When you apply for life insurance, your application goes through a process called “underwriting”. This process is often seen as something vague and mysterious in which your application gets submitted and then you wait. What, exactly, is happening while you wait? Who is looking at your application and what are they looking for? In this article we’ll help you understand underwriting.
The basic principles of underwriting
Simply put, underwriting is the process by which an insurance company evaluates an insurance application, considering different risks. Generally speaking, the greater the risk, the higher the premiums. The lower the risk, generally, the lower the premiums.
For example, a person who enjoys sky diving, traveling to remote and potentially dangerous locations, is a heavy smoker, and whose parents both died young from heart disease, may find that the cost of their life insurance policy is considerably higher than, say, someone of the same age and sex who is a non-smoker, at a healthy weight, exercises regularly, and enjoys holidays closer to home at their lakeside cabin. That is not to say that you shouldn’t live your life, but when it comes to life insurance, some lifestyle choices, along with your family and medical history, may be considered when offering you an insurance policy.
Let’s break it down
There are two general categories underwriters look at when processing your application for insurance. These categories include factors that you have some control over, and some others that you can’t control. Below is a list of the most common factors affecting your life insurance application but there are many more, and your advisor can help you understand them all.
What you have some control over
- Smoking
- Alcohol and drug consumption
- Engaging in risky activities and behaviours
- Diet
- Weight
- Occupation
- Physical activity
What you can’t control
- Age
- Sex at birth
- Family medical history
- Height
Once your application goes through the underwriting process, and if you are offered a policy, remember that it is not a once-and-done. Take a look at that list of things that you have some control over. If you make any positive lifestyle changes after your policy is issued, consider letting your advisor know as it might affect your policy and/or premiums.
It’s important to remember that ivari takes a holistic approach to risk assessment when it comes to underwriting. This means that we don’t look at any singular concern. Instead, we look at the whole picture including everything mentioned here and more. Still have questions? Your independent insurance advisor can help you better understand the underwriting process.
Disclaimer
This article is intended for general information purposes only and should not be considered specific or personal investment, insurance, estate planning, legal or tax advice or a solicitation to purchase insurance. Nor should any medical information provided in this article be considered medical or health advice and should not be considered a substitute for advice from a qualified medical professional. While reasonable efforts have been made to ensure that the contents of this article have been derived from sources believed to be reliable and accurate at the time of publication, ivari does not warrant the accuracy or completeness of the information contained herein.
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