Guest Post: Understanding the Life Insurance Underwriting Process

Today’s guest post was provided by Denise Mancini of Accuquote. Check out Accuquote.com for free term life insurance quotes from top-rated companies.

You could save yourself a lot of money buying life insurance by understanding the underwriting process. Underwriting is a process that insurers use to examine whether an applicant is eligible for life insurance under a specified premium amount. There are many factors that go into the underwriting process including mortality rates, various economical factors and detailed information about the applicant. The final goal of the underwriting process is to determine the risk of death of the applicant. According to the risk, insurers will base the premium amount.

The first thing you need to know is that while life insurance companies use the same basic methods, the criteria they use may differ making the underwriting process very dynamic. This is why one life insurance company may charge you Standard rates and another may look at your health risks a little more favorably and charge you preferred rates. How can you take advantage of this to get the best policy at the most affordable price? Here’s what you should know.

What does the underwriting process involve?

The underwriting process takes about 6 to 8 weeks from the time you submit your application to the time you receive your life insurance policy. During this time, underwriters are working out your life insurance rates using both the medical and non-medical information you provide such as:
• Age
• Sex
• Marital status
• Your current health
• Medical history including that of close family members
• Driving record
• Alcohol intake
• Smoking habits
• Lifestyle
• Financial status
• Occupation
• Other civil or criminal information which they may think is useful in determining your mortality

In the past life insurance underwriting was a simple process. People fell into Best, Preferred, Standard or Smokers’ rates. Today with health complications rising, life insurance has become a more competitive business. While nomenclatures may vary from company to company the more general classifications companies use to classify premium rates are:
• Super Preferred or Best
• Preferred
• Standard
• Nicotine (with sub-categories such as Preferred or Standard)

It’s worth knowing that only 10 to 15 percent of applicants will qualify for the Super Preferred or Best category. This category offers the lowest premiums and only those who are in the best of health qualify. There is not much flexibility in this category. With some life insurance company, being one pound overweight or having a cholesterol level that is over by 5 counts, can increase your life insurance by 20 percent and put you into the Preferred category. Having a family medical history can increase life insurance by 20 to 40 percent. If you think you have any chance qualifying for Super Preferred rates, it would be worth losing a few pounds (to reach normal weight for you age and height) and improving your diet before applying for any type of life insurance.

Whether you smoke a cigar occasionally or chew on tobacco, most life insurance companies will put you in the smokers’ category. But you may be surprised to know that some life insurance companies offer an incentive to quit smoking. If you quit smoking a year after purchasing a policy, you can apply for non-smokers’ rates. Some may even look at your smoking habits in greater detail, and you may be able to get non-smokers’ rates even if you smoke an occasional pipe or cigar.

Many people today take blood pressure tablets which would disqualify them from Super Preferred rates with most companies. But again, there are companies that offer the Best Preferred rates if you are in general good health.

The same holds true in other areas. Generally, life insurance companies look unfavorably at those with DIU records, those who are engaged in hazardous occupations or life-threatening sports such as hang-gliding, bungee jumping, etc. Since underwriting processes differ, you may be able to find a life insurance company that offers better life insurance rates in spite of your situation with no medical exam required.

Find a life insurance company that favors you!

Several life insurance companies specialize in insuring people with higher death risks. These companies pay special attention to high-risk health conditions, occupations or hobbies that are hazardous and look at your personal situation in greater depth. For instance, if you have diabetes, life insurance companies may increase your premiums by 50 to 100 percent. Those that specialize in diabetes will look at your personal medical history and current lifestyle. If they see that you are taking steps to bring your diabetes under control, Standard rates may be applied.

With such companies your chances of getting low premium rates are much higher! How do you locate such companies? And how do you know whether they will actually pay out when the time comes?

Shop around for life insurance

In order to compare life insurance rates from different companies you need to shop around. The Internet offers a vast array of reliable online services. These services can save you time and money by shopping around for you to get the best rates based on your specific health and information. (Make sure the online life insurance provider you use is certified by the Better Business Bureau.)

Whether you are interested in whole life or term life insurance, online insurance providers can easily find companies that meet your criteria. Receiving free life insurance quotes from multiple companies allows you the opportunity to compare pricing, terms and conditions, as well as company ratings. In addition to a wealth of helpful information on life insurance products, online life insurance providers may also offer personal service from unbiased life insurance professionals. Some may even offer discounts of up to 70 percent by purchasing online.