What is a life insurance underwriter?
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Life insurance underwriters ultimately determine who can receive life insurance and who can’t, all while looking out for the best interest of the company. Even though they operate behind the scenes, insurance underwriters have a big impact upon the life insurance industry and how it works. If you want to compare rates before talking with an underwriter, try using an online comparison tool first. Start comparing life insurance rates now by using our FREE tool above!
Understanding the Underwriter’s Role
To have a basic understanding of the underwriter’s role in the life insurance process, you would first need to know the type of tasks the underwriter completes on a daily basis:
- Examining the provided information from life insurance applications
- Determining the risks involved for potential customers
- Analyzing records and contacting the appropriate individuals to obtain additional information
- Evaluating premium recommendations from the underwriting software
- Deciding whether to accept or reject applicants
- Determining the premium based on what conditions were presented
By signing your name on the application, you give the life insurance underwriter the permission to delve into your personal information. This includes your permission to obtain credit reports, driving records, medical records, etc. The whole point of this process is for the underwriter to determine how much of a risk you pose to the company and to make sure you are insurable. An insurance underwriter will go to whatever lengths needed to get the information. Your life expectancy also plays a major role in helping the underwriter determine how much your premium should be. After all, the company makes money off of collecting life insurance premiums, not by regularly paying out thousands of dollars in death benefits. If necessary, the insurance underwriter may even require that you undergo a medical exam. A medical exam may include any of the following procedures:
- Drawing a blood sample from your arm. This will allow the underwriter to unveil any abnormalities that may be indicative of a serious medical condition such as a kidney or liver disorder, high cholesterol levels, or diabetes.
- Providing a urine sample. This will allow the underwriter to see if you have any traces of nicotine or other drugs, elevated sugar levels, or signs of kidney disease.
- Checking your pulse and blood pressure.This gives the underwriter an inside look to determine if you have high blood pressure.
- Analyzing your weight and height. This shows the underwriter if you are at risk for any health conditions based on your comparison to the average BMI for your height and weight.
- Examining the results of an ECG (electrocardiogram). This allows the underwriter to see if there are any heart abnormalities such as an irregular heartbeat or rhythm, or a decreased supply of blood and oxygen to the heart.
Of course, the actual procedures of the exam may vary dependent upon your age, health, and the amount of insurance you are applying for.
Determination of Insurance Premium
In today’s day and age, technology plays a big part in the underwriting process. Special computer software allows underwriters to put in the applicant’s information, and in turn, provides suggestions on what the premium should be for that individual.
Certain risks such as smoking, health problems, or a driving record full of DUI’s could indicate the chance for a premature death, and in turn, could have a significant impact on the monthly premium.
There are a lot of other factors that a life insurance underwriter takes into account before determining what the customer should pay for an insurance premium. Even the hobbies you participate in could play a part in the underwriting process. Underwriters look more kindly on those who are more likely to live a long, natural life, and those customers can expect to benefit from a lower premium. The more at risk an applicant is the more the underwriter will read into their personal history. Overall, the underwriting process generally takes one month to complete from start to finish.
Assigning a Class
There are four categories of risk groups that an underwriter will assign to each individual who applies. Depending on which one you fall into could determine your acceptance or rejection.
- Standard risks – The underwriter determines these individuals to be in good health, and will not be subjected to rating surcharges. A standard rating will give the individual the best rates possible for insurance premiums.
- Preferred risks – The underwriter determines these individuals to be in current, good health, but may have had some health problems in the past. A preferred rating will give the individual an average rate for insurance premiums.
- Substandard risks – The underwriter determines these individuals to be at high risk, whether it be their job of chronic health condition. A substandard rating will come with rating surcharges, and the individual will pay a higher than standard rate for insurance premiums.
- Uninsurable – The underwriter determines the individual to be ineligible for life insurance because they are at high risk for a premature death. Most often, these people have a terminal illness.
Underwriting at Different Companies
Overall, underwriting varies from company to company. Some life insurance companies are willing to take on those who have certain risks while others will only accept applicants who are in perfect health.
Learning to Shop Around
Understanding how life insurance underwriting works is important, because once you know how a company underwrites, you can find the right company to apply for life insurance. Comparing quotes and shopping around will give you a variety of options for finding affordable life insurance quotes that will meet your needs. Start comparing life insurance rates now by entering your zip code in our FREE tool below!
The life insurance company uses underwriters to determine its best option to make money from its product. It’s a risky business for the company, so they must use underwriters to evaluate the risk of potential customers. It can be said that underwriting is the backbone of the life insurance industry.
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