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When you purchase a life insurance policy, you need to qualify first. The underwriting process is used to determine your risk level. That risk level is what dictates pricing for a life insurance policy.
To learn more about life insurance underwriting, keep reading.
What Is Life Insurance?
Life insurance is an insurance contract that provides a death benefit if you die while covered. The benefit is paid to your beneficiaries, which you select at the time of signing the contract.
There are two types of life insurance; term life insurance and permanent life insurance. Term life insurance lasts for a set period of time while permanent life insurance lasts for your entire life. Though, you must pay your premiums on time to stay covered by either type of plan.
What Is Underwriting?
Life insurance underwriting is a process wherein insurance companies assign applicants a classification based on certain factors. The underwriters at insurance companies will consider several factors that can affect your rate. Those factors include:
- Age
- Gender
- Medical history
For example, if you are a 60-year-old smoker, you are more likely to die, therefore costs will be higher. Similarly, men have higher death rates than women, so simply being male can even affect your rates.
What Are Underwriters?
The underwriter is the person who collects the data needed to determine your rates. They give you an insurance classification, then, based on that data, the insurance company will make their decision on whether or not to insure you and how much to charge. Usually, better classifications lead to lower premium rates.
Underwriters will ask you about your medical history and often require a medical exam to be completed. You also need to tell them whether you often engage in dangerous activities, such as skydiving. Knowing this can help them make a fair assessment of your risk level.
What Is The Underwriting Process?
There are several steps in the underwriting process. They include:
Application
First, you fill out an application. This requires time and thought, but it is usually relatively simple. The application includes basic health information, like your height and weight, as well as other habits, such as smoking. It may also ask about your family history with diseases.
Sometimes financial information must be included too, but this isn’t always the case. Though, they do need to know what your job is, especially if it is a high-risk job.
Medical exam
Next, you must complete a medical exam. This costs nothing usually, as the insurance company has the incentive to have you examined so you can become a customer.
During the exam, the doctor will verify any information your put on your application and complete tests to accurately gauge your health. Once the exam is complete, you should receive a physician statement from your doctor. This will be submitted to the insurance company to inform them of the doctor’s findings.
Motor vehicle report
The Department of Motor Vehicles offers drivers the option to have a Motor Vehicle Report made. This report summarizes your driving history over the past five or seven years. It lists citations and tickets, as well as an accident you’ve been involved in.
The report should be collected and submitted to the insurance underwriter. With this information, the insurance company can accurately determine if your driving history places you at higher risk for fatal accidents.
Analysis and classification
Once everything is submitted, you’ll need to wait for the underwriter to analyze the information. This may take some time, but once it’s over, your underwriter will assign you a final rating and classification.
Start The Underwriting Process
Underwriting can take a while, so don’t wait to get started with the process. You can speak to an insurance professional from Insured For Life to begin with a free quote on life insurance in your area.
Call us at 1-888-989-0079 to get your quote and consultation.
