Life Insurance Underwriting is not something that will apply to everybody that makes an application for a Life Term Insurance Policy. If you are of average age, height, weight and have little or no medical history yourself or in your family, you will more than likely be offered standard acceptance terms and a Life Insurance Premium straight away to match what you were originally quoted.
Life Insurance Underwriting is the process that takes place if your application shows that you present more of a risk to the insurer than the average person.
For clarity's sake, each and every person insured pays a Life Insurance Premium into a huge pool of money and when claims are made the proceeds come from this pool. The insurer needs to ascertain how much of a risk to the pool each new person presents and the Life Insurance Premium is charged accordingly. If somebody is a higher risk to the pool then they will have to pay more than the people that present little or no risk. So the purpose of Life Insurance Underwriting is to determine how much of a risk these people present and then offer them acceptance terms and a Life Insurance Premium that is fair to the entire pool of money and the people that pay into it.
The Life Insurance Underwriting process is as follows:
- Application is made on-line, over the phone, with a broker/adviser by you the consumer.
- Application is submitted to the Insurance Company.
- The answers to each question is assessed and anybody with any answers determined as 'non-standard' will be referred to the insurer's Life Insurance Underwriting department.
- A Life Insurance Underwriter will then look at the application and decide whether on the information provided they can still offer standard acceptance terms or if with the information provided they can offer non-standard acceptance terms.
If they feel that they need further information then it is possible that they will do one or more of the following:
- Contact you and ask you personally about your answer to questions on your application
- Send you a questionnaire applicable to specific medical conditions, pastimes or in relation to your occupation
- Request that you go for a medical examination or take a number of other medical tests, such as a test to see whether you have smoked within the last 12 months
- Send you a questionnaire in relation to your finances
- Approach your doctor for medical records or clarification on any matters
- It is their job to collate as much information as possible in order to offer the correct terms that are fair to both you and every other person within the pool.
Following their assessment of all of the information they can proceed to either issue you with standard acceptance terms, non-standard acceptance terms, decline your application or in some scenarios defer your application.
Non-standard acceptance terms
- These can differ in a variety of ways, such as:
- The outcome of the Life Insurance Underwriting may be that the premium is increased, this is often referred to as a 'rating' or 'loading' for reasons that they will be specific about
- Certain exclusions can be placed upon the policy, for example if you have a dangerous occupation then no claim can be made for death to do with the occupation, of if you have a family history of a certain medical condition it may be that an exclusion is put in place so if you were to die from this condition a claim could not be made.
- The amount of Life Insurance Cover could be restricted to a certain amount.
Life Insurance Underwriting Decision to defer
If you are at present suffering from a certain condition and awaiting further medical investigations or an operation or you are awaiting the results of one of these then the decision may be to defer you until more conclusive information is available to the Life Insurance Underwriter.
Having your application declined
The worst case scenario is that your application is declined. This will only happen if you present a risk to the insurer that they are unable to accept or if through the underwriting process they discover that you were not truthful on your application.
If from reading this you are considering applying for a Life Term Assurance Policy and you think that it is likely that your policy will need to be underwritten then it is wise to apply early as the process can often take several weeks.
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