What Is Life Insurance Underwriting?
Life insurance underwriting is the process of reviewing your background and medical history to determine your premiums.
Published November 7, 2020.
Life insurance underwriting evaluates the risks involved in insuring a potential policyholder.
After a careful review of his or her profile, underwriting can approve the application, sometimes with exclusions, conditions, and revised premiums, or reject it.
How does life insurance underwriting work?
Underwriters assess the degree of risk of your profile, based on your age, gender and health, but also lifestyle choices, occupation, insurance records, family medical history and other factors as specified by the selected insurance company.
First, you will be asked to fill out a detailed application and submit all your documents. The insurer will review your application to check for missing information and might request a phone interview to clarify some of your answers. Once all the required information is there, the underwriting process can start.
What are underwriters looking for?
Health and medical history
You will be asked to submit your medical records, conduct an interview, answer a questionnaire, get a medical exam, or some combination of the four.
Frequently, underwriters are only looking for significant, long-term health issues. This can include but is not limited to diabetes, heart conditions, genetic disorders, obesity, smoking, cancer, anxiety, depression, and alcoholism. Prescription drug use and your family medical history will also be considered to assess risks.
While not all these medical conditions will make you ineligible for life insurance, they can significantly increase your life insurance premiums. On the other hand, in some cases underwriting will grant you such a clean bill of health that you can receive a rate reduction!
Lifestyle, occupation and hobbies
Another factor that underwriting will take into consideration is your lifestyle choices.
Having a dangerous profession like being a police officer or construction worker, or participating in hobbies that are considered risky can also increase your premiums. These could be activities like scuba-diving, intense rock-climbing, parachuting, and extreme sports. Reckless driving habits and high levels of alcohol consumption may also be considered.
Again, these factors will not automatically make you ineligible or increase your premium rate. It is essential to be thorough and provide all relevant information during the underwriting process, to avoid the risk of having your coverage cancelled or significantly reduced, in which case your beneficiary would receive less death benefit than you originally planned for.
How long does underwriting take?
The underwriting process can take up to four to six weeks, though it really depends on several factors.
For example, it will take more time if you are requesting a high amount of coverage or if your individual case is complicated. You might also experience delay when scheduling a medical exam or requesting medical records.
But if you are a significantly healthy and low-risk individual, your life insurance policy should be issued quickly.
Am I covered during the underwriting process?
As long as you remit your first payment, you are covered to the extent that underwriting would have approved your life insurance policy.
This means that if you were to die unexpectedly while waiting for your application approval, then underwriting would process your application as usual, and the final decision would determine whether your beneficiary receives the chosen death benefit or not.
Can I skip life insurance underwriting?
People who afraid of being rejected for life insurance due to an underlying condition may be more inclined to choose no-exam life insurance. Others, who might be uncomfortable with the underwriting process, or simply want a more streamlined service might choose this option as well. Yet, no-exam life insurance usually comes at a cost.
If you have any further questions or concerns, you should always feel free to contact your life insurance agent!