When it comes to insurance, the underwriting process can seem mysterious. If you’ve had questions surrounding this topic, you’re not alone! What you need is an introduction to underwriting in life insurance.
In this article, we’re going to explain what the underwriting process is and how different factors can affect your insurance rates, as well as what you can do to lower them.
By the time you’ve finished this article, you’ll be on top of all things underwriting!
Underwriting is one of the most important steps in getting a life insurance policy. It’s when your provider evaluates your case and assesses its level of risk. The underwriting process is used to determine what policies and the amount of coverage you qualify for, as well as how much you will have to pay in premiums for your policy.
Since life insurance is, for the most part, centred around death benefits, the underwriting process is streamlined (although not always simple). In a nutshell, tt focuses on the risk of early death of the applicant. The higher the likelihood an applicant dies early, the higher the risk for the insurance company to insure the individual. That’s why some people are quoted cheaper premiums and qualify for more coverage than others.
The easiest way to understand the underwriting process is to know what key factors are examined.
As with any life insurance plan, age is the first and most important detail about an applicant. The older you are, the riskier you will be for your insurance provider. Because of this, as a general rule, younger people pay lower premiums than older people.
Your sex also plays a big factor into determining how much you should pay in premiums. In Canada, women’s life expectancy is at a staggering 84 years, which is about 4 years higher than Canadian men.
This means that depending on your sex, your age might not represent the same risk for your insurer. Women pay lower premiums than men across the board because they tend to live longer, work safer jobs and have safer hobbies.
Because the underwriting process is all about risk assessment, it basically comes down to measuring the overall health of a candidate. Things that put your health at risk or that actively worsen your health will always be a detriment to your life insurance’s underwriting process.
Smoking is one of the most obvious things to look out for. Smoking is usually a daily, regular habit, and its negative effects on health have been well-documented over the last decades. Because of this, the simple fact of being a smoker could double, triple, or even quadruple your insurance premiums, depending on other factors.
Medical history is a very important part of the underwriting process. Because of the way certain diseases work, knowing your personal as well as your family medical history is crucial for insurers to be able to do an accurate risk assessment.
If you have a history of critical illnesses like heart disease or cancer in your family, that will make you a riskier candidate than someone who doesn’t have a history of illness. As a result, your premiums will more than likely increase, depending on how serious your medical history is.
Medical history is also one of the main reasons why people’s applications get denied. If your medical history suggests too much risk for the insurer, then they might think it better to simply reject your application than take a risk with you.
However, the thing about medical history is that not all plans require a medical underwriting. Guaranteed-issue plans are an example of this. Make sure you understand whether the plan you’re interested in requires medical history as part of your underwriting process.
Together with your medical history, insurers will want to see how healthy you are currently. This is often done through what is called an Attending Physician Statement, where your doctor completes a questionnaire about your medical status for your insurer, and a medical examination.
During this process, you will undergo a number of tests to determine your general health, and whether or not you are experiencing any symptoms. The better the assessment, the lower your premiums will be. If you are deemed too unhealthy in your current state, then your application may be denied. But don’t worry, being denied once doesn’t mean you will be denied forever. You can always improve your health for your next application!
Here, your insurer will ask you about the different occupations you have in life, typically your job and hobbies. Depending on how dangerous these are, your provider could decide to increase your premiums.
For example, if you work an office job and you play golf on the weekends, your occupations won’t be deemed very risky. On the other hand, if you’re an underwater welder and you enjoy extreme sports in your free time, your provider will most likely increase your premium payments to compensate for your risky occupational habits.
The underwriting goes through multiple steps in order to assess your risk. These steps can vary from company to company and from plan to plan, but they generally follow a similar pattern. There are three big steps in the underwriting process:
The reason why underwriting is intimidating to a lot of prospective clients out there is because traditional insurance companies can take a very long time with the process. So people are left waiting for weeks or even months before they get a response.
At Insurance Supermarket, we focus on creating a smooth application process for our clients. Reducing the length of the underwriting process was key to achieving this. With some of our plans, you could be approved for insurance in just 48 hours!
If you’ve already been denied for a plan with one provider, that doesn’t mean you are uninsurable! Even amongst insurance companies, some are more inclusive than others. Some, like the major banks, may only accept those they deem low-risk. Others may accept applicants for certain plan types.
At ISI, we understand that often those who typically get denied coverage are those who need financial protection the most. In fact, many of our existing policyholders are those who had struggled to pass underwriting previously.
If you’ve been denied life insurance coverage in the past, you may still be able to qualify with our comprehensive suite of simplified-issue and guaranteed-issue life insurance policies. These policies have a more limited underwriting process that usually excludes medical history and medical exams, making them much more accessible.
By picking the right provider and the right plan, you’ll be maximising your odds of having a smooth underwriting process and getting the best possible rates for the plan that works best for you.
At Insurance Supermarket, one of our main goals is to make the application process as smooth and fast as possible. We know things can be stressful going in, so we want our clients to be at ease during the entire process.
It can be difficult sitting around waiting for a response from your underwriters about how much your life insurance is going to cost. Why not start today?
