A few thoughts on understanding underwriting in life insurance

It’s all good and well that you take the time and make the decision to buy life insurance and get coverage for you and your family. But did you know that there is a system in the application process that could possibly lead you to have higher than average premiums or not being granted life insurance?

This is why you need to understand underwriting in life insurance as it will affect your plans. FInd out what you can do to guarantee coverage and affordable insurance options.

What is it?

Underwriting is, essentially, the application process you go through when applying for any and all insurance policies. It’s a process that takes everything concerning you, the applicant, and weighs the pros and cons of providing you coverage depending on your overall risk factor. They calculate your premiums based on the findings of their risk assessment and on your possible future losses based on your current and past behaviors. Think of it as a “life audit” in order to qualify for life insurance.

What does it entail?

An underwriter is responsible for asking a series of questions and carrying out tests to verify and review your application. Basically, they are the people who give the yay or nay for your insurance coverage. There isn’t much you can do in this process other than be honest – they will be checking out your claims – and taking in what you can do in the future to change their minds if your application is denied or premiums set incredibly high.

The types of questions they will ask you include things along the lines of:

  • Do you have any prescription medication?
  • Do you smoke?
  • Do you take part in dangerous (adventure-based) activities?
  • What are your travel plans?
  • What is your current height and weight?
  • Has anyone in your family passed away before the age of 60 as a result of health conditions?
  • What is your driving history and record?
  • What is your history of claims?

You will also be expected to undergo a medical examination where they will look into your family’s medical history and test your vitals, blood and urine. So, basically, just be prepared for some personal-bubble invasion.

What makes it so important?

This process of underwriting is important for the insurance company to cover their bases and make sure that at the end of the day, they will still be making a profit and not be investing in a super high risk applicant.

It’s also important for you because it is the process that will determine your insurance costs, if they grant you insurance at all that is. Make a point of comparing insurance companies’ underwriting processes and charges because you may find where one company denies you insurance, another will provide it but at high premium rates and another might have slightly lower rates to offer you.

What can you do?

Every company has their own underwriting approaches and will have different offers for you to consider. Start doing research on different insurance companies such as AUL where the comprehensive website (http://www.africanunity.co.za/) provides all the information you may need. To make sure you get the best possible deal, however, it’s time to make a few necessary lifestyle changes.

You should be thinking about this before you even know you’re going to be buying insurance, but as that is somewhat impossible (especially if you have no idea about insurance in the first place), now would be the best time for you to start doing something about it.

  • Take your general health care seriously. Yes, that means exercise and a healthy diet.
  • Quit smoking or, at the very least, smoke a lot less. But you’ll still be charged more as a smoker.
  • Let Daredevil be the adrenaline junkie. Unless you want to be paying premiums out of your nose, hold back from the sky diving and rock climbing. Insurance companies aren’t attracted to the possibility of losing a client to an adventuring accident.
  • Drive smart. Smart driving means less of a liability and lower premium rates.

Now that you’re more informed on the application and underwriting process, you can start looking around to find the perfect policy and premium rate for you.

 

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