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Understanding the Life Insurance Underwriting Process

pen on a life insurance application needing a signature

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

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When you’re applying for any kind of life insurance, you must go through the underwriting process.

We’ve been in the insurance industry for years, and we are still getting questions about underwriting. The most common question is, “What in the world is underwriting?!”

So let’s take a closer look at the life insurance underwriting process.

What is Life Insurance Underwriting?

Underwriting entails evaluating criteria such as the health, medical history, hobbies, occupation, smoking habits, and family history of an applicant in order to determine eligibility for coverage.

Should the applicant qualify, the amount they will pay is based on their overall health, as well as the potential risk that they present to the life insurance company.

This risk is assessed by the underwriter.

What Does an Insurance Underwriter Do?

It is the job of the life insurance underwriter to evaluate the overall risk of insuring a particular applicant for coverage. In doing so, the underwriter will also set the premium price for the applicant’s insurance policy.

Life insurance underwriters decide who the insurance company will and will not insure. This decision is typically based on risk assessment.

The primary goal of the underwriter is to ensure profitability to the insurer.

Therefore, the underwriter will evaluate the risks of insuring an individual for coverage in order to set up the premium pricing for his/her life insurance policy.

How Does the Life Insurance Underwriting Process Work?

When evaluating an applicant’s overall risk, a life insurance underwriter will review a number of different factors.

These may include:

  • Height
  • Weight
  • Current health status
  • Medical history/lab reports
  • Family history
  • Occupation
  • Hobbies
  • Smoking habits
  • Driving record/motor vehicle report
  • Prescription medications

Additional Underwriting Tests

Depending on the person’s health, as well as the amount of coverage that is being applied for, it may be necessary for the proposed insured to also provide a blood and urine sample.

These tests typically screen for things such as nicotine and certain drugs, as well as kidney disease and elevated sugar levels. In addition, they may also be able to point out the individual’s cholesterol levels and health conditions such as diabetes.

Information about the applicant may also be obtained from the Medical Information Bureau (MIB), an information source that may alert insurance companies to errors, omissions, or misrepresentations in the insurance application process.

By obtaining additional information from the MIB, an applicant can be better categorized into the appropriate policy rating.

What Do Life Insurance Underwriters Look Out For?

When analyzing an application for coverage, life insurance underwriters look for a number of different factors. Certainly, your current overall health is the most important of these, followed closely by your past health.

The underwriter who is going to be reviewing your application will also want to know as much detail as they can get about your family’s health – as well as your family’s health history – as this can be an indication of any diseases that you may be prone to obtain in the future.

Hobbies, occupation, and activities are also important. This is because all of these activities could essentially put you at physical risk of injury or death – especially if you work in a dangerous occupation and/or participate in dangerous or risky hobbies.

In addition, stressful activities can also lead to increased blood pressure, which can, in turn, lead to heart-related disease or stroke.

No matter what, do not lie on your life insurance policy. Doing this can bring a whole different set of consequences for you, both now, and later in life.

How Underwriting Affects Premium Pricing

Once all of the information about an applicant has been compiled, the underwriters will analyze it in order to come up with an overall price.

Oftentimes, underwriters will use computer programs and actuarial data, when determining both the magnitude and the likelihood of a claims payout.

People who pose the most amount of mortality risk will pay the highest premiums, and those who are the least risk will pay the lowest. This is why applying young makes a difference, just as much as applying when you’re healthy.

Although all insurance companies will differ, most will have policy rating classifications that range from preferred down to substandard. Each company will also have criteria whereby an applicant for coverage must be declined.

How Do Healthy Credits Work in Underwriting?

Some insurers may also allow policyholders to increase their policy rating through “healthy credits.”

This means, for example, that if an insured maintains certain blood pressure levels or cholesterol levels without medication for a certain amount of time, they may be able to raise their rating up to a better level – and better premium rate.

Life Insurance Underwriting Differs By Insurer

When applying for life insurance coverage, it is important to remember that everything you do is taken into account by the underwriters when determining your eligibility for coverage, as well as your policy’s premium rate.

Finally, when you do decide it’s time for you to apply, we strongly advise putting your best efforts into finding the best life insurance companies who will meet your needs, your budget, and your overall risks.

Compare rates using the quote form on this page, or call us at 800-712-8519.

Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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