What Is Involved In Life Insurance Underwriting?

life insurance underwriting

What Is Involved In Life Insurance Underwriting?

There’s and old adage in the insurance business, “you buy life insurance with your health not your money.” When life insurance is applied for, the insurer evaluates an applicant through a process called underwriting.  Life underwriting occurs over a number of weeks in which an underwriting specialist investigates and evaluates an insurance candidate for risk. Once completed the underwriter assigns an appropriate underwriting classification for the application.  Underwriting helps insurance companies determine whether an applicant represents a suitable risk and ensures proper pricing.  The underwriting process is crucial for consumers to understand, because the results will ultimately determine the price that you pay for your life insurance contract.

The underwriting specialist is trained to look critically at all insurance applications and search for hidden risk to the insurance company.  They will be taking all of the information gathered during this process and ultimately coming to a decision on your application.

Here are the steps in the underwriting process.

Paramedic Examination


paramed examThe process begins with an insurance application filled out by an applicant and a life agent. Once an application for life insurance contract is completed and submitted to the insurance company, most carriers require a paramedic examination.  The results of this exam determine the applicant’s current health status.  Paramedic examinations typically involve the following steps; draw a blood sample, collect a urine sample, determine height and weight, check pulse and blood pressure, and depending on the applicant’s age and any health disclosures on the application an electrocardiogram (EKG).  The “paramedic” will typically come to a home or place of business to complete the evaluation, with the cost of the examination covered by the insurance carrier.


Lab Evaluation


The blood and urine samples from the paramedic evaluation are then sent to an independent lab for evaluation.  The evaluation will look at various health markers to determine an applicant’s overall level of health and determine whether further tests or evaluations are necessary.  The underwriter receives the confidential information back from the laboratory and the results of these tests become an important factor in the overall underwriting decision.

Medical Information Bureau


Medical Information BureauAnother important step that insurance companies take in the underwriting process is to gather information from the Medical Information Bureau (MIB).  The MIB is made up of United States and Canadian life and health insurance carriers.  The mission of the organization is to detect and minimize fraud that may occur when individuals apply for life insurance.  All carriers send information to the MIB obtained during the life insurance application process.  The primary purpose is to protect carriers from individuals who knowingly or unknowingly leave out information that is important to the insurance underwriting process.  During underwriting, the specialist will compare the application to the applicant’s MIB file to determine whether any relevant information was left off of the application.  The MIB is only an alert to a potential issue and cannot be used as a sole determining factor for a term life insurance application. However if you applied for life insurance with a different carrier and were declined or rated for coverage, you can bet that that information will hit the MIB.  

Information from Your Primary Care Physician


Depending on the type and size of insurance that applied for, the underwriting specialist may request information directly from a primary care physician through an Attending Physician’s Report (APR).  Typical insurance applications will have a HIPAA (Health Insurance Portability and Accountability Act of 1996) form that is signed to authorize release of personal medical files.  Medical history plays a very important part of the underwriting process and is a determining factor in pricing and underwriting classification.

Underwriting Decision


Once all information is gathered the underwriters come to a decision.  The applicant may be approved, modified or declined.  Approval or modified means the insurance company has agreed to offer a contract.  Approval means as applied for, while modified means they may ask to change one or more of the terms of the contract which may include lowering the death benefit and/or increasing the cost usually because of a health condition or hobby.  A decline means that the medical history or a condition is deemed unsuitable for their guidelines.

If you have a pre-existing condition such as hypertension, diabetes, stroke or cancer, it is crucial to work with a qualified agency that makes sure that you apply with the right carriers.  Working with an experienced and licensed insurance agent is critical to ensure that this process works smoothly.

It is crucial for applicants to provide full and complete disclosure with their agents during the initial interview and application process on any health history, big or small that may impact the underwriting process.  Insurance companies are very good health detectives and will most likely find an undisclosed condition.  This could lead to a decline from the carrier and difficulty down the road finding coverage from another insurance company. Is-your-family-protected