Can you explain the life insurance underwriting process?

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Asked July 2, 2013

1 Answer


The life insurance underwriting process begins when you apply for a policy. First, you will fill out the application form, and if that checks out, the insurance company will arrange for you to take a medical examination. After the exam, and as long as you are relatively healthy, the insurance company will begin the actual underwriting process.

During the underwriting process, an insurance company agent, but not an insurance sales agent, will review your application and the results of your medical exam. His role is to determine what risks you pose for the insurance company, and to set the premiums based on those risks. If you are high risk, such as someone who partakes in dangerous activities like skydiving, your rates will be higher than someone who has less risky behaviors.

Similarly, if you are a smoker, your rates will be higher than for a nonsmoker. Even if you have just quit smoking, you will still have to pay the higher rates for a period of about 1 year. After that time, you can request nonsmoker's rates and the insurance company will reevaluate the policy. If you are determined to be smoke free, than you will qualify for lower rates. Other than the change of rates, your policy would continue unchanged.

The underwriting process works for you as well as against you. The idea is to base your premiums on your health, age, and lifestyle, and the underwriting process could be considered a "discovery" process where you re weighed against your expected lifespan.

Some types of insurance, such as final expense life insurance, may not have a medical exam, but they will always be examined during the underwriting process to help you get the rates that apply to your risk category. Just as it would be unfair to charge smoker's rates to nonsmokers, it would also be unfair to uniformly charge all policyholders rates based on the risky behaviors of a few people.

Once the underwriting process is complete, you will be presented with a quote for the actual amount of your premiums and the details of your policy. At that time, you have the option of accepting or turning down the offer. If you turn down the offer, the insurance company may be willing to make a second offer with some exclusions added to take the risks out for the insurer. This is not mandatory, and some insurance companies may simply deny you coverage if you decline the offer. In this situation, you are free to shop for insurance elsewhere.

Answered July 2, 2013 by Anonymous

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