Underwriting is the process an insurance company uses to evaluate a life insurance applicant’s risk and determine whether to offer coverage, and at what price. The underwriter assesses the probability that the insurer will need to pay a claim, and sets the premium accordingly.
What underwriters evaluate
Life insurance underwriters typically review:
- Age: A primary factor in pricing; younger applicants represent lower statistical risk
- Health history: Existing conditions, past diagnoses, hospitalizations, surgeries, and medications
- Family medical history: Hereditary conditions such as heart disease, cancer, or diabetes in immediate family members
- Lifestyle: Smoking, alcohol use, recreational drug use
- Occupation: High-risk jobs (pilots, miners, commercial fishermen) may result in higher premiums or exclusions
- Hobbies and activities: Skydiving, rock climbing, racing, and similar activities can affect pricing
- Height and weight: Insurers use build tables to assess health risk
- Financial information: For large policies, to verify an insurable interest basis for the coverage amount
Medical exam underwriting
Traditional, fully underwritten life insurance policies typically require a medical exam. A licensed medical professional (often a nurse) comes to your home or office to:
- Take height, weight, and blood pressure measurements
- Collect a blood and urine sample
- Review your medical history through a questionnaire
This exam is paid for by the insurer and helps them get an accurate picture of your current health.
No-exam underwriting
Some policies use accelerated underwriting or simplified issue underwriting, allowing applicants to get coverage without a traditional medical exam. These policies typically use:
- Health questionnaires
- Access to medical records databases (with consent)
- Prescription drug history
- Motor vehicle records
No-exam policies often have lower coverage limits or higher premiums compared to fully underwritten policies.
Risk classifications
After evaluating the application, underwriters assign a risk classification that determines pricing. Common classifications include (names vary by insurer):
- Preferred Plus / Super Preferred: Excellent health, lowest rates
- Preferred: Good health, favorable rates
- Standard Plus: Average to above-average health
- Standard: Average health, standard rates
- Substandard / Rated: Below-average health, higher premiums or policy limitations
Policy terms and provisions vary by insurer and policy type. This is educational information only.