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Life

Understanding the Underwriting Process

Now that you have decided to purchase life insurance, it is important to understand what will take place prior to receiving a policy. Underwriting is the risk selection process that allows the insurance company to evaluate and price risks. By collecting data about your health, finances, lifestyle, hobbies, avocations, driving history, etc., the insurance company will determine the appropriate premium classification. It is important to understand that underwriting will ultimately protect you as a policyholder. It will allow the company to make informed decisions about the risks they take.


Completing the application
– each answer must be completed and details provided when appropriate. If some of the questions seem repetitious, it’s because the insurance company wants to be sure you understood the question and that the answers you provided are consistent.

Special Questionnaires
– lifestyle activities may require additional questionnaires. Foreign travel, hazardous avocations like racing cars, motorcycles, planes or flying private planes, use of parachutes, hang gliding, etc., may all require a special questionnaire, and you may be charged additional premium for participation.

Financial Data
– It’s likely that you will be asked to provide data about your income and net worth. If your coverage is business related, you should anticipate the need to provide pertinent data about the company involved in the purchase. Financial justification is required for all insurance purchases. Your ability to pay a premium is not the only factor used to determine an appropriate amount of coverage.

Name of Physicians
– whether your agent completes medical questions with you or you are asked to participate in an exam (or both), providing the name(s), address, phone number and reasons for your visits is very important. In most cases, your physician will be contacted and asked to provide a report. Frequently, this is the longest part of the underwriting process because the physicians’ offices do not always respond to the insurance company requests in a timely manner. Providing the data about the physicians you’ve seen early in the process allows the company to request the data sooner. If your physician does not cooperate, you may be asked to contact your physician.

The Exam
– It’s likely that you will be asked to provide a urine specimen, have blood drawn, have your blood pressure checked and answer medical questions. For larger amounts of coverage, you may be asked to have an EKG, an exercise EKG, a chest X-ray and an M.D. exam.

Inspection Report
– for larger amounts of insurance, many carriers require that you participate in an interview with a third party inspection company. The questions from the inspector may be similar to questions you’ve already answered and will cover topics such as your health, finances, hobbies, business duties, etc. Most inspection reports are completed via telephone.

Cognitive Testing
– because many insurance companies will now issue polices through age 90, the use of cognitive testing has become much more common for senior applicants. Most cognitive testing is completed with the paramed.

Motor Vehicle Report (MVR)
– the insurance company will obtain a MVR in nearly every application. Some people are confused as to why the life insurance company may want this report. Rest assured, there is significant statistical evidence about those with serious driving infractions and premature death.

Medical Information Bureau (MIB)
– the MIB is an information clearinghouse of medical data that nearly all insurance companies use. When you apply for life insurance, the company will know you’ve applied elsewhere and what other companies reported to the MIB.

 

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