiplied Ages Factor x Income Factor x Income Income 18- Income 18- by an age-linked factor. by an age-linked factor x x 30 30x 30 30x Ages Factor x Income 20- Ages Factor x Income x x x x x 30 30x x x x x x x x x x x x x x Ox Ox x x x x x x x x x x Over x Over x x x x 76+ Individual considerations Information Needed Information Needed x x 76+ Individual considerations The total amount of insurance Gross annual income Gross annual income x x The total amount of insurance cannot exceed the greater of How amount of How amount of insurance was cannot exceed the greater of amounts determined under insurance was determined amounts determined under Income Replacement or Estate determined Other coverage in force or Income Replacement or Estate Protection. Other coverage in force pending with all carriers Protection. or pending with all carriers Estate Planning The underwriter will consider the nature of the assets and how their value has changed over time. Additional factors include a reasonable rate of growth, compounded up to 20 years, depending on the clients' age and risk class, and offset by the expected tax bracket. The total amount of insurance cannot exceed the greater of amounts determined under The underwriter will consider the nature of the assets and how their value has changed over time. Additional factors include a reasonable rate of growth, compounded up to 20 years, depending on the clients' age and risk class, and offset by the expected tax bracket. The total amount of insurance cannot exceed the greater of amounts determined under Formulas and Guidelines Estate growth factor up to 8% Estate growth period: Ages % of life expectancy not to exceed 15 years Ages % of life expectancy not to exceed 10 years Ages Use current estate value; no growth Formulas and Guidelines Estate growth factor up to 8% Estate growth period: Ages % of life expectancy not to exceed 15 years Ages % of life expectancy not to exceed 10 years Ages Use current estate value; no growth assumptions Assume 50% of estimated

26 Income Replacement or Estate Protection. Income Replacement or Estate Protection. assumptions Assume 50% of estimated future estate value will be lost to estate tax Insurance amount = 50% of estimated future estate value Information Needed Estate analysis Net worth How insurance amount was determined Risk amounts future estate value will be lost to estate tax Insurance amount = 50% of estimated future estate value Information Needed Estate analysis Net worth How insurance amount was determined Risk amounts Charitable The life insurance amount is based on the insured's ability to contribute and established record of giving. Personal insurance needs should already be met. The policy owner must not be the charity. Use the amount of annual giving, times the factors in the table under Income Replacement. The life insurance amount is based on the insured's ability to contribute and established record of giving. Personal insurance needs should already be met. The policy owner must not be the charity. Use the amount of annual giving, times the factors in the table under Income Replacement. Keyman Used to indemnify the company against the loss of an Used to indemnify the company against the loss of an employee Formulas and Guidelines Up to 10 times annual Formulas and Guidelines Up to 10 times annual income

27 employee whose skills and contributions are critical to the firm. In most cases, use a factor of five to ten times the individual's annual income to determine the amount permitted. Age, level of managerial or technical experience, unique and special skills, and prior track record of success are considerations in determining the factor used. whose skills and contributions are critical to the firm. In most cases, use a factor of five to ten times the individual's annual income to determine the amount permitted. Age, level of managerial or technical experience, unique and special skills, and prior track record of success are considerations in determining the factor used. income Business owner and beneficiary Information Needed Verification of income List of other key executives and their coverage Explanation of lay role to employer Business owner and beneficiary Information Needed Verification of income List of other key executives and their coverage Explanation of lay role to employer Buy/Sell It is expected that all owners should be covered, commensurate with the ownership percentages. Establish the value of the business using the net income of the business over the past two to three years. Multiply it by a factor between five and 10(the viability of the business is used to determine the factor used). Then multiply by the percentage of the business owned by the individual. It is expected that all owners should be covered, commensurate with the ownership percentages. Establish the value of the business using the net income of the business over the past two to three years. Multiply it by a factor between five and 10(the viability of the business is used to determine the factor used). Then multiply by the percentage of the business owned by the individual. Formulas and Guidelines Percent of ownership = X value of company Cross purchase - partners are owners and beneficiaries Entity purchase - business is owner and beneficiary Information Needed Business financials: Balance sheet Income statement List of owners/ownership percent Confirmation all Formulas and Guidelines Percent of ownership = X value of company Cross purchase - partners are owners and beneficiaries Entity purchase - business is owner and beneficiary Information Needed Business financials: Balance sheet Income statement List of owners/ownership percent Confirmation all partners are similarly insured

