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Understanding The Underwriting Process of Life Insurance

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Understanding The Underwriting Process of Life Insurance

The quest to get life insurance can hit some rocky depths when it hits the underwriting process. Underwriting can be a very confusing process to explain, but the idea behind it is quite simple. Underwriting is simply the process of evaluating a client’s risks and assessing them to figure out if they should issue the client a policy, and at what rate to pay off their potential risks.

This happens after a person seeking insurance applies for insurance, takes a medical exam, and sends over any information the provider may need to know such as health records, financial statements, and lifestyle answers. The underwriter will look at these things, and will use programs to help determine their risk, and see if the company can afford to take on the customer. If the client appeasers to be too much of a risk for the company, the client may be denied, or may just get stuck paying higher premiums.

While the basic concept of underwriting seems simple enough to understand, the tricky part comes in when people try to figure out exactly how the process works, like pinpointing why they got denied insurance, or trying to determine exactly what it was that made their rates are so high.

 

There is no clean-cut way to explain this, as each insurance carrier is different and has various approaches to underwriting, but there are some basic steps of the underwriting process to help you understand how it works:

 

First, they'll assess your life expectancy

From the start, the underwriter will try to figure out the probability of the person to live a long lasting and healthy life. This will be based on the age of the individual, the gender, and other like components. With this estimate, the underwriter will try to determine whether or not the insured will live long enough to pay off their premiums.

If the underwriter estimates that the life expectancy of the individual is shorter than average, and that the client’s premiums will not accumulate enough to pay off the death benefit as well as the excess profits for the insurance company, then the prospect will be denied coverage.

Second, they’ll look for medical problems, and other risks

In order to get life insurance, you have to prove that you are healthy, and able to make payments to the company that will profit the company in the long run.

If the underwriter can predict an average or above average life expectancy, then you should be able to get coverage. While you may be young and healthy, there are some other factors that could affect your health and life expectancy rate.

Some of these factors include your health history, physique, occupation, family makeup, drug or alcohol use, hobbies, and travel plans, all things that can cause issues or safety concerns.

Then, they'll check your income

Underwriters need to make sure you won’t be a financial risk to the company. They are going to look at an individual’s income to make sure they are getting the right policy and can afford to pay their premiums. The underwriters will also look into their reasoning behind getting insurance, their current coverage plans, and their past experiences with applying for insurance.

These factors can determine your need for insurance, your anticipated risks, and whether you will be a benefit or a bomb for the company.

Narrowing down the factors that have the biggest impact can be hard, but the main idea here is that anything that causes you higher risks of death, will be a strike against you in the underwriting process.

The underwriting process is hard to predict without the formulas and programs used by the professionals, but by knowing your risks, you can get a good idea of the outcome of underwriting.

Lucky for you, the insured, is that there are so many different companies offering varieties of life insurance coverage for people with different levels of risk. Odds are that you will be able attain the coverage you need, when you need it.

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