Life insurance underwriting is complicated, and most people don’t know what to look for when choosing a life insurance company. That’s where RiskQuoter can help you.
Our tips and advice teach you what to look for.
What is Life Insurance Underwriting?
Life insurance underwriting is the evaluation of your medical history, personal background, and other factors to determine your eligibility and price for life insurance.
Life insurance companies want to know everything, including information about your:
Family Medical History
Income & Financials
Medical Underwriting Overview
Many factors make up the medical underwriting aspect of life insurance, such as:
Current Health – Life insurance companies look at your current health, build, control of any medical conditions, compliance with your doctor’s orders, medications, and results from the insurance paramedical exam if required.
Medical History – Have you ever been diagnosed with or treated for:
Most of the above have made the top 10 health problems in life insurance list every year.
Life insurers may add a table rating and/or a flat extra charge for some medical conditions.
Do you use tobacco/nicotine products? Life insurance for smokers and other tobacco products have additional rules that may impact your underwriting.
Family Medical History – If your parents or siblings have had cancer, heart disease or diabetes, it’s important that you understand the family history life insurance rules for the company you apply to as it may negatively affect your life insurance rate.
Recently there have been some news stories about people who were declined for life insurance simply due to having prescriptions for medications such as Naloxone or Truvada. We have companies that will offer you coverage with either.
Financial Underwriting Overview
With financial underwriting, insurance carriers want to see if the amount of life insurance is justifiable. Many times, a good cover letter will address financial concerns if you are applying for more life insurance than what would typically be expected for your situation.
Occupation – While most occupations do not present a problem, you may be charged more money depending on what your occupation and job duties are.
Keep in mind that some insurance companies are better than others with certain occupations, but we’ll make sure you get to the right company.
Income & Financials – Underwriters want to know what your income level is, do you receive any investment income (unearned income), and what is your net worth as part of the financial underwriting requirements.
Estimates for unearned income and net worth are fine as insurance carriers are not looking for detailed financials, except maybe for some business and estate planning applications.
Credit History – Your credit history is considered as part of financial underwriting. Bankruptcy is the most common issue we see. Some companies will make you wait until discharge, while others may consider now depending on the circumstances.
Personal History Underwriting Overview
Life insurance companies want to know more than just your medical information. The following are all considered as part of the life insurance application process:
Lifestyle – Do you participate in any adventure sports activities? Scuba diving, rock or mountain climbing, skydiving, motorized racing, etc. may impact rates.
If you are involved in private aviation, special underwriting rules apply and only a few life insurers do a good job with private pilots. Commercial airline pilots are not affected.
Do you travel internationally? Countries listed on the U.S. State Department travel warnings site may result in additional premiums or postponement of life insurance until you return from your trip.
Driving Record – Life insurers use a points system to determine if your motor vehicle record will negatively affect you.
Single violations such as a speeding ticket is usually a non-factor with underwriting. Life insurers become concerned when they see multiple violations within a 2-3 year period of time, which may result in higher premiums.
Reckless driving and DUI’s typically follow criminal underwriting rules.
Criminal History – The most common history we see in life insurance underwriting is drunk driving arrests. Most rates are based on the time since your DUI arrest and court outcome.
For other criminal histories, the availability of life insurance depends on individual crimes, convictions, and your current probation/parole status.
Life Insurance Questions
The following are the most common life insurance underwriting questions we receive.
- How long does life insurance underwriting take?
- What are life insurance company underwriting guidelines?
- What does fully underwritten life insurance mean?
- What is no medical life insurance underwriting?
- What is guaranteed issue life insurance underwriting?
- How does my health affect life insurance underwriting?
- Non-medical factors that affect life insurance underwriting.
How Long Does Life Insurance Underwriting Take?
Underwriting may take anywhere from several days to a few months to complete. It all depends on the type of policy, insurance company chosen, your medical history and more.
Life insurance underwriting times are negatively affected by:
- Incorrect or incomplete applications
- Delays in completing the paramed exam
- Medical record retrieval from doctors.
- Significant high-risk health issues
Waiting for medical records to arrive is typically the longest part of the process. Most physicians use a medical records service to send records to the insurance carrier and that may add weeks to underwriting.
Significant health issues require more time as those files will be sent to a medical director for additional review before an underwriting decision is made.
What are Life Insurance company underwriting guidelines?
Each life insurer has its own set of general life underwriting guidelines that are used to determine your eligibility and price for life insurance.
Examples of general underwriting criteria include build charts, blood pressure, and cholesterol cutoffs, tobacco usage, etc.
Here’s an example of underwriting guidelines by Banner Life
In addition to the general criteria mentioned, high-risk health issues as mentioned above are underwritten according to each company’s guidelines and offers may vary significantly.
What Does Fully Underwritten Life Insurance Mean?
Fully underwritten life insurance requires the most comprehensive underwriting review when compared to other types of underwriting mentioned later.
The benefit to you is that fully underwritten life insurance offers the best life insurance pricing.
The downside to fully underwritten life insurance is that it takes longer to complete, a paramedical exam is required, and you have to answer more questions.
What is No Medical Life Insurance Underwriting?
No medical life insurance is a great option if you are in good health, like convenience, do not like paramed exams, and you are in a hurry to complete your life insurance.
