How does the life insurance underwriting process work?

Underwriters review your application to get a snapshot of your life, including your health status and activities, to determine your insurance status.

While many people don’t like to think about life insurance, it is essential for most people should have it to provide for their families. It doesn’t take long to apply for life insurance, and it protects your family financially if you pass away.

Your application goes to an underwriter at the insurance company. This is the individual who reviews the application and assigns an insurance classification to you. The underwriter works for the insurance provider to determine whether the original insurance quote given to you is the one you will actually pay. This is based on the health information you and your physician or a medical professional have provided. He will review all the relevant information and determine the odds of you dying before your life insurance expires, then set your premium based on that information.

All insurance applications go through the underwriting process. It can be quite complex in some situations but relatively straightforward in others, hinging on various factors, including the type of policy you are applying for. Factors the underwriter considers will include your medical history, your current health status, your age, your occupation, lifestyle, driving ability, and hobbies.

The underwriting process can take several weeks, but applying to more than one insurance company through SimpleLife can help. You can apply to more than one insurance provider through SimpleLife to ensure you will get the best rates possible.

The Underwriting Bible

Each life insurance provider has an underwriting manual that is the “bible” that defines the company’s guidelines for evaluating all policy applications. It determines when a physician’s statement is necessary and what questions the applicant must answer. Questions might include whether a prescription report is needed, what impact height and weight have on the health classification, and more.

Because each life insurance company has its own underwriting manual, the process of underwriting will vary from provider to provider. Medical tests that are required by some companies may be unnecessary for others. The same goes for what information you need to provide and other factors. SimpleLife‘s outline of how the underwriting process works is simply a general outline. The details of what is done and how the rates are determined will vary slightly from one provider to another.

Application Review

Before the underwriter can process your application, your application will be reviewed to ensure you have provided the correct information. Providing false information can stop the application process before it has begun.

In most situations, missing information is the only problem. The insurance company needs to have complete and accurate answers to process your application. If the form is incomplete, it will be sent back to you with a request to fill in any missing information. This won’t significantly impact how long it takes to complete the underwriting process unless vital medical information is missing.

Some underwriters require a phone interview, particularly if the information you provided on your application wasn’t detailed enough. If you only included information such as your address, date of birth, and how much coverage you want, the underwriter will likely contact you for details such as hobbies and lifestyle. After the interview, the actual underwriting begins.

Paramedical Exam

The paramedical exam is similar to an annual physical. Your doctor will do a brief examination and send you to a lab to have some medical tests done, including blood work. Some doctors or insurance carriers may send a medical technician to your home or office to do the needed tests. The results are sent to the underwriter, who will evaluate the information. There are three many components he or she will review:

  • Basic information such as age, weight, height, blood pressure and other measurements taken during a routine physical. Your height and weight will have a significant impact on your classification. Blood pressure is also a crucial indicator taken into consideration.
  • Blood tests will reveal whether you have risk factors for, or already suffer from, certain diseases such as stroke, diabetes, heart disease and some kinds of blood borne illnesses.
  • A drug test, usually performed using a urine sample, will let the underwriter know whether you use controlled substances such as cocaine, amphetamines and other controlled substances. Using drugs increases your health risk and will affect your premiums.

Once you’ve had a paramedical examination done, you can use those results to apply for life insurance from other providers or different kinds of insurance, such as disability insurance. You do not have to purchase insurance from the company that paid for your original physical exam.

Doctor’s Statement

If any problems show up in your paramedical exam, the company’s underwriter will request a report called an Attending Physician Statement (APS) to get additional information. The APS is a summary of your your medical history prepared by your doctor. The information in the APS should answer any remaining questions the underwriter has about your health. It will outline whatever medical conditions you are being treated for and outline its history, including symptoms, duration, and prognosis.

An example would be diabetes or high blood sugar. Your APS will tell the underwriter how long you’ve had the condition, how long you’ve been under treatment, what medications or treatments you are undergoing, and what the future outlook is for your condition. The APS will outline details such as how severe or minor your condition is, whether it has improved or gotten worse, and other details that your paramedical exam might not include. The APS can lengthen the time it takes for the underwriter to assign you a health classification, adding time to the application process.

MIB Check

The Medical Information Bureau (MIB) is an organization that assists insurers by gathering and sharing medical data on individuals. The MIB minimizes fraud by tracking when and where individuals apply for life insurance coverage in the six months prior to your current application. While it isn’t a bad thing to have applied for insurance through several providers, it will alert the MIB if you have provided different medical information on your other applications or left relevant information off them. If you’ve failed a drug test or forgotten to mention a condition you are being treated for, the MIB will discover this and report it to the insurance companies.

Prescription Review

The underwriter will review all the prescription medications you have taken in the past several years (usually five to seven). This review will confirm any prescription information you included on your application as well as any information you might have forgotten. This isn’t a step that is required unless the underwriter requests it based on how the investigation into your medical records and your physical warrant it. If you are applying for life insurance with an exceptionally high death benefit, a prescription review may be required.

Motor Vehicle Report

The underwriter reviewing your application will also see a motor vehicle report (MVR) outlining your vehicle driving history. This report will be used along with your medical history and physical to help determine whether you are a low-, medium- or high-risk potential insured.

MVRs detail any traffic violations, accidents, or vehicle-related crimes as well as any driving points you have accrued and any Driving Under the Influence convictions. The MVR also goes back between five and seven years. Anyone who has a record of driving while intoxicated, speeding, running stop signs, or other dangerous activities will have to pay higher premiums than a safe driver. Your MVR is also used when you apply for auto insurance coverage. If you want to see your MVR, you can request a copy for your state.

Actuarial Tables

Actuarial tables are detailed mathematical tables used by underwriters to help them determine the amount of risk taken on if they insure an individual. The underwriter will use the information to establish the rate you need to pay for your coverage. There are two parts to any actuarial table:

Mortality Table – The mortality table outlines the probability of death in any given population. This is based on information such as gender and age. It is the starting point for determining when you are likely to die.

Build Table – A build table calculates your health classification based on your body mass index (BMI). Your BMI is calculated using both your height and weight. If you have a poor Build, you will pay higher premiums than someone with a better Build score.

Health Credit

Your underwriter can help you get a better premium rate by giving you credits even if your insurance classification isn’t good. After he has reviewed all tests and information, if you have a low score, he or she may use a credit system to raise your score so that you can get a better rate. For instance, if you have chronic health problems but are taking appropriate medications and attempting to get healthier, the underwriter could give you a bump up on your score. Your APS and prescription review will provide the underwriter all the material needed to see that you’re taking the right steps to improve your health. 

Completing the Process

After the underwriter has gone through all the steps outlined above, a final premium offer will be made. If you sign the policy and accept the terms, you will own a life insurance policy. From application to purchasing your life insurance policy, it generally takes anywhere from three weeks to two months. If a physician doesn’t supply an APS promptly or the underwriter has to investigate further, this can add even more time to the process.

If you don’t like the idea of going through a lengthy or complicated underwriting process, consider applying for a simplified-issue policy. These don’t require the paramedical exam or a statement from your doctor. Still, keep in mind that you won’t be able to get as much coverage, and you may not qualify based on your health profile.

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