Underwriting Process Explained11.29.16
The process that an insurance company uses in order to assess an individual’s ability for coverage is known as underwriting. Underwriters are hired to evaluate the risks associated with accepting individuals who have applied for an insurance policy.
They use risk and exposure data in order to determine the amount of coverage an individual needs and how much they will need to pay for it. Their main goal is to protect the insurance company from losses by figuring out how much of a risk it is to accept certain applicants.
Underwriters Place Individuals in a Risk Class
After an individual is evaluated by an underwriter, he or she is placed into a risk class. A number of factors including age, smoking status, current health conditions, medical history, and nature of occupation can all play a role in what risk class an individual gets grouped into.
Those in the preferred risk class reap the benefits of lower premium rates because they have a risk that is better than average. Individuals in the standard class meet the typical risk requirements and are charged a standard rate. The rated class is comprised of those who have an above average risk and are almost always charged higher rates than individuals in the preferred and standard classes.
The postponed class represents applicants that must meet certain requirements or provide more information before they can be placed into the preferred, standard, or rated classes. Individuals who pose an uninsurable risk are in the declined class, do not qualify for coverage, and must wait at least two years prior to re-applying for coverage through the insurance company that denied them.
Underwriting Benefits Insurers & Individuals
Underwriting is essential for insurance companies because it safeguards them from taking on individuals who are susceptible to a great amount of incidents for which the insurance company will be responsible for covering. Ultimately, it benefits both individuals and insurance companies by reducing the risk of loss and keeping premiums at a minimum.
Blood Work & a Medical Exam is Not Required with Simplified Life
With simplified issue term life insurance from Simplified Life, blood work and a medical exam are not required for the underwriting process meaning you could get approved for up to $500,000 in coverage in 30 minutes or less. Apply online today or call 1-866-REAL-SIMPLE.