How Life Insurance Underwriting Works

Written by Jason Fisher

How Life Insurance Underwriting Works

Knowing how life insurance underwiting works can help you get a better rate.

If you’ve never purchased a life insurance policy, or you haven’t in a long time, you may have questions about how life insurance underwriting works.

As an applicant, this is a good thing to know so you can not only get the best premiums available for you, but also speed up the process.

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The underwriting process can be lengthy and daunting, but if you are more prepared up front, it can be a seamless process.

How Life Insurance Underwriting Works

Find The Best Life Insurance Quote

Finding the right quote is not really a part of how the underwriting process works, but it does ultimately determine who your underwriter will be, so take your time.

Start off your hunt for life insurance by finding the best life insurance quote you can to ensure you pay the least possible amount. By far the easiest way to do this is to get a quote using a quote engine like ours.

A good quote engine will give you all of your life insurance quotes immediately. No waiting. No phone calls from call centers for months to come. No hassles. Just an instant view of all the companies who are offering life insurance for exactly what you are looking for. Right now.

Use The Best Life Insurance Companies

If you use a quote engine, it reveal quotes from many companies, never just one. Beside each company, you should see a rating scale. The rating tends to be from a rating agency like A.M. Best, and you’ll want to try to use a carrier who has at least an A rating or higher.

The reason you want to use a company with a high rating is the same reason you would buy food from a reputable restaurant. You want quality, you want service, and you want a product you ordered to be exactly what you want when it’s delivered. This is what a good company will provide.

Complete The Online Life Insurance Application

This is your first representation of yourself to the insurance company. The online life insurance application usually is just some basic contact information, and the part II is going to be either a non-med or paramed.

A non-med is going to be the medical questions asked by an agent directly or over the phone by an interviewer. They’re also going to collect some basics like your height, weight, doctors information, medications and other necessary information to get a good basic idea of your current and past health. Don’t worry because you can still get life insurance with health problems such as someone needing life insurance for overweight individuals. There are even companies who offer million dollar no exam life insurance. Let us guide you in this process.

A paramed is the same sort of questionnaire, but it’s completed by an examiner and tends to be much more in depth than a standard non-med. A paramed is required when a person opts for a larger face amount than one which can be completed with just a non-med for most standard issued life insurance policies.

Next, your MVR will be accessed, which is your motor vehicle report. On your application, you’ll be required to list your driver’s license number, and your driving record will give the underwriter details about how much of a hazard you are on the road, and it can affect your life insurance premiums.

Your MIB profile (Medical Information Bureau) will also be reviewed, which is a medical history report of any minor to major health concerns you have had in the past. This allows an underwriter to see if a person has a medical infraction, allergy, or even surgery in the past which might require special consideration.

Most people don’t understand how the life insurance underwriting process works, and don’t even realize something like a driving record has an impact. But it, along with things like assets and liabilities, family history, and others all can have an effect, positive and negative.


Understanding How Underwriters Review Applications

The review process by an underwriter is a multi-step process. Going from the most basic to the most specific information, the underwriter aims to put you into a class of risk which seems to mimic other people of your same age, gender and health class. By doing so, the insurance company is able to ultimately define what rating to give you, and what premium to charge.

An underwriter can only review the information they are provided! If there’s something you would feel might benefit your profile, you’ll have to provide them with any details up front.

Overview of Life Insurance Ratings and Classes

So how can an underwriter classify you? There are point systems involved with each carrier. As you have more health concerns, family history glitches, or hazardous activities, you acquire points which will lower your rating. Here’s a list of the possible ratings, for example:

Life Insurance Ratings

Most of the policies issued from most carriers fall into these categories. These risk classes encompass the average to above average health risks, and account for a large majority of standard issued policies. But not everyone has a clean bill of health and clear family history. Some get what are called table ratings. A Table Rating is when an underwriter has given more points to a profile than allowed by the above listed classes, and will result in a higher premium.

Your Free Look Period

After you’ve been given your rating by the carrier, this will create a policy for you matched to your death benefit amount, gender, age and premium. This is essentially the offer of the life insurance carrier to cover you, and how life insurance underwriting works.

Even after you accept, you still have what is called a Free Look Period, which is normally 10 days in duration (it can be 30 days if your policy is replacing another). It allows you to review the policy, its contents, beneficiaries, and other information. If you need to make alterations, this is the time to do it if it affects the policy itself. Basic information can usually be changed later in the life of the policy.


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