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How Life Insurance Underwriting Works

Before most people can qualify for life insurance coverage, an applicant must go through a process called underwriting. This involves the insurance company analyzing whether or not an individual will be a good risk for coverage.

Historically, the word underwriter came from individuals writing how much risk they were willing to take on in return for a certain amount of premium payment. If an insurance company feels that the amount of premium paid by an applicant for insurance will not be sufficient to cover the risk that the company is taking, then it is likely that the applicant will be denied for coverage.life insurance underwriting

How Life Insurance Underwriting Works

With life insurance, the insurance company will decide whether or not to insure an applicant and at what premium rate they will charge for taking on the risk of the insured passing away sooner or later in relation to the amount of death benefit coverage being applied for.

Factors that a life insurance company will base their decision upon include the applicant’s age and medical history, their height and weight in relation to the height and weight of an “average” individual at that same age, as well as the occupation and other activities that the proposed insured engages in.

If an applicant has what is considered to be a dangerous job – such as a firefighter – they run a higher risk of death than someone who works at a “safer” occupation and thus may not be covered because they are considered by the insurance company to be a high risk. Likewise, if the proposed insured engages in hazardous activities such as skydiving, they may also be denied for coverage as they, too, run a higher risk of death.

Other considerations taken into account by the life insurance underwriter are the applicant’s gender and whether or not they smoke. Typically, women live longer than men. Therefore, the likelihood of a man at a certain age dying in comparison to a woman is greater and thus the premiums for males are typically higher than for females of the same age.

Likewise, those who smoke are considered to be a higher risk than those who do not. Because of this, the premiums for a life insurance policy of a smoker will typically be higher than the premium for the same amount of coverage for a non-smoker.

Life Insurance Company Rating Classes

Once approved for coverage, life insurance policy premiums of the applicant are placed into different categories, based upon the health factors of the insured. For example, those who are considered to be of average height, weight, and health are typically considered to be a “standard” risk and are thus charged accordingly for their policy premiums.

Those who are considered to be in better health than the average may be thought to be a “preferred” risk, and are charged a lower amount of premium. This means that these individuals are in stellar health and will likely live a longer life – and will therefore not require a benefit payout for a longer period of time from the insurance company.

Conversely, there are also some insureds who are considered to be sub-standard risks. This means that these individuals have a lower health rating than the average and are thus more likely to require the insurance company to pay a claim sooner. Therefore, these policyholders will be charged a higher amount of premium for their policy.

What is Advanced Life Insurance Underwriting?

Advanced life insurance underwriting is a process that involves the underwriting of policies that are used in more complex life insurance cases such as those that are used in estate planning or business insurance situations.

This process includes the sale of larger volumes of life insurance plans, as well as the servicing of these policies, whereby the insurance is used not only for its pure death benefit but also for issues such as taxation and charitable giving.

The Necessity of Underwriting

Although the underwriting of life insurance policies is not an exact science, it is necessary in order for the insurance company to adequately place certain risks. This helps the insurance company to better determine its profit or loss, based on the risks it takes.

However, it also helps in more accurately pricing life insurance policies so that insureds are paying a more fair amount of premium based on their specific risk to the insurance company. This also helps the financial stability of the insurance company so that it can ensure the payout of benefits at the time they are needed by the beneficiaries of each policyholder.

What To Do If You Are Denied Coverage

For those who are denied life insurance coverage due to a negative health condition, there are other options for obtaining the protection that you need. One potential option is to apply for a no medical exam life insurance policy.

A no medical exam policy is self-explanatory – it will not require an applicant to undergo a medical exam for underwriting purposes. Typically, an individual will only need to fill out an application for coverage. Because there is no lengthy underwriting process, policies can usually be issued much quicker than normal.

Another potential option for obtaining coverage is through a guaranteed issue life insurance policy. With a guaranteed issue policy, an applicant can get coverage, regardless of his or her health condition. Oftentimes, this coverage is considered to be a “coverage of last resort” for those unable to qualify for traditionally underwritten life insurance due to health-related issues. In some cases, applicants for the guaranteed issue may not have group health insurance coverage available to them.

Guaranteed issue policies can be purchased as either term or whole life. So, the decision regarding which type of plan to obtain will depend on whether the applicant wishes to have just pure death benefit protection, or a death benefit along with a cash value build up.

It is important to understand that because guaranteed issue life insurance is typically purchased by those who are considered the riskiest to the life insurance carrier, the premiums charged for this coverage can be quite high – in some cases, the cost may be two to three times higher than a similar policy that is traditionally underwritten. However, a guaranteed issue policy could be the only option that is available for obtaining the coverage that is needed for paying final expenses or other financial obligations. With this in mind, it could still be a very viable option.

Purchasing the Right Life Insurance for You

Finding the right life insurance can be intimidating. But, don’t fear! Through working with the top life insurance carriers in the market today – including those that offer no medical exam and guaranteed issue policies – we ensure you receive the best life insurance for you at the best price. Simply fill out and submit the form on this page to begin a conversation.

Have any questions? Please, contact us if you have any needs. Simply give us a call, toll-free, at 888-229-7522. We want to be sure that you have all of your questions answered as you make your life insurance decision. Getting the best life insurance plan is important; we are here to help every step of the way.


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