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Your Guide to Understanding the Life Insurance Underwriting Process

If this is your first time you are applying for life insurance, chances are you are not familiar with the life insurance underwriting process.

Life Insurance Underwriting

Underwriting is a very intimidating term in the industry. One of the main reasons why underwriting is so intimidating is because the underwriter has the power to deny your application because of answers on your application or because of the results that come back from your medical exam. If you understand the importance of buying life insurance to provide for and protect your family, do not let the underwriting process scare you away from applying. Educate yourself on the process, find out what you can expect, and feel more comfortable when you submit your life insurance application for a term of life insurance policy. Read also: Guarantee Your Retirement Income With a Life Insurance Annuity.

Why Do Insurance Companies Require So Much?

Just because you are ready to hand your money over to the insurance company, does not mean the insurance company is going to take your money. Insurance companies require all applications, even those on children and teenagers, to go through a strict underwriting process. The insurance company will assign an underwriter to each application to verify the answers on the policy. An underwriter must review the policy before an individual will be considered eligible for insurance.

If you have invested in other financial products in the past, you may be wondering why insurance companies seem to make it so difficult to buy their products. Life insurance companies are taking a much bigger risk on you when they make an offer for insurance. If they do not underwrite policies properly, they risk the chance of approving a policy on a risk individual and losing money. While insurance companies can deny claims within 2 years if the applicant lied on their application, proving a lie is much more difficult than you may think. This is why the underwriting process is important on both ends of the spectrum. Read also: Top Five Benefits to a Life Insurance Trust.

Understanding the Life Insurance Underwriting Process

Surprisingly enough, the underwriting process has not changed much over the last decade. Even so, the process remains a mystery to most who do not have professional underwriter titles with life insurance companies. While the process may vary from insurer to insurer, every good process includes the following steps:

  1. Examination of the insurance application.
  2. Review of medical examination results.
  3. Deciding whether or not to insure applicant.
  4. Determining premiums and whether or not to rate policy.

Now, you need to understand what is included in each process. Read also: Life Insurance is Necessary for Your Loved Ones.

What is considered on the application?

As an applicant, you are obligated to to report honest and relevant information on your life insurance application. All of the answers on the application will be considered in combination with one another to evaluate whether or not you are “insurable”. Each of the following areas on the application will be considered:

  • Your income and lifestyle. (If you participate in dangerous sports or activities, the underwriter will consider you a higher risk.)
  • Medical history of the applicant. (The insurer may order your medical records to look for risks that have not been listed on the application.)
  • Your family’s medical history.
  • Hazardous occupation or duties.

You must do your best to list everything possible on your life insurance application. If the insurer believes you have provided false information on purpose, they can deny you for coverage.

Reviewing Your Medical Exam

Not all policies require applicants to complete a medical exam. If you are older or you are applying for a large death benefit, the insurer will require you to meet with your doctor or one of their medical professionals. What is required during the exam may vary. Some individuals may need to have their blood pressure checked and others may need to have their blood drawn. You may also need to submit an oral swab to prove you are not a smoker. After the lab work is processed, the underwriter will receive the results and the underwriter will extend an offer based on the findings. Read also: Top 8 Myths About Life Insurance – Busted!

Extending Offers to Those With Medical Conditions

If you have preexisting medical conditions, it does not mean that you will be denied life insurance. The underwriter may extend an offer with a rated premium. This means that the premium is higher because you are a higher risk. When you receive your offer, you have the right to either pay the first month’s premium or reject the offer.

Now that you know your life insurance underwriting process works, you do not have to feel intimidated when you are answering each question. Make sure to be honest, speak with your agent when you have questions, and make sure you buy enough coverage to give your family the protection they need.


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