What is life insurance underwriting?

What is Life Insurance Underwriting?

Life insurance underwriting is the process that an insurance company goes through to determine their premium charge for a life insurance policy.  There are several factors that determine the premium charge for each insurance company.  Some of these factors are:

•  Body mass index ( height, weight ratio ) 
• smoker or non smoker 
• age 
• sex 
• Lifestyle( dangerous activities ) 
• mental health 
• physical health
• and several other factors.

Once an underwriter receives all of the information necessary to make a determination, he calculates a score for that individual and assigns him into a rating class.  Then that rating class is applied to the insurance that is being applied for and a premium is calculated.  There are many rating classes for each insurance company and each rating class can be smoker or non smoker.  These classes are typically

• Preferred Plus or Ultimate preferred
• Preferred
• Standard Plus
• Standard.

In addition to these rating classes there are also sub standard rating classes for people who are not in the best of health.  These classes are broken down by table ratings.  There are typically 8 to 16 substandard rating classes for an insurance company.  Table 1 is the best table rating ( lower cost ) and table 8 or 16( depending on the insurance company) the worst rating( highest cost ) and again these can be smoker or non smoker.

Each insurance company's underwriting guidelines varies and the same individual applying with ABC insurance company could come up with a completely different underwriting decision from company XYZ.  Even if they receive a similar rating, the policy could vary significantly in cost between companies.

The only simple life insurance comparisons are for the best class, individuals who qualify for Ultimate preferred with all of the insurance companies, these people can see the rates on our spreadsheets or our competitors spreadsheets and apply with the lowest cost company.  But there are differences even in these policies.  Some of the differences are conversion privileges to convert all or part of the term insurance into permanent insurance at a later date and waiver of premium. Waiver of premium allows for you to stop paying the life insurance premium if you become disabled .  This can be important to people who become sick during their term policy period and want permanent insurance or cant afford premiums because they are disabled.

For anyone applying for insurance who doesn't receive the ultimate preferred rating, it becomes much more difficult to do a side by side comparison directly between insurance companies.  Just because an individual received one rating class from one insurance company, that doesn't necessarily mean they couldn't get a better rating class from another insurance company, also the cost difference between insurance companies can be significant even if they assign the same rating class. 

This is where our experience comes in.  Our senior agents have 30 years of experience or more.  Their knowledge of  the insurance companies, that we represent, is your best way to know that you will end up with the most cost effective policy for your unique circumstance.  In addition they will be able to advise you on the type and amount of insurance that would be best for you.  With a life insurance purchase there is no substitution for experience and experience separates Insurafy from our competitors.  Give us a try today.