What is the Underwriting Process for Life Insurance?

If you’ve spent any time doing research for your life insurance, chances are you’ve bumped into the term “underwriting.

No matter what questions you may have regarding your life insurance coverage or what rates when browsing around for life insurance policies, everything is qualified with the ominous-sounding: “PENDING UNDERWRITING APPROVAL”.

Doesn’t that sound like you are in trouble? Or give you flashbacks of being called to the principal’s office?

Ok, maybe that’s just me.

Understanding the “underwriting” process and how it works can save yourself a lot of time, money and confusion.

What Does Underwriting Mean?

Underwriting in life insurance is the process of a company analyzing and determining the risk and applicant poses in order to determine acceptability and pricing for a policy.

Let’s take a second to explain this with something everyone has likely had to deal with before — applying and being approved for car insurance.

When you apply for car insurance, someone will run reports on you to determine your credit, your driving record, and your claim history. Based on those reports, you may be denied coverage by an insurance company or surcharged based on activity.

That is underwriting.

Life insurance companies do the same thing. They evaluate your level of risk to the company and adjust the premium accordingly.

Not every person exhibits the same degree of risk to the insurance company.

Insurance companies need to determine each risk as accurately as possible.

  • If they overprice their product, they won’t sell as many policies because of the steep price competition in the industry.
  • If they underprice policies, they will lose money.
Remember: Insurance companies are a business providing an amazing product, but like any business, they must make a profit. Without those profits they can’t deliver on the death benefit the policies promise.

About 93% of all life policies will go through an underwriter. This other 7 % are priced higher to avoid the underwriting process and be issued faster.

Before we look at underwriting specifics, let’s take some time to answer one more common question we often get:

Who Are Underwriters?

life insurance underwriting processThere are several requirements to become an underwriter.

Usually, insurance companies require insurance experience, and/or a bachelor’s degree in business administration, finance, accounting, or related degree.

Underwriters must have a high attention to detail and good judgment ability. They will primarily be tasked with collecting and analyzing data then make decisions based on that data.

Some companies or states may actually require insurance licensing to be an underwriter as well.

What Can You Expect During the Underwriting Process?

Underwriting begins with an application.

Once you complete the app, it is sent to a company underwriter to begin analysis of all the information you disclosed.

There are three main categories of information they look for to assess the risk of an applicant.

  1. Health
  2. Lifestyle
  3. Occupation

Health

When you fill out a life insurance application, there is a medical portion with questions about your health history and family medical history. They want to know about any pre-existing conditions such as cancer, diabetes, high blood pressure, etc.

After this, for most life insurance policies, there is a medical examination.

Depending on the policy type and company you choose, they may require a phone interview with the underwriter if something undisclosed appears on your medical exam. Any red flags will usually require an attending physician statement.

Beyond the exam, there are several medical reports available to insurance companies to verify information on your application:

  • The MIB
  • Rx Report

The first is the MIB (not the men in black). MIB stands for the Medical Information Bureau. The MIB is a trade group for medical information to help insurance companies verify information and to detect fraud.

The other health report that underwriters often look at is the Rx Report. This report is designed to verify prescription drugs taken by an individual.

You’ll find that there is never a reason to hide something on the application. It will be found out during the underwriting process. If something is found that you omitted you will probably be denied coverage rather than just uprated.

Lifestyle

We all have a wide variety of lifestyle habits that affect health and lifespan. The lifestyle choice that has the biggest effect on rate is tobacco & nicotine use. This question is on every life application and will be verified in the medical exam.

Believe it or not, hobbies are asked about.

If you are a high adventure free-climber or skydiver, it might impact your life rates. On the other hand, if you are a regular exerciser or athlete, the positive contribution those activities contribute to your health and lifespan will be considered.

There are two lifestyle reports:

  • The MVR
  • Credit report

The Motor Vehicle Report is commonly used for auto insurance to assess your driving ability and claim proneness. It’s important for life companies as well. If you are an erratic driver, it may affect your life rates, because your driving habits may affect lifespan.

