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Important underwriting factors which determine your life insurance premium
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When you apply for life insurance, the company is putting itself at risk. The death benefit may be astronomically larger than the premiums it received to insure the person. For this reason, all applications go through underwriting. Underwriting is basically the analysis of the application to determine if the applicant is acceptable for the insurance under the conditions indicated. Underwriting also tries to avoid taking on those conditions which may cost the company more claims than is expected, and has the ability to do this by rejecting the policy application.
The main factors which underwriting focuses on are as follows.
- Age: As you get older, your risk of dying goes up, so your premium trends up as well.
- Gender: Men don’t go to the doctor as much as females, and don’t typically live as long, so all things equal, pay more.
- Smoking: If you smoke cigarettes, you are considered a smoker and should expect to pay more. If, however, you smoke a few cigars a year, you are most likely not going to be marked for higher rates.
- Occupation and hobbies: If you are employed as a daredevil and bungee jump off of bridges for fun, you can definitely expect to see extremely high rates, if you are lucky enough to be deemed insurable.
- Physical condition: Your weight and height will be measured, and compared to a chart just like one a doctor would use when going in for a checkup.
- Moral hazard/financial hazard: You will be asked if you have declared bankruptcy, and also if you have suffered anxiety or depression.
- Health History: Past and present diseases, including but not limited to HIV/AIDS, cancer, stroke, as well as family history.
- Foreign travel: You will be asked if you have travelled, or plan to travel to foreign countries, as well as where and how long you plan to stay. Travelling and staying abroad for a period of time increases your risk factor.
- Other insurance: You will be asked to disclose all insurance you have with other carriers. If you have a significantly higher amount of insurance on your life than can be justified, the company will be very suspicious.
The important thing to understand here is that in a lot of cases, one risk factor alone won’t necessarily translate into higher premiums for you. The more risk factors you have, however, the more likely it will cost you when underwriting determines your risk class.
If you are taking medication for hypertension, it probably won’t affect your premiums, so long as the situation is under control. You will be asked to disclose medication that you are taking, and you should admit to taking them, the company will find out when they check your medical records.
You can expect to answer a lot of these questions I outlined above in bullet point, and in the vast majority of cases, a medical examiner will meet with you briefly to go over the complete set of questions, as well as take your height/weight, monitor your blood pressure, and take a blood and urine sample. The underwriting time varies with different companies, but you should generally expect to be notified of your premium status a month from the exam.
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