What is life insurance underwriting?

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If you’ve ever applied for life insurance, then you may have heard about the underwriting of your policy. But what is insurance underwriting? How does it impact your policy and your premium costs? The insurance underwriting process can be complex, so let’s break it down and take a look at life insurance underwriters and what they do.

What is a life insurance underwriter?

Simply put, an underwriter is the person or company who looks at all the data collected about you and determines if you would be a good risk for the company to insure. This person will give you an insurance classification and, based on that classification and other data, a decision will be made on insuring you and your premium rate will be set. The better your classification, the less you will pay for your premium.

Basically, although it sounds morbid, what the underwriter is trying to determine is how likely it is that you will die while the policy is in force. Every policy the underwriter writes is a gamble for the insurance company. They are hoping you won’t pass away, meaning they’ll be able to earn money off your premiums but don’t have to pay out a death benefit. If they have to pay out a benefit then they may lose money.

So the underwriter looks at everything from your age and weight to whether your hobbies are risky — skydiving, for example — and then assesses the likelihood of your still being alive when the policy ends. To make their assessment, they’ll use something called an underwriting manual, which is specific to that company. This manual lists the guidelines that the company uses to determine who they will and won’t write policies for.

What is the insurance underwriting process?

The life insurance underwriting process has multiple steps and usually takes two to eight weeks to complete. It may be longer than that if your potential insurer has questions or if they need to wait on a response from your doctor.

The application

The process starts with you filling out an application. This may take some time and thought. It includes basic health information, such as your height and weight, along with information on your habits, such as whether you smoke, how much you drink and whether you exercise regularly. It will also ask about your family history with any diseases — if you have a history of cancer in your family, for example, you’ll list it here.

The application may also include financial information, as well as information about what you do for a living and how you spend your free time. They are trying to discover if you are engaged in any risky behaviors. For example, if you work in the logging industry, one of the most dangerous professions in the U.S., they may either turn down your application or increase the premium they are charging.

It doesn’t pay to lie on your application. The company will dig deep to find out all the facts, and any misstatement you make could cost you a policy. Your best bet is to fill out the application as completely and honestly as you can. Once submitted, there may be a follow-up phone call if the company needs further clarification on anything you’ve said in the application.

Medical exam & statement

The next step is a medical exam, which comes at no cost to you. A nurse or medical technician will meet you at your home, place of work or at the insurer’s office to do an exam. This will verify the initial information you put on your application, like height and weight, and will probably include a blood test and possibly a urine test to check for drug use.

All of this is to determine the state of your health. If the exam determines that you are overweight, have high blood pressure or any number of other physical ailments or potential health issues, your classification may be bumped down.

Following the paramedical exam, the underwriter may ask you for an attending physician statement from your doctor. Your own doctor is in the best place to speak about your health and he or she can expand on the findings from the medical exam.

This may work in your favor. If, for example, the medical exam discovered a drug in your system through the urinalysis, your doctor may be able to explain that it’s just for a short-term treatment and not something that the underwriter needs to worry about. Your doctor’s statement can explain your treatment and offer additional information on the severity of your symptoms.

The final steps in the medical portion of the underwriting include a prescription check, to confirm any information you’ve given about drugs that you take, either short-term or for maintenance purposes. The underwriter will also check with the Medical Information Bureau, which is a non-profit trade group that can verify or dispute medical information gathered to date.

Motor vehicle report

In addition to a thorough review of your medical data, the underwriter will request a motor vehicle report (MVR), which is a statement available through your state’s DMV that summarizes your driving history over the past five to seven years (how long varies from state to state).

Your MVR will list traffic citations and tickets, as well as accidents you’ve been involved in, points taken off your license and DUI or DWI convictions. Basically, the report includes anything that shows that you’ve been an unsafe driver in any way.

Although one or two traffic tickets won’t make a big difference, if you have a pattern of bad behavior behind the wheel your underwriter is going to take a very careful look at your MVR and may drop you down to a lower classification rating, which means higher premiums or a denial of your policy.

If this is a concern for you, you can obtain a copy of your MVR before you apply for life insurance. Your state’s DMV is required to give you a copy at your request. If you find any errors, you’ll want to straighten them out before you apply for insurance.

Analyzing the information

Armed with all the information that’s been gathered, your underwriter will now sit down to determine your final rating. Their first step will be to consult an actuarial table. This is a document that shows life expectancy — in other words, how likely it is that you will die at a certain age.

The data on the actuarial table is broken down by age and gender as well as body mass index (BMI) and it takes into account your height/weight ratio. Using this resource, the underwriter is able to see what the probability is that you’ll die while the policy is in effect. The higher that probability, the higher your premium costs.

The underwriter does have some discretionary ability when assessing the data. For example, if your probability of death is higher than ideal, but you’ve been able to prove during the medical portion of the process that you are currently in the process of giving up smoking and are losing weight, they may decide that you’re a better risk than the actuarial table would indicate.

Your insurance classification

After all this, your underwriter, taking everything into consideration, gives you an insurance classification rating. There are five categories you can fall into, listed here from best to worst:

  • Preferred Plus or Preferred Elite
  • Preferred
  • Standard Plus
  • Standard
  • Substandard

If you are in one of the top categories, your potential insurer will be eager to sign you up because you are unlikely to die and require a payout while your policy is in effect. This means you’re in excellent health, have a great height/weight ratio and don’t have any bad habits that would impact your health.

Once you get down to a standard rating, you will still be able to purchase a policy, but you may have some dings on your medical record or a family history of disease. Your premium rates will be higher than if you were in one of the upper categories.

Substandard isn’t exactly a category, and involves a further rating system. Depending on how you score in that, you will either be denied a policy or be assigned to a policy with high rates. This is to account for a complex medical history, bad driving record or other factors that make you a higher risk to insure.

If you end up near the bottom of the rankings but really need that policy to protect your loved ones, you do have other options. Simplified-issue life insurance, which does not include the medical portion of the application process, can be purchased but coverage amounts are often lower. However, it’s a good option to explore if regular life insurance doesn’t work for you.

Frequently asked questions

How long does the underwriting process take for life insurance?

Depending on how much information the underwriter needs and how long it takes to get it, the process can take anywhere from two to eight weeks, or longer.

What are some factors that underwriters consider when evaluating a life insurance application?

Underwriters look at your medical history, your height/weight ratio, your family’s medical history and your driving history. Basically, they will consider anything that might impact how long you are likely to live.

Where should you apply for life insurance?

There are a number of good companies operating in the U.S. today, including companies like MetLife and Northwestern Mutual. Our listing of the best life insurance companies is a good place to start your search.

Written by
Mary Van Keuren
Insurance Contributor
Mary Van Keuren has written for insurance domains such as Bankrate.com, Coverage.com and Thesimpledollar.com for the past five years, specializing in home and auto insurance. She has also written extensively for consumer websites including reviews.com and myslumberyard.com. Prior to that, she worked as a writer in academia for several decades.