28 partners are similarly insured Loan Protection Juvenile Coverage The business usually owns the pol cy, and the death benefit is assigned to the lending institution. The sum of insurance should not exceed 80% of the loan value. The sum of the key person coverage plus business loan coverage cannot exceed 150% of the key person limits All siblings are similarly insured. The parent should have a minimum of two times (and preferably four times) the life insurance as that proposed on the child. Consideration is given to the purpose of coverage and the family's net worth. Cover letters are strongly recommended when the amount of insurance is greater than $50,000. The business usually owns the pol cy, and the death benefit is assigned to the lending institution. The sum of insurance should not exceed 80% of the loan value. The sum of the key person coverage plus business loan coverage cannot exceed 150% of the key person limits All siblings are similarly insured. The parent should have a minimum of two times (and preferably four times) the life insurance as that proposed on the child. Consideration is given to the purpose of coverage and the family's net worth. Cover letters are strongly recommended when the amount of insurance is greater than $50,000. Bankruptcy Venture

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30 Income Protection Prudential Transamerica Term Perm Term Perm General Income Factor Tables: General Income Factor Tables: Income Protection: Ages Factor x Income AGES INCOME FACTOR AMOUNT AGES INCOME FACTOR AMOUNT Up to age 35 30x OF INS OF INS 36 to 45 25x 46 to 50 20x To $40 $ X S 35 = To $40 $ X S 35 = 51 to 55 15x $ X S 25 = $ X S 25 = 56 to 65 10x $ X S 20= $ X S 20= 66 to 70 5 x $ X S 10= $ X S 10= 71+ Individual $ X S 5 = $ X S 5 = Consideration *To determine the qualifying coverage based on annual earned income, a 3% Cost of Living Adjustment is applied to the insured s current annual income for a certain number of years, depending on the insured s age. Remember that earned income included salary, bonuses, and commissions and deferred compensation. It excluded income from investments. Income Protection: Ages Factor x Income Up to age 35 30x 36 to 45 25x 46 to 50 20x 51 to 55 15x 56 to 65 10x 66 to 70 5 x 71+ Individual Consideration *To determine the qualifying coverage based on annual earned income, a 3% Cost of Living Adjustment is applied to the insured s current annual income for a certain number of years, depending on the insured s age. Remember that earned income included salary, bonuses, and commissions and deferred compensation. It excluded income from investments.

31 Estate Planning For Estate Settlement Costs: estate liquidity needs projected 8-10 years at reasonable rates of growth (approximately 6%) More aggressive projections can be considered on an individual basis if supported by valid financial documentation. For Estate Settlement Costs: estate liquidity needs projected 8-10 years at reasonable rates of growth (approximately 6%) More aggressive projections can be considered on an individual basis if supported by valid financial documentation. Estate Planning: Net Worth x 50% x 7% growth rate for the applicable number of years. Age /Growth Rate /Number of Years Up to age 65 / 7% / to 75 /7% / and over 17% I 7 Estate Planning: Net Worth x 50% x 7% growth rate for the applicable number of years. Age /Growth Rate /Number of Years Up to age 65 / 7% / to 75 /7% / and over 17% I 7 Charitable Keyman Charitable Donation: based on past contribution history ; personal insurance needs have been satisfied Charitable Trust/Asset: Fair Market Value of Contributed Assets Five to ten times annual compensation. More could be considered depending on economic value to the company. Refer to Financial UW Highlighter for specific information on requirements for Key Person in New York. Charitable Donation: based on past contribution history ; personal insurance needs have been satisfied Charitable Trust/Asset: Fair Market Value of Contributed Assets Five to ten times annual compensation. More could be considered depending on economic value to the company. Refer to Financial UW Highlighter for specific information on requirements for Key Person in New York. Age - Income Factor Up to age 65-1Ox income 66 and above - 5x income A cover letter from the writing producer is needed to explain the key person's value to the company, how the coverage amount was determined, whether the Proposed Insured has ownership in the company and, if so, the percentage of ownership. Age - Income Factor Up to age 65-1Ox income 66 and above - 5x income A cover letter from the writing producer is needed to explain the key person's value to the company, how the coverage amount was determined, whether the Proposed Insured has ownership in the company and, if so, the percentage of ownership.