Unless your potential insured's financial planner is Carnac the Magnificent, there is no way to predict the future. Yet, spurred to action by what was until recently a strong economy and bullish stock market, financial planners are challenging direct life insurance underwriters to rethink the conventional approach to financial underwriting. Increasingly, home office underwriters are being asked to accept forecasted growth estimates that far exceed historical comfort levels. But unlike Carnac, a late-night television mystic who knew the contents of the envelope, underwriters are at a disadvantage when they don't have all the facts in front of them. Life underwriters are trained to take future value into consideration.
Future value is the process by which today's money grows in value over time.
That amount is calculated by using an assumed rate of interest or appreciation for a given duration. Very little published information exists to help predict how much an individual's net worth increases over time. What's more, no one gathers information about the financial condition of insureds at death. So, building an accurate model to predict the financial future of an insured is impossible. It is possible, however, to generate empirical data from Forbes magazine's 400 wealthiest Americans listing.