Applying for life or health insurance is an important milestone in safeguarding your family's financial future. However, before a policy is issued, every application must undergo a rigorous evaluation process known as underwriting.
Understanding what underwriting is, what underwriters look for, and how to prepare can help demystify the process and even help you secure more favorable premium rates.
What is Underwriting?
Underwriting is the process insurance companies use to assess the level of risk you present to their pool of policyholders. The results of this assessment directly determine two things:
- Whether the insurer will approve your application.
- The maximum coverage you can purchase and the monthly premium rate you will pay.
For Life Insurance, underwriters evaluate the risk of premature death. For Health or Critical Illness Insurance, they evaluate the likelihood of you developing a chronic illness or suffering a serious injury.
The Underwriting Journey: A Step-by-Step Review
Once your application is submitted, a professional underwriter reviews your file using standard guidelines. Depending on your age and the amount of coverage you apply for, they will utilize several risk-assessment tools:
- Attending Physician’s Report (APS): A summary of your medical history requested directly from your family doctor to ensure objectivity.
- Paramedical Exam: A brief medical check conducted by a third-party medical professional who records your height, weight, blood pressure, and pulse.
- Blood and Urine Profiles: Lab tests used to screen for indicators of underlying conditions such as diabetes, high cholesterol, or kidney disease.
- Tele-Interview: A phone call to verify your lifestyle habits, travel plans, and family health history.
- Mature Age Focus Interview (MAFI): A cognitive and mobility test typically required for applicants aged 71 or older to evaluate active daily living skills.
How to Secure More Favorable Premium Rates
While you cannot change fixed risk factors like your age or genetic family history, you can influence other components of the risk assessment through healthy habits:
- Achieve a Healthy Weight: Carrying excess body weight increases the risk of heart disease and diabetes. Reaching a healthy BMI range can drop your premium class significantly.
- Lifestyle Adjustments: Avoiding tobacco use (including vaping) and moderating alcohol consumption are the fastest ways to lower your rate.
- Driving History: A clean driving record with no major speeding tickets or DUI charges signals lower risk to underwriters.
Is Underwriting Always Necessary?
No. Insurers offer policies known as No-Medical or Guaranteed Issue life insurance. These plans require no medical exams or questionnaires and are automatically approved.
However, because the insurer takes on higher risk without knowing your health status, these policies typically carry higher premiums and offer capped, lower death benefits (usually under $25,000). If you are in good or moderate health, going through medical underwriting is almost always the most cost-effective path, yielding substantially higher coverage for your dollar.
