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Term life insurance underwriting process
How does the underwriting process really work

The terms "underwriting" and "underwriter" are typically heard when discussing the enrollment process for term life insurance.  Aside from the ominous sound, what do these terms really mean?  Let's take a quick look at the underwriter's role in applying for term life insurance. 

Underwriting is essentially the process by which a carrier determines if you are eligible to qualify for term life insurance coverage and at what health class (which directly translates into "what rate").  The underwriter, in this sense, is the person who reviews your information based on carrier guidelines and practices (called underwriting guidelines in keeping with the theme).  Your part of the process typically consists of completing the life insurance application and taking the paramedical exam.  The evaluation of this information then falls to the underwriter, an employee of the carrier.

The bulk of factors that affect your eligibility status are pretty well spelled out in these guidelines.  For example, these carriers will usually have an explicit height to weight ratio chart that determines health class along clear lines.  Smoking (including type, for how long, and at what volume) is also pretty well delineated.  These same guidelines will list a range of health issues with parameters for contributing facts such as how long sing/symptom/treatment free.  Cancer is an example where type of cancer, severity (state in the case of cancer), treatment results, and time cancer-free will all be factored in.

Not everything is so black and white and the underwriter is the person that has to determine the shades of gray for an applicant's health status and history.  Think of all the combinations of health issues and you see how a person needs to be involved.  A person could only have high blood pressure which obviously is a concern, but much more so if found in conjunction with high cholesterol, obesity, and a family history of heart attack/disease.  The underwriter is the person who tries to align your personal mortality risk with the carrier's health classes.

 The underwriter uses information from your health questionnaire on the application, family medical history listed, the results of your paramedical exam, and even outside information such as from the MIB (Medical Information Board).  The MIB is an repository of medical information shared and created by life carriers that they each access to verify information or use to detect potential fraud.  For example, if you had a history of heart disease or left off information relating to this disease with another carrier, it might appear at the MIB.  The underwriter may use all these potential sources within the framework of the carriers underwriting guidelines to establish your eligibility.

As the applicant, it's important to present all your information in an honest, complete, and direct manner.  It does not serve your you well to get a better rate and/or approved with missing/false information only to have your coverage rescinded or benefit declined.  We have seen this occur and it a horrible position to be in.  You can find more information on how the carriers view certain health issues in our life insurance health class article.





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