How do life insurance providers determine whether to accept your application for coverage? And if you are accepted, how do they determine your monthly insurance cost and the amount of coverage (death benefit) you are entitled to? “Life insurance underwriting” is the method used to provide answers to these queries. Here’s what you’ll discover:
Underwriting: What is it?
Almost all applications for life insurance go through an underwriting procedure where the insurance provider evaluates the risk of covering the applicant. Numerous data points may be examined, such as personal data (gender, age, occupation, lifestyle, hobbies, and motor vehicle record), financial data, medical exam, current health issues, smoking habits, individual and family medical histories, and more. The only kind of coverage that doesn’t require an underwriting risk assessment is “guaranteed issue” life insurance, which has a modest death benefit that’s usually only enough to pay for a funeral and other final expenses. Other policies can require less information.
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The underwriter will decide whether to approve or deny the application for coverage based on the risk assessment. If approved, they will also decide how much coverage is needed and at what cost. As one might expect, the cost of the policy will increase with the amount of risk the insurance company must take on. Put simply, if everything else is equal, a fifty-year-old smoker who has health problems should anticipate paying more for insurance than a thirty-year-old in good health who does not smoke. Furthermore, the most dangerous applicants might not even be able to get authorized. Because of this, it’s critical to understand the life insurance underwriting procedure before submitting a coverage request. By being aware of what to anticipate from the application and medical exam, you can minimize stress, save time, and, with a little planning and preparation, even improve your chances of being accepted for the coverage you desire at a reasonable price.
Is underwriting conventional or fluidless?
Conventional underwriting often entails completing a life insurance application as well as a medical examination, which may require drawing blood or urine samples. Nevertheless, some insurers provide “accelerated underwriting” or “fluidless underwriting.” As the name suggests, this procedure removes the need for an examination and the drawing of blood or urine samples, which expedites the underwriting process. Instead, it assesses the applicant’s risk profile by using technology like mortality modeling and algorithms. Not all insurance providers offer fluidless underwriting, and not all policy types do. To be eligible, candidates must normally be under 60 years old and in good health.
The procedure for applying and underwriting
As previously mentioned, the majority of applicants must finish an application for life insurance and a health examination. You will also likely be required to sign HIPAA-compliant consent forms and other documents granting the insurance underwriter access to your driving record, credit history, financial statements, medical data, and prescription history. During underwriting, the insurance company will have access to part or all of this information, therefore it’s critical that you provide accurate disclosures. Intentional or inadvertent misrepresentations could potentially compromise your application for coverage approval and, in some situations, make your insurance policy null and void in the event of your death.
Your application for life insurance
Your application will probably include some or all of the following information because the insurance underwriter will take into account both your health history and lifestyle details:
medical history in the family
individual medical background
history of prescriptions
Contact details for doctors, both current and past
Report on motor vehicles
occupation (which aids in evaluating potential risks at work)
Interests (some sports, such as scuba diving, are linked to a higher risk of death)
Plans for overseas travel (there may be a risk while visiting war zones or places with high infection rates)
Before starting to fill out your application, make sure you have the following documents and information on hand to save time and prevent delays: A copy of your driver’s license or other picture ID; a list of your prescriptions with dosage instructions; the names and addresses of any doctors you’ve seen recently (usually within the last five years); a description and the dates of any recent procedures you’ve had.
The health examination
Apart from reviewing your medical records, the majority of insurance companies will also need a current health status report and a quick physical examination, which is typically done at your place of employment or residence. Usually, the exam covers the following topics:
Note down your height, weight, and BMI (body mass index)
obtaining your blood pressure and pulse, among other vital signs
supplying a urine sample
A blood test to assess blood sugar, cholesterol, and other health concerns, such as drug and nicotine usage, although not exclusively
Additionally, certain candidates might need to submit to x-rays, treadmill stress tests, cognitive ability tests, and/or electrocardiograms (EKGs).
How to be ready for your health examination
You cannot significantly improve your health in a short period of time, therefore there isn’t much you can do to get ready for the medical component of your application. However, there are some steps you may take to guarantee the best outcome:
Eat well the week before your exam. Eat less salt, sugar, fat, cholesterol-raising meals, and any other food that can make a risk factor worse.
Steer clear of over-the-counter drugs that are not necessary, like decongestants and antihistamines, as these can increase blood pressure and glucose levels.
Steer clear of alcohol, as it can impair liver enzymes and lead to dehydration.
Drink more water. Drinking enough water helps your body rid itself of contaminants that could affect your blood and urine tests. Maintaining adequate hydration will also facilitate the blood draw.
12 to 24 hours before to the exam:
Steer clear of intense exercise as it can raise your cholesterol and blood pressure.
Get into bed early. Your vital signs will improve with a restful night’s sleep.
Exam day: If at all feasible, schedule it for early in the day.
Steer clear of caffeine
Even if fasting is not necessary, abstain from all food and liquids (except water).
Water is a good beverage to have right before an exam.
