What is medical and financial underwriting for IUL?
Every international IUL application goes through underwriting before the insurer issues the policy. The result decides whether cover is offered and on what terms, and the underwriting class is one of the factors that set the cost of insurance deducted from the cash value each month for the life of the policy.
How it works
Medical underwriting looks at the health and lifestyle of the life insured:
- health questions on the application and, for larger amounts, a medical examination, which can include blood tests, an ECG and a review of medical history and doctors' reports;
- smoking status, occupation, hobbies and travel, any of which can add a loading;
- country of residence, which some insurers reflect in a country loading.
Financial underwriting justifies the amount of cover. The insurer verifies income, net worth, liabilities and any business structures, and looks at the purpose of the cover: family protection, estate tax, a business loan or a key person's value to the company. The same review confirms insurable interest. Alongside it, the insurer checks the source of the premium funds.
The insurer then decides: standard terms, terms with a loading or extra premium, a postponement, or a decline. On large cases, reinsurers review the same evidence; see jumbo life insurance.
In practice
- Fact find. Personal details, residence, finances, objectives and the ownership structure, so the right level of cover is requested.
- Medical. Arranged where the amount or the applicant's age calls for it.
- Financial review. Evidence of income and net worth, and the reason for the cover.
- Decision. The offer is reviewed with the client: any medical or country loading, the illustration, the funding pattern and the structure.
- Funding and issue. Cover starts once the insurer receives the premium. Trustees or directors sign the acceptance for a trust or company.
In an international IUL
International IUL is underwritten for applicants usually aged 18 to 79, with minimum cover of US$1m. Healthy applicants under 55 can take up to US$3m of cover non-medical at large international insurers, on the health questions without a medical examination. Larger amounts and older ages usually need a medical. The same limits apply to company-owned key person policies. Opening a policy, underwriting included, takes 8 to 12 weeks. Insurers price on actual age or age nearest birthday, and backdating the policy date by up to six months can secure a younger insurance age.
Common questions
Do you need a medical for IUL?
It depends on the amount and age. Healthy applicants under 55 can take up to US$3m of cover without a medical at large international insurers. Larger amounts and older ages usually need one, which can include blood tests and an ECG.
What is financial underwriting?
The insurer's check that the amount of cover matches the applicant's finances and the purpose of the cover. It verifies income, net worth and liabilities and, for business cover, the company's position. Each insurer sets its own limits, which vary by age and purpose.
Can underwriting terms improve after the policy starts?
With some insurers, stopping smoking or giving up a dangerous sport can lower premiums after issue. The insurer asks for fresh evidence before it changes the terms.
Go deeper: how to open an international IUL, in the IUL guide.
Underwriting is the insurer's assessment of an applicant before it issues cover. Medical underwriting prices the health risk; financial underwriting confirms the cover is justified by income, net worth and need.
