Process of Underwriting in Life Insurance
The life insurance underwriting process is a systematic evaluation used by insurers to assess the risk associated with an individual seeking coverage. The most important underwriting tools include the Proposal Form, Age Proof, Income Documents, Questionnaires Sales Report and a Client Confidential Report (CCR).
The process adopted in underwriting is as follows:
Step 1: Application Quality Check
Your application is first reviewed to make sure the information provided is complete and correct. Therefore, it is important that you fill out your proposal form carefully and completely. Unless the missing information is related to your medical history, a minor change required in an application does not typically slow down the underwriting process. After this, your application goes into the official underwriting process. Each of the following checks can increase the turnaround time, but it is worth it to get you the right premium price you will need to pay over the policy term.
Step 2: Medical Examination
This step involves looking thoroughly at the results of your paramedical exam, conducted only if required for health proof. This medical test is a simple checkup with the doctor recommended by the insurance company. After the medical examination, the results are sent to the underwriter for evaluation. The information used by the underwriter is mainly of three types – basic measurements, your blood test and your drug test. Basic measurements include regular metrics like height, weight, and blood pressure. Blood tests can get a lot of information on potential health risks such as heart disease, stroke, diabetes, and blood-borne illnesses, among others. Finally, a urine test for a full drug panel will alert the underwriter to the use of drugs, smoking and alcohol consumption.
Step 3: Final Application Rating
Once the underwriting process in insurance is complete and all your medical and financial backgrounds have been checked, you are either made a counteroffer suggesting the changes based on your policy evaluation, or you are offered the life insurance policy. Depending upon your acceptance or rejection of the new policy term, your policy is then issued. The whole process can take anywhere between three and eight weeks. After this, all that’s left to be done is to confirm the premium rate and sign the policy to put it in force to keep your family protected.
While not every applicant will require a detailed medical examination, underwriters may sometimes request an inspection report or independent information on the applicant's financial situation and lifestyle. The premium that you have to pay for your life insurance policy depends mainly on this evaluation based on factors like your age, medical history, gender, lifestyle, and job. However, you must remember that a life insurance policy should not be bought on the basis of lower premiums. While term insurance plans are usually known to have the lowest premiums, you can choose an insurance provider that offers a relatively higher implied investment return, a high death benefit, relatively lower surrender charges, and a high claim settlement ratio.