Benefits of no exam life insurance include not having to give blood and urine samples, fast underwriting approvals, and in some cases, you may receive an underwriting decision in 10 minutes or less.
The trade-off with no medical life insurance is more expensive pricing, limitations in coverage amounts and term lengths.
What is Guaranteed Issue Life Insurance Underwriting?
With guaranteed issue life insurance, few if any health questions are asked. The main reason why any health questions are asked with guaranteed issue life insurance is to determine if you will receive a level or graded death benefit policy.
With level benefit policies, the full face amount of your policy is paid to your beneficiaries
With graded benefit policies, if you die during the first 2 years (in most cases) your beneficiary would only receive the premiums paid as the death benefit. Starting in year 3, the full death benefit would be paid.
Guaranteed issue life insurance is a great option if you’ve been denied life insurance, or only need a small life insurance policy of $25,000 or less.
How does my health affect life insurance underwriting?
We specialize in high-risk life insurance underwriting.
What that means is that we have taken the time to learn which life insurance companies will be best based on your individual health problem or non-medical underwriting issue.
So while your health condition may end up costing you more than someone without health issues, we make sure you end up with the best company to meet your needs.
With medications, companies look at the control of your condition when underwriting.
What are Non-Medical Factors?
Non-medical underwriting factors include your driving history, tobacco usage, dangerous occupations, avocations, some foreign travel, and your residency/citizenship.
What is the underwriting process for life insurance?
Once you submit your life insurance application, the underwriting process begins. Your application is the primary source of underwriting information used and will become part of the policy itself.
The insurance company will obtain information from the following sources:
- The paramed exam you complete, including lab results.
- Medical records from your physician(s)
- Prescription database review
- MIB – Medical Information Bureau
- Motor vehicle records
- Credit check
- Inspection report…aka a phone interview.
This information is gathered by the insurance company for the purpose of determining your eligibility and price for life insurance.
What Do Insurance Underwriter’s Look For?
Once all of your information has been assembled, your file is sent to the underwriter for a decision.
The underwriter will review the following:
- Build – What are your height and weight.
- Tobacco Use History if any
- Medications – What do you take, why do you take it, how much and how often?
- Medical History – Have you had any health issues in the past or present? If yes, what was the treatment?
- Blood Pressure and Cholesterol – What is blood pressure and cholesterol history, and what are your results from the paramedical?
- Family History – Is there any family history to consider?
- Alcohol & Drug Abuse – Do you have any history of abuse?
- Driving Record – Any history of DUI’s or moving violations?
- Occupation – What is your occupation? Do you travel to foreign countries for work?
- Avocation – Do you scuba dive, mountain climb, race cars, motorcycles, skydive, fly a private plane, etc?
- Residence – Do you live in the U.S. year-round, live in other countries?
Many times after the initial review is completed, the underwriting team will send us a list of questions to review with you or ask for additional physician’s information.
What is an underwriting decision?
After your file has been reviewed, the underwriter determines if you are eligible for life insurance with their company, and what rate they will charge you.
Approved As Applied – Good news! You received the underwriting rate you were expecting.
Approved Other Than As You Applied – You may receive approval at a more or less favorable rate class than expected.
Postponed – If you were just diagnosed or recently completed treatment for a health issue, some carriers may postpone offering life insurance to you for a period of time.
Denied – You may be denied life insurance by the company you apply to. When that happens, we’ll help you determine the exact reason for the denial, and will help you plan your next steps.
Are life insurance offers negotiable?
Yes and No. There are times when we will receive an offer from a company that we know is not the best available. Approvals with life insurance table ratings added are the most common example.
Each table rating adds approximately 25% to your life insurance rate, so there are instances where we can negotiate with an underwriter to reduce the overall rating.
Will you qualify for preferred best rates?
It’s possible, but keep in mind that only about 20% of all applicants will qualify for the preferred best life insurance rate. The guidelines for preferred best rates are strict, and missing one of the underwriting criteria will kick you out of the best rate class.
Will my upcoming birthday affect my rate?
While most life insurers consider you to be the next age once you are within 6 months of your next birthday, companies do allow you to “backdate” your policy for the younger age.
Does my family’s medical history affect my life insurance rate?
If your parents or siblings have a history of heart disease, cancer or diabetes, it’s important for you to let us know about any family history as it could affect your life insurance rate with the wrong carriers.
Speaking of parents, can I buy life insurance for my parents?
Buying life insurance for parents is actually pretty common, whether it is to help with final expenses, provide something to the kids and grandchildren, estate planning and more.
Do medications for blood pressure and cholesterol affect life insurance rates?
Many life insurance companies will still allow their best life insurance rates if you take blood pressure and/or cholesterol medication. Most important is your control of both on meds.
Do I have to pay tobacco rates if I smoke cigars?
Non-tobacco life insurance rates are always available for cigar smokers. The key is knowing which company to work with based on your cigar smoking habits.
Can cigarette smokers get non-tobacco rates?
It’s not easy, but there is a company that will offer cigarette smokers non-smoker life insurance rates for the first few years, but only if you buy a universal life or whole life policy.
At RiskQuoter.com, we’ll help you find the best life insurance rates based on your individual situation.