What is underwriting ?

Once you have decided how much life insurance cover you need and over what period of time you complete an application, which is sent to the insurance provider.  The application will look at many factors including your age, whether you smoke, your current occupation and your health record. It may also ask questions concerning the health of your parents and siblings.

The insurance provider will use this information to decide whether it requires more details about your health, this is called underwriting.

Underwriting is done to ensure that the company knows the risk of paying out over the length of time chosen.  It has to calculate the percentage of policies that it may have to pay out against the number of policies that will not be claimed upon.  It does this to ensure it has the funds available to meet a potential claim and give you the protection you are applying for. 

Obviously, the higher the risk of a pay out the higher the insurance costs.  For example as you get older the cost of life insurance goes up because you have less life expectancy, any medical condition may also impact on your life expectancy.

If there are no excess risks you will be accepted on what is known as standard rates and the cost should be the same as you have been quoted.  However, if you are classed as being ‘Rated’ it means the life insurance provider has increased your premium to match your risk.

If there is anything mentioned on the application form that may pose a higher risk the insurance provider may wish to write to your doctor for clarification.

This does not necessarily mean that you will need to have a medical examination as in the majority of such cases, the information your GP provides will be sufficient to enable the insurance provider to make a decision on the amount of risk posed by your application.

The insurance provider may also decide that it needs a second opinion or a completely up to date report on your health. In these circumstances the life insurance provider will require you to take a medical.

A medical can be done by a short visit to your home by a qualified nurse or at your Doctors surgery. Either way, the insurance provider will meet the full cost of the medical. This is usually done at a time suitable to you.

The medical report produced is the property of the insurance provider but you can request on your application form to see a copy of the report. If anything of concern is discovered within the report the insurance company underwriters or your Doctor will usually let you know.

If a medical is requested this may cause a time delay to your policy coming into force, therefore do not cancel any existing polices until all the research has been done and you have a new policy accepted.

The insurance provider can refuse to insure you if it considers you are too high a risk.

Finally, you must be totally truthful when you complete your application form. If you fail to disclose anything they ask you about or you fail to tell the truth, then if in the unfortunate case a claim is made it will be invalidated.