Life insurance underwriting is the process that an insurer goes through to evaluate the risk associated with insuring an individual. It involves evaluating the individual’s age, health, lifestyle, and other factors to determine the likelihood of the policyholder passing away during the policy term. Based on this risk assessment, the insurer sets a premium for the policy. This allows the insurance provider to determine how much a policyholder should pay for a certain level of coverage.
The process can be overwhelming and nerve-wracking as if you’re applying for a mortgage. The most daunting aspect of the process is often the uncertainty of what to expect. However, to help ease your concerns and provide clarity, we have compiled this guide to help you better understand the process.
Life insurance underwriting is the process of assessing the risk associated with insuring an individual. This involves evaluating the individual’s age, health, lifestyle, and other factors to determine the likelihood of the policyholder passing away during the policy term. Based on this risk assessment, the insurer sets a premium for the policy. Applicants are grouped into broad categories that help insurers get the appropriate price for a policy.
Questionnaire
As a typical part of the life insurance application process, you will be asked to complete a personal questionnaire. This questionnaire consists of various questions about your personal history, such as your birthplace, occupation, and income. By providing this information, the insurance underwriter can gain insight into your lifestyle and better assess your risk profile.
Background Check
As part of the life insurance application process, a background check is conducted. This includes a review of a motor vehicle report, a prescription drug database, and previous life insurance application activity from data provided by the Medical Information Bureau.
The motor vehicle report shows an applicant’s driving record, with the life insurance underwriter paying particular attention to any significant violations, such as speeding, or any records on risky behavior such as driving under the influence.
Life insurers utilize the prescription drug database check as a means to confirm the accuracy of the information provided in the health questionnaire, which may include information that was not initially disclosed. The tool can be particularly helpful for individuals who struggle to recall all the specifics of their prescription drug history, as it can assist in obtaining the necessary information.
It is not uncommon for life insurance applicants to withhold certain details regarding their health history, and the prescription drug database check is one of the methods employed by insurers to uncover such information that may have been omitted from the applicant’s responses.
The insurance provider typically submits an entry to the Medical Information Bureau (MIB). This entry can be accessed by any other life insurance company that queries the database, and it reveals that the individual applied for life insurance with the original company. The MIB plays a vital role in combating insurance fraud by enabling insurers to detect inconsistencies in an applicant’s medical history across different insurance applications.
Health Exam
To evaluate the general health of the applicant, several life insurance policies ask for a medical examination, which is also known as a paramedical exam. Typically, this exam is conducted by a medical professional, such as a registered nurse, to gather essential health information.
The health exam is important in evaluating the risk profile of an applicant. With technological development, some life insurance providers can now eliminate the need for medical exams. It is highly likely that medical exams would no longer be mandatory in the next several years.
Medical History
Medical records contain notes taken by doctors and are required by regulations to be kept on file. These records help refresh the doctor’s memory during a patient’s subsequent visits. Life insurance underwriters frequently refer to these records to gain a comprehensive understanding of an individual’s medical history and the severity of any conditions they may have, regardless of their perceived significance.
Requesting medical records can be time-consuming and costly for the insurer. Life insurers have reduced their reliance on medical records as a result. The industry is actively exploring alternative methods of assessing risk that are faster and less expensive.
Underwriters typically look for a variety of factors including health, lifestyle, occupation, age, and more. Underwriters will review an individual’s medical history, current health status, and any pre-existing conditions to assess their overall health risk. Lifestyle habits such as tobacco use, alcohol consumption, and risky hobbies can all impact an individual’s life insurance risk assessment. Certain occupations may carry a higher risk of injury or mortality, which can impact an individual’s life insurance risk assessment.
Insurance underwriters also look for indicators that may suggest a longer life expectancy. For instance. Factors such as maintaining physical fitness and having long-term stable employment can be viewed as positive attributes that may contribute to a more favorable risk assessment. These characteristics could elevate an individual into a better risk category with a more favorable premium.
Completing an assessment for underwriting involves several factors and underwriters can typically conclude their assessments in 48 hours. This shouldn’t mean that you should only wait 48 hours to complete your application. There are more steps involved in collecting data and the whole process can stretch to several weeks.
Background checks can be completed quickly, usually taking less than 24 hours. However, the timeline for the application process can be prolonged by ordering, scheduling, and completing the paramedical exam. After the applicant has finished the exam, the examiner needs to submit the necessary paperwork and send the body fluids to a lab for testing, which can take several days to complete.
Medical records can also delay the process by several weeks. The timeline to order and receive medical records can vary significantly from one medical practice to another. In general, the underwriting process for life insurance typically takes anywhere from a few weeks to several months.
