Insurance Underwriting Explained

Life Insurance Underwriting

Life insurance underwriting is an extremely complicated process that is used by life insurance companies to determine whether or not an applicant is qualified to get life insurance under their terms and conditions. The underwriters use a complex set of tools called risk table and actuaries to determine if you qualify and when the process of life insurance underwriting is finished, you have an answer about your policy and how much your life insurance premiums are going to cost you every month.

When you apply for a policy, the application that goes through life insurance underwriting will include you present health conditions, past health conditions, the possibility of contracting a disease that runs in your family, how you live, your credit record, and your driving record. Life insurance underwriting departments will look at each of these factors to assign a numerical number to your application that will determine how much of a risk you are.

Life insurance underwriting departments are very important to the life insurance industry. Liberal underwriters will cost the company money and too strict underwriters will cost the company customers. The numerical scores that are assigned by life insurance underwriting department are standard for each company and they actually provide the insurance company an objective way to determine what you will pay for insurance coverage.

Each factor a life insurance underwriting department will consider in your initial application is important to allowing them to make a decision on your policy. You will be required to complete an exhaustive questionnaire about your past and present health and honesty is the best policy here. You will also be required to answer questions and provide information on your ancestor’s health history so that the life insurance underwriting department can see if you are at risk of getting a familial disease that will drive up your premiums. The life insurance underwriting department will then look over your medical records and your premium could be affected by things found in it.

If you smoke, drink, do drugs, or work in a high risk occupation – police officer, fireman, coal miner, etc. – you will lose points on your policy and up goes your premium some more. Dangerous hobbies, like hunting and skydiving, will push up the premium as well. Do not lie on the application form because the life insurance underwriting department will catch it and they will immediately deny you coverage. If they find out after they have already issues the policy that you lied, you have forfeited all of the premiums you have paid into it.

One of the most controversial aspects of life insurance underwriting is the inspection of your credit record and rating. There are facts that show that the lower your credit score, the higher a risk you are for dying before you pay off your insurance policy. Statistics have shown the correlation between your credit score and how long you live and it is also a way for the life insurance underwriting department to determine whether or not you will pay your premiums on time.

You driving record are used by the life insurance underwriting department to determine whether or not you are a poor driver and at risk for getting into a fatal accident. The worse your driving record is, the more you will pay on your premium. Additionally, the life insurance underwriting department will investigate the type of neighborhood and area you live in and base scores here on whether or not you live in a high or low crime area.

You should always be wary of life insurance companies and their life insurance underwriting department that offer you no document policies. Even life insurance no exam coverage includes a thorough investigation into your health. They just don’t ask for a physical. Companies that have a no document policy should raise red flags in your head. Life insurance underwriting departments need to see what your life is like in order to issue a policy and any company that doesn’t ask for some documentation is probably not legitimate. And never get upset with a life insurance underwriting department. They are only doing their job based on the information you give them. They are there to protect you and the insurance company, and to make sure that you get the coverage you need.