Life Insurance Underwriting: What You Need to Know

​Are you in the process of purchasing life insurance for the first time? Feeling overwhelmed by the application process? If so, you’re not alone. Life insurers use a process called underwriting to determine the amount of risk involved in each policy. Essentially, insurers estimate the odds that they will have to pay the death benefit, as well as when that may happen. In other words, they want to predict when you may pass away. While that thought may seem morbid, it’s an essential part of determining a policy’s premiums.
 
The underwriting process is based on a variety of factors, including your gender, age and health. The insurance company uses a range of tools to gauge your health and factor it into its premium calculation. Below are a few questions and answers about underwriting and how you can score the best possible health rating:

What is underwriting and why do they need my health information?
 
Your health obviously plays a major role in your life expectancy. Consider that two people of the same age could have very different life expectancies based on their health. If one struggles with weight, high blood pressure, chronic illness or other issues, he or she may have a shorter life expectancy than the other.
 
In that case, the life insurance company may feel that it will pay the death benefit for that person relatively soon. Thus, it gives the less healthy individual a lower health rating and a higher premium amount.
 
Conversely, a person who’s healthier than the average individual the same age may score a much better health rating. The insurer may feel that person represents a lower risk and thus offer a discounted premium.

Why do I need to take a medical exam?
 
The life insurance company gauges your health by collecting information. The most basic form of information is your application and a health questionnaire about your medical history and your family history. If you are relatively young or applying for a low death benefit amount, this may be the only required piece of medical information.
However, most applicants will at least need to take a medical exam. These exams are usually conducted by nurses and performed in your home, office or other convenient location. The nurse measures your height, weight and blood pressure, and also takes blood and urine samples. The whole process often takes a matter of minutes.
 
If you are applying for a significant amount of coverage or have a history of health issues, you may need a more thorough exam. The insurer could ask for a full physical, a stress test or more. The specific information requested largely depends on your unique history and health issues.

What other factors could influence my rating?
 
Lifestyle factors can also impact your rating. One of the biggest is the use of tobacco, alcohol or drugs. The difference in premiums for a smoker versus a nonsmoker can be significant. If you’ve ever considered quitting smoking, you may want to do so in the months ahead of your life insurance exam.
 
Some insurers also look at risky activities such as sky diving. You likely won’t be declined for participating in these activities, but you could see an increase in premiums. However, your financial professional may be able to look for insurers that aren’t as prohibitive in this area.
 
Ready to find the right life insurance policy for you? Let’s talk about it. Contact us today at Rex Financial Group. We can help you analyze your health, lifestyle and goals, and then develop a strategy. Let’s connect soon and start the conversation.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
17965 – 2018/9/4

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