What is Underwriting and How it Affects Your Life Insurance Premiums

  • Posted 31 Oct

What is Underwriting and How it Affects Your Life Insurance Premiums

If you’ve bought life insurance before, you’ve seen the word “underwriting” at least in passing. While the term might look like just another confusing piece of insurance legalese thrown into the mixing pot, it’s actually something that you, as a buyer, should pay attention to before signing on the dotted line.

What Is Underwriting?

The simple answer is, is that underwriting is a method for a life insurance company to decide whether or not someone will be covered, and what that coverage will cost in terms of insurance premiums.

You can think of it like a formula. When you apply for life insurance, you fill out a questionnaire, and the answers to those questions affect how your risk is weighed.

Insurance is a numbers game and if you represent a minor risk, you’ll be covered and provided with lower premiums.

Higher risk clients may be denied coverage entirely, or given coverage with very high premiums and conditions or exclusions placed on them.

Is Underwriting the Same as a No?

Not at all. Underwriting is simply how an insurance company decides risk when it comes to who it provides coverage to. Not only that, but the way risk is assessed varies from one life insurance provider to another.

For instance, one life insurance provider may ask for nothing more than a medical check-up; whereas another will take into account your family history to see how likely it is that you might develop certain critical health-related conditions in the future.

Just because a life insurance policy is underwritten doesn’t mean that it’s bad for you. Not all underwritten life insurance policies are the same.

What does underwriting look for?

There are a lot of red flags that underwriters will be set up to catch. For instance, they will look for those who have medical conditions, or who have a family history of medical conditions like cancer, heart failure, etc. These ‘red flag’ questions will look for individuals who work in dangerous professions, or who have histories of on-site injuries.

There are any number of flags that can trip you as a risk, but it’s important to remember just because you fall into a risky category, this doesn’t automatically mean that you’ll be disqualified from getting any coverage.

Some risks are worse than others, and the results have to be considered as a whole before a final decision is made.

Always get Multiple Quotes Before Signing a Life Insurance Contract

While it’s wise to always shop around to get the best deal, this strategy cannot be underlined enough when it comes to life insurance. Your life insurance premiums can be noticeably distinguishable from one provider to another.

Just because one company has a particular underwriting policy; the second or third company could have one that is entirely different.

It’s important not to rush into things, because rushing might lead you to pay much higher life insurance premiums, and that can have both short and long term consequences for you financially.

If you need help navigating these waters then turn to our expert team; we’re here to help you get the life insurance you need at prices you can afford. Get in touch with us today and learn how we can assist you.

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