What Does an Underwriter Do?
When you apply for life insurance, you follow some steps before the company informs you of your application’s outcome. First, you request quotes from different insurers and then take some time to compare life insurance quotes.
Next would be selecting the insurer you feel most compatible with in terms of service, your desired coverage, and budget. Then, you fill out the application form and hand it over for approval.
So, who evaluates your application and decides your acceptance status? That’s right — it’s the insurance company’s underwriter.
The Underwriter’s Role
Different financial institutions employ underwriting services to assess the risks of a client before they grant a loan, funding, or in this case, insurance. Specifically, the life insurance underwriter’s job entails:
- Screening applicants.
Underwriters, following their company’s criteria, review applications whether or not they meet the insurance company’s basic requirements.
- Analysing client’s risks.
For those who have satisfied the basic requirements, their applications then go through risks evaluation. For instance, they check if a client has medical conditions or habits like smoking that could significantly influence their insurability. More on this later.
- Approving applications and writing policies.
Underwriters approve applications that passed the risk analysis and reject those that failed. Insurance companies typically have guidelines (and even computer programs) to help make this process more systematic and smoother. Underwriters decide on premiums and coverage limits that will best suit each client, and write insurance policies explaining these in details.
Are You Insurable? Underwriters Make the Assessment.
When it comes to insurability, the main deciding factors would be your age and your current health condition. Generally speaking, younger clients in good health condition are deemed low-risk and are, therefore, more insurable. These same factors determine the premiums that you will have to pay as well.
Underwriters look into the following considerations:
Compared to younger clients, older ones pay higher premiums due to their increased predisposition to illnesses, accidents, and disabilities.
- Current health status
Clients in good health conditions are considered low risk by underwriters. Those who are constantly ill or have undergone serious surgery in the past are considered a high risk that underwriters may even refuse their insurance application.
- Family health history
Underwriters deem applicants with a genetic predisposition for diseases like cancer, heart problems, and diabetes as high risk.
- Prescription history
Don’t be surprised, but underwriters may also take into significant account the clients’ prescription history. Some medications for targeting to treat some ailments may come with potential health risks. Knowing the clients’ prescription history gives underwriters a better sense of their risk.
- Smoking status
Smokers naturally pay higher premiums than non-smokers because of their increased risk of smoking-related health issues.
The nature of the clients’ job also determines their insurability. For example, underwriters categorise clients with office jobs as low risk; on the other hand, those who work in the construction industry are high risk. People whose occupations expose them to danger have a greater predisposition to accidents, injuries, and even death.
- Financial history
Underwriters assess clients’ financial history and salary over a time span to determine the kind of cover and premium they can offer them.
- Hobbies and sports
Clients who participate in dangerous or risky activities like racing are at high risk for injuries and even death.
Benefits and Disadvantages of Dealing with an Underwriter
Life insurance with underwriting comes with advantages and disadvantages. The not-so-pleasant ones: having an underwriter assess your insurance application makes the whole process longer. In addition, underwriters may exclude your pre-existing conditions that are already covered in your superfund group policy.
As for the advantages, you have a better opportunity of reviewing (and getting covered) your pre-existing conditions. It also allows you to know right away what the insurer can and cannot cover. And lastly, should the time come for you to make a claim, you will have the full confidence of knowing that you are filing a valid one.
Whilst insurance underwriters may make the life insurance application a bit more demanding for you, just keep in mind the benefits they bring. Don’t hesitate to make that first step towards securing your future; compare and get the life insurance that fits your requirement and budget today.
The most practical tip is this: do not sign the first proposal you come across with. Go through several proposals first, so that you are guaranteed that you are making the most out of the money you pay for. Remember, it is the entire family’s future that is at stake.
Check out your options in the market using a trusted comparison site like Makes Cents!
Have you considered switching your life insurance policy? Use our Life Insurance comparison service today.