Understanding financial documentation for individual DI and business overhead expense (BOE) insurance For Producer use only. Not for use with clients.

understanding financial documentation for individual DI and business overhead expense (BOE) insurance

For Producer use only. Not for use with clients.DI 1489 5-14

disclosures

• In approved states, Disability Income insurance (forms 4501NC, 4502GR and 4503BOE) is issued by Ameritas Life Insurance Corp. located at 5900 O Street, Lincoln, NE 68510. In New York, Disability Income insurance (forms 5501-NC, 5502-GR and 5503-BOE) is issued by Ameritas Life Insurance Corp. of New York located at 1350 Broadway, Suite 2201, New York, NY 10018. Policy and riders may vary and may not be available in all states.

• This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to, Ameritas Life Insurance Corp., Ameritas Life Insurance Corp. of New York and Ameritas Investment Corp., member FINRA/SIPC. Ameritas Life Insurance Corp. is not licensed in New York. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit ameritas.com.

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2014 Ameritas Mutual Holding Company

For Producer use only. Not for use with clients.

financial documentation

• Required in most DI and BOE situations to verify/confirm income, both earned and unearned

• Amount and type of coverage, along with employment situation will determine what financial documentation is required to underwrite the application

• Larger monthly benefit amounts require more substantial documentation

For Producer use only. Not for use with clients.

financial documentation

• Applicants that are self employed/business owners will need to supply documentation of business profit/loss for DI purposes

• Additionally they will need to supply documentation of business expenses for BOE purposes

For Producer use only. Not for use with clients.

types of financial documentation

• Paystubs

• W-2 Forms

• Profit & Loss Statements

For Producer use only. Not for use with clients.

types of financial documentation

• Tax Returns/Forms

• 1040

• Schedules C, E

• 1120S

• 1120

• 1125-E

• 1065 and schedule K-1

For Producer use only. Not for use with clients.

a note of caution

• The documentation and examples contained in this presentation should cover the vast majority of situations normally encountered in the course of financially underwriting most disability applicants

• The accompanying handouts provide a quick line by line reference with respect to determining earned/unearned income, eligible overhead expenses and other information

For Producer use only. Not for use with clients.

a note of caution

• Disability underwriting, and financial underwriting in particular, is far from a “black and white” exercise. Individual characteristics of a particular case may require deviation from what is suggested in this presentation or the accompanying handouts

For Producer use only. Not for use with clients.

paystubs

• What to look for:

• Rate of pay

• Frequency of pay period

• Salary vs. commission vs. bonus

• Any deductions for group LTD coverage

For Producer use only. Not for use with clients.

W-2 forms

• Represents an individual’s compensation for the tax year from that particular employer

• Box 1 represents wages/compensation paid

• Watch for deductions to retirement plans such as 401k. These deductions should be added to the box 1 figure to determine earned income shown on the W-2 form

• Is the W-2 representative of current earnings?

For Producer use only. Not for use with clients.

profit/loss statements

• Typically not acceptable as the sole source of financial documentation except for smaller BOE applications

• Can be helpful in some unique circumstances as a supplement to other sources of information

• General format: revenues – expenses = profit (loss)

For Producer use only. Not for use with clients.

For Producer use only. Not for use with clients.

form 1040

For Producer use only. Not for use with clients.

form 1040

For Producer use only. Not for use with clients.

form 1040

For Producer use only. Not for use with clients.

form 1040

For Producer use only. Not for use with clients.

form 1040

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule C

For Producer use only. Not for use with clients.

form 1040 – schedule E

For Producer use only. Not for use with clients.

form 1040 – schedule E

For Producer use only. Not for use with clients.

form 1040 – schedule E

For Producer use only. Not for use with clients.

form 1040 – schedule E

For Producer use only. Not for use with clients.

form 1120S

For Producer use only. Not for use with clients.

form 1120S

For Producer use only. Not for use with clients.

form 1120

For Producer use only. Not for use with clients.

form 1120

For Producer use only. Not for use with clients.

form 1120

form 1125-E

For Producer use only. Not for use with clients.

form 1065

• Form 1065 is the tax return filed by partnerships

• Format is very similar to the 1120S filed by S-corps.

• Partnerships are also pass-through entities

• Partners share of profit/loss is reported on schedule E of the owner’s personal tax return

For Producer use only. Not for use with clients.

schedule K-1

• Used by both S-corporations and partnerships

• K-1 issued to each owner and shows the owners share of income/loss and percentage of ownership

• The income/loss from the K-1 is then reported on schedule E filed with the owner’s personal tax return

• K-1’s can serve as documentation of business profit/loss in place of the actual business tax return

For Producer use only. Not for use with clients.

For Producer use only. Not for use with clients.

questions?

• Disclaimer:

• This is a high-level overview of what your DI underwriter reviews when financially underwriting your clients for DI/BOE insurance. Financial documentation can be quite complex and additional information and/or analysis may be required, depending on your clients’ individual situations.

key contacts

• Your agency or brokerage manager

• Your Ameritas® sales development team

• Your GSI regional director

• The DI product management team

For Producer use only. Not for use with clients.