We’ll try and make our financial underwriting decisions immediately. To do this we’ll get as much information as we can through our online financial questions, including details of any existing cover and the specific reason for the new cover. This means that the majority of your cases will be processed straight through without the need for further evidence or a paper financial questionnaire.
Financial underwriting limits
*We'll need a financial questionnaire completed if you submit a paper application for your client.
See our financial frequently asked questions
How to calculate the sum assured
Personal cover rules
The maximum Life Cover we’ll allow is based on a specific multiple of your client's salary and the number of years to their retirement, with Critical Illness Cover based on half this calculation. We use age 70 as the normal retirement age.
Amount of cover = (70 - your client’s current age) x current salary.
For example if your client is 35 and earns £50,000 a year:
- for Life Cover: 70 - 35 = 35 x £50,000 = £1.75m
- for Critical Illness Cover: £1.75 / 2 = £875,000.
Life Cover and Life with Critical Illness Cover for mortgage purposes will be assessed directly against the mortgage amount. We won’t restrict the term of the cover to the term of the mortgage.
Life Cover for Inheritance Tax (IHT) should reflect the IHT liability of the person covered directly.
Please see www.hmrc.gov.uk/inheritancetax for the latest information on tax rates and allowances.
Business cover rules
Life Cover and Life with Critical Illness Cover for business loans should be appropriate to the specific amount of the loan and the term. Consideration is also given to the number of people being covered. Where you’re applying for cover for multiple people within a business you should consider offering each person covered the appropriate split of the full loan amount.
Life Cover and Life with Critical Illness Cover for Key Person allows you to choose whether the sum assured should be based on multiples of the key person's income or loss of profits.
- Up to a maximum of 10 x total income.
- Maximum allowance of up to 5 x net profit (averaged over last 2-3 years). This figure then needs to be split according to the percentage of profit attributable to the key person.
For example: net profit average = £600,000 x 5 = £3m. Key person drives 50% of the business profits; therefore the sum assured will be £1.5m.
Life Cover and Life with Critical Illness Cover will be calculated on a business valuation based on the net profit and assets and then an appropriate allowance will be assessed based on the client’s share percentage.
- Up to a maximum of 7 x net profit (averaged over 2-3 years) plus net assets x percentage of shareholding.
For example: net profit average = £800,000 x7 = £5.6m. If four shareholders hold 25% shareholding each, then the sum assured will be £1.4m per life assured (£5.6m / 4 = £1.4m).
Relevant life cover rules
The maximum for Relevant Life Cover will be based on multiples of the total remuneration of the life assured.
- Under 45 = Total remuneration x 30.
- 45-65 = (75 less your client’s current age) x current remuneration.
For example: if your client is 50 and earns £50,000 a year, this would be 75 - 50 = 25 x £50,000 = £1.25m Life Cover.
- Over 65 = Total remuneration x 10.