The credit report is definitely a surprise for most people. Primarily life companies are looking at your ability to pay premiums. Also, there is some correlation between financial stability and lifespan as well.

Occupation

Some occupations are more dangerous than others. We all know that.

Life insurance companies want to know what you do and whether you are in a higher risk occupation.

The list changes annually based on government data of a number of fatalities as well as the percentage of fatalities per job.

Below is the most recent list of high risk occupations compiled in 2016:

  1. Logging
  2. Fishing
  3. Aircraft Pilots
  4. Roofers
  5. Trash Collectors
  6. Iron & Steel Workers
  7. Truck Drivers
  8. Agricultural Workers
  9. Extraction Trades (Oil & Mining)
  10. Grounds Maintenance Workers

If you are in any of these occupations expect it to impact your life insurance premiums. The key to saving money on all these factors is to manage the ones you can control.

For other factors such as occupation and some health conditions, each company will rate and treat differently. Knowing this for every company is difficult and one reason to consult with an agent representing a wide variety of carriers.

They can place into the company with the most advantageous underwriting for your situation.

Underwriting and the Medical Exam

Many people dread the life insurance medical exam, but they couldn’t be easier. A third party vendor called a paramedical service will do the exam. In most cases, you can schedule them to come to your house rather than going to a hospital or doctor’s office.

A medical exam will test the following:

Basic Measurements

These include but are not limited to:

  • Height
  • Weight
  • Blood pressure
  • Heart rate
  • BMI

Blood, Saliva, and Urine Tests

With these tests, underwriters are looking for any biomedical markers that could indicate disease in your system. Any number of diseases can raise concerns to underwriters and cause rates to increase or coverage to be denied.

The primary diseases that underwriters are looking for with these tests are:

  • Cancer
  • High blood pressure
  • Cardiovascular disease
  • HIV/AIDS
  • Diabetes
  • COPD
  • Tuberculosis
  • Hepatitis

This list is not exhaustive and can encompass many other diseases that can be life-threatening or affect overall health in a negative way.

Underwriters also look for these conditions in medical exams:

  • Heart conditions
  • Chest pain
  • Lung problems
  • Kidney/bladder/liver conditions
  • Mental issues
  • Epilepsy
  • And more…

Drug Tests

Most companies will be looking for nicotine, but if they spot any illegal drug you could be declined or uprated (marijuana is a potential exception for some companies).

If you are 55+ an underwriter may require an EKG to measure your cardiac output. Especially, if there is any indication you have had cardiac issues or high blood pressure.

2 Ways to Avoid the Life Insurance Medical Exam

Simplified Issue Life

This policy lets you skip the medical exam.

However, you still must answer the medical questionnaire with brief questions about your health history and family health history.

Guaranteed Issue Life

Guaranteed life lets you skip the exam and the questionnaire. This type of life insurance is guaranteed for anyone who applies, even those who have dangerous life-threatening illnesses such as cancer, heart disease, etc…

You pay a higher premium for these types of policies, but if you have a pre-existing issue or struggling with your health this is a quick way to get insurance.

Actuarial Tables

Skip this section if you aren’t looking for technical information about the insurance rate decision process.

Every insurance company employs a group of folks called actuaries. In my many years in the industry, I have rarely met an actuary. I assumed they were basement dwelling number crunchers who occasionally came up for sunlight and a whiff of fresh air.

I kid. I know plenty of actuaries, and they are very intelligent people, as they have to be to fulfill such a demanding job.

Becoming an actuary is hard work. It may be one of the most rigorous occupations in mathematics. They are number crunchers and insurance companies stake their profits on these people.

There are two basic tables actuaries create for underwriting to help determine life insurance rates for various policies. Both tables predict lifespan.

Mortality Tables

These are factors based on age, gender, height, weight, etc. that generate a lifespan prediction.