When you weigh in, dress comfortably.
The underwriting process’s next steps
Underwriting may take four to six weeks, but it might take as little as twenty-four hours. The process is more intricate and time-consuming the more comprehensive the policy. The underwriter will examine the specifics of your application and the findings of your physical examination within that period. After that, the underwriter will evaluate your life expectancy and establish your life insurance risk class and classification using the information provided. The permitted coverage amount and the monthly premium will subsequently be established by this. Although insurance companies have slightly different classifications, the class that is eligible for the best policy terms is usually referred to as “Preferred Plus”. Others could be:
Preferred Plus: perfect height/weight ratio, outstanding health, and unblemished family history
Preferred: Excellent health with few medical issues
Standard Plus: Good family history, non-ideal height/weight ratio, and good health
Standard: Unsuitable height to weight ratio, convoluted family background
Table Ratings: Severe Obesity or Serious Health Problems
Ratings for Smokers and Tobacco Users: Have used nicotine or tobacco products in the previous 12 months (Premium prices for these ratings can be up to three times greater than those for non-tobacco ratings on average.)
Warning signs for insurers
While each life insurance provider has its own underwriting standards, most of them adhere to the same fundamental underwriting principles with regard to “red flags.” These risk factors could cause the insurer to reject an application completely, raise the rate for life insurance, or restrict the amount of coverage that is supplied. Among the most important ones include smoking habits and a medical history involving a serious or potentially fatal condition like diabetes, heart disease, cancer, HIV/AIDS, or blood-borne infections. Other things of this kind that could affect your insurability are:
Obesity: Typically, a body mass index (BMI) of 40 or more prompts insurers to ask for additional medical documentation. A BMI over 45 typically results in the application being denied.
High blood pressure that is managed with medication: The majority of insurance providers will still cover you for this condition. Rejection may result from abuse or neglect of the pressures.
go: If an applicant intends to go to a dangerous or unstable area, insurers may reject their application.
Use of alcohol: Higher premiums are likely to result from above-average use, even from three or four beers per day. Drinking more alcohol could result in the application being rejected.
Drug use: Using drugs like heroin, cocaine, or crack will inevitably result in rejection. Insurance companies treat marijuana use in different ways.
Risky hobbies: Excessive risk-taking hobbies, including skydiving or auto racing, might result in much higher premiums or, in rare situations, the application being denied.
Risky occupations: Candidates who work in hazardous fields, such pilots or police bomb technicians, would need to obtain coverage through employer plans or specialty carriers.
a bad driving history. Some insurers could deny an application if the applicant has a history of careless or intoxicated driving.
It does not preclude you from obtaining coverage if you suffer from any of these ailments. You might have fewer options, though, and your insurance cost might go up a little. But remember that more solutions can become available as medical science develops. For instance, receiving a medically underwritten plan was previously unattainable because to an HIV diagnosis. Nevertheless, a few life insurance providers, such as Guardian, will now offer policies for specific candidates who have been diagnosed with HIV in addition to other ailments.
Advice for candidates who run the risk of failing
Every day, people with modest or manageable health issues are approved for coverage. But you have two major options if you have a medical history or issues that could make it impossible for you to “pass” a mandatory medical check. The first option is to apply for a simple issue insurance, which doesn’t require a medical exam and will be underwritten using a less involved application. Be advised that policies with simplified issues typically have higher premiums and lower coverage maximums. But, they can be worthwhile to investigate if you are not qualified for a traditional life insurance coverage.
If you are employed, purchasing life insurance through a plan offered by your company is an additional choice. These plans may not require medical exams and typically have reasonable group prices (unless you ask for coverage over a specified amount).
Learn more
We advise speaking with an experienced specialist if you have any questions or concerns about applying for life insurance coverage. If you don’t have somebody with whom to talk about insurance, Guardian can connect you with a local financial expert who will listen to your concerns and give you options and solutions to make the process easier.
Common inquiries concerning life insurance underwriting
What is the life insurance underwriting procedure?
Underwriting for life insurance is the process by which an insurance provider evaluates an applicant’s risk of coverage by utilizing personal and medical data. The firm will decide whether to approve or reject the application for coverage based on the risk assessment. If approved, it will also decide how much coverage may be provided and at what cost.
What is the role of a life underwriter?
Life underwriters classify life insurance policies, evaluate medical tests and applications for life insurance, and execute risk evaluations. The insurance categorization will determine the available coverage and rates for life insurance.
How much time does it take to get life insurance underwritten?
It can take as little as 24 hours after the medical test and application are finished. However, the life insurance provider will often provide you a 4–6 week window of time. The underwriting procedure for life insurance may take longer the more coverage is needed.
Is an agent for life insurance an underwriter?
No. A life insurance underwriter is a specialist with extensive training in risk assessment. Your life insurance agent will guide you through the application process, help you decide what sort of policy to apply for and how much coverage you need, and send your application to the underwriting department of the life insurance company for consideration.