Life Insurance Underwriting Explained and How It Works
Life insurance and life insurance underwriting are topics none of us like to think about much. But it’s a smart idea to have a policy. Today, the average funeral costs between $7,000 and $10,000 , and you don’t want your family scrambling to come up with that money. Plus if anything happens with your house, car, or other debts, you want to have something you can leave to help your loved ones out.
If you’re thinking about applying for life insurance, you’ll need to go through the life insurance underwriting process. This is the system through which your provider will determine how much they’ll charge you for your policy. Read on to learn more about this underwriting process and what it entails.
Life Insurance Underwriting Rules
Life insurance providers each use their own manual to guide the life insurance risk analysis process. This is the tool they use to determine how much your final rate will be depending on a number of factors. Because companies each use a different manual, each underwriting process will look different.
In addition to outlining the steps of the underwriting process, the manual determines which providers you can use for certain steps in the process. For instance, one of the steps can be a physical exam, and the underwriting manual will dictate which physician you can see for this step. It will also determine how the outcomes of each of these steps will influence your final rate.
Life Insurance Application Requirements
The first step in the underwriting process is for your life insurance provider to check your application. They’ll make sure all information is complete and accurate and come back to you to get any missing information. People often accidentally miss sections of their application, so this is a common part of the process.
Depending on the provider, you may also need to do a phone interview with them. This will look into things like your hobbies, your lifestyle, and other relevant details. If your favorite pastime is hunting or free climbing, for instance, that will impact your life insurance rates.
Medical Exam and Physician Statement
With the application check out of the way, you may need to go get a physical exam. This will provide your life insurance carrier with information about your general health and any preexisting conditions. They’re not likely to approve an application for someone with Stage IV cancer, for instance.
Your physical exam will include basics like your height and weight and a blood test. You may also have to do a urine test to ensure that you aren’t on any illegal drugs. If there are any areas of concern that show up in this exam, your underwriter may require an attending physician statement to get an idea of your overall health and an explanation for any problems.
MIB Check
Once the physical exam is taken care of, your provider will run a Medical Information Bureau check. The MIB lets insurers share medical data with each other. This is a way for them to make sure you aren’t committing fraud by applying for life insurance with multiple companies in a row.
You’re allowed to apply for life insurance multiple times in a six-month period, but your current insurer will find out about any information you’ve disclosed on previous applications. So if you failed a drug test three months before but passed it on this exam, your carrier will find out about it.
Prescription and Car Checks
Your underwriter will also check in on any prescriptions you’ve taken in the last five to seven years. This is another way for them to find out about any conditions you may have been hiding. If they see a prescription for a condition you haven’t mentioned, they’re going to have some questions.
They may also take a look into your driving history to determine what sort of driver you are. If you’ve gotten four tickets and been involved in three accidents in the last two years, they’re likely to charge you more for insurance since there’s a greater chance you’ll die in a car accident.
Actuarial Tables
Once all this investigating is done, your underwriter will turn to actuarial tables to assess your life insurance risk analysis. There are two main tables they use: build and mortality. The build table looks at your height and weight to determine what sort of health you’re in as a way of determining your status.
The mortality table looks at the statistical likelihood of when you’re likely to die. This is based mostly on age and gender demographics and serves as a statistical baseline. So if you’re a man your seventies, your life insurance rates are going to be much higher because you’re approaching the life expectancy age for your demographic group.
Life Insurance Underwriting Credits
If all these checks and sorting have you feeling dejected, the credit system will cheer you up. This is what your underwriter uses to give you credit for the things you’re doing to improve your life expectancy. Enough good credit can bump you from a Standard tier to a Premium tier.
For example, if you have high cholesterol or high blood pressure, but take medication and have taken up a running habit, you’ll get credit for that. Likewise, if you were previously addicted to drugs and have since gotten clean, your underwriter may give you some credit for that.
Learn More About Life Insurance Underwriting
The process of life insurance underwriting is like the strictest background check you’ll ever go through. Everything from your medical history to your hobbies comes under the spotlight. But if you’re taking care of yourself and working to make sure you stick around for as long as possible, you should come out with good life insurance rates.
If you’d like to get a quote on your life insurance, get in touch with us at America Quote. We’ve been America’s life insurance source since 1996, and we are the oldest instant quote life insurance company on the internet. Check out our instant quote service and learn right now how much you’re looking at for a life insurance policy. Do you have life insurance underwriting questions? Call us at 800-542-5530.