BMI Tables

This is the Body Mass Index. It is a table based primarily on height and weight. The higher the BMI number the shorter your lifespan and a greater likelihood for disease.

Obesity is probably second to smoking for uprated policies.

How Long Does the Underwriting Process Take?

The thinner your information on the application the longer it will take to process. With the exception of course of simplified and guaranteed issue life insurance policies.

Be as comprehensive as possible when you fill out a life insurance application. Have a discussion with your agent about any issue that could impact an underwriters decision.

You now know what underwriters look for, so you should be better prepared to move smoothly through this process.

Any incomplete information will result in further questions from the agent or even a phone interview with the underwriter.

To be honest, a great agent will walk you through this process and make as painless as possible. They know what specific companies need and will be able to gather all that information up front, so you are continually asked for more after you apply.

Schedule and finish your exam quickly. Nothing delays a life application faster than holding up the exam process.

Here’s what you can expect for approval times:

Guaranteed Issue Policies

These policies can be approved within a few minutes to hours. (there are no exams or medical questions on this one).

This is another advantage of guaranteed issue policies.  Usually, approval takes no longer than a week across the industry, even with complications in the application process.

Simplified Issued Policies

Usually, underwriting for these policies takes less than a week.

Remember, with simplified issue, the underwriting process includes medical questions but no medical exam.

Traditional (Fully Underwritten) 

For fully underwritten policies, the underwriting process usually takes 2-4 weeks.

If medical issues are discovered during the exam the time for approval could extend to 6-8 weeks or longer, depending on how long you take to schedule an additional medical exam.

Technology has made approval much faster because of the ability to transmit forms and health data almost instantly.

Tips for Speeding Up the Life Insurance Underwriting Process

1. Choose the Right Life Insurance Company 

Each company has different time commitments on approval. Some companies are slower and others are faster. Your agent will know these expectations and can help you find the right company for your time table.

2. Don’t Hide Medical Issues or Drug Use

We’ve said it many times throughout this post — disclose everything. If there are any medical surprises it will delay the process. Understand this going and don’t try to sugarcoat or downplay any known issues.

3. Choose the Right Face Amount for Your Coverage

The size of the policy will impact the time. The larger the policy, the more exact the underwriter will be at analyzing your file.

On average a $100,000 policy will be approved much quicker than the $1,000,000 one.

Policies upwards of $2,000,000 can often include additional medical examinations such as a CT Scan or hair tests for drug and tobacco usage. This is just to protect the life insurance company from any risk on such an expensive policy.

4. Know Which Type of Policy is Best for You

Term policies will approve faster than permanent policies. Permanent policies such as whole or universal life have a longer time commitment for the insurance company, so they need to understand your risk profile better than for a term policy.

5. Apply When You Are Young

Unfortunately the older you are the longer the process may be. Again this varies by companies and is not a hard and fast rule, so don’t be discouraged about applying for life after 65.

6. Having Good Credit Helps

One factor we didn’t discuss was the “ace up the sleeve” underwriters keep hidden. Underwriters have the ability to credit the policy based on intuition and agent discussion.

Perhaps someone has poor health conditions, but they have turned the corner with treatment, changed their diet, and begun an exercise regimen. Underwriters have the discretion to look at that info and improve the rating on the policy even though all the hard data may suggest otherwise.

Underwriting credit is a big reason to use an agent. They can advocate to the underwriter on your behalf and improve your policy rating. Agents can be your biggest cheerleaders in the ear of company underwriters.

Make the Underwriting Process Easy

Speak with one of our agents today to find out what types of policies and coverage are available to you.

Our agents can help you find the best policies, companies, rates and coverage for your specific needs.

You can also use our online quoting engine in order to get quick and easy life insurance quotes instantly.

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About Jeff Root

is the owner of rootfin.com. He's an independent life insurance agent who has helped 1,000's of consumers purchase life insurance online and over the phone.

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