Definition of Underwriting:

In simplest words, underwriting refers to the process followed by an insurance company wherein a designated individual analyzes the risk involved in insuring a potential insured (customer). In the evaluation process, the amount of coverage for the applicant, as well as the premium amount to be paid by her/him will be decided.

So, while underwriting a prospective customer, the insurance underwriter aims to protect the insurer’s business if the customer appears to be too risky. Keeping this point in mind, one should understand that when a prospective customer comes at too high a risk to the insurance company, s/he may be denied life insurance.

Different Factors to Take into Account While Underwriting a Life Insurance Policy:

There are a lot of factors that should be considered while underwriting a life insurance policy. Naturally, the first and foremost factor is the life expectancy of an applicant. If the applicant leads a healthy lifestyle, the insurer is more likely to approve his/her application. This is because such a candidate will give the insurer a chance to balance the sum assured offered with the total premiums paid by him/her during the tenure of the policy.

Besides the applicant’s life expectancy, insurers also analyze several other factors that can lead to the applicant’s early demise, such as one’s family history of medical ailments including stroke or cancer, her/his occupation, etc.

Below we’ve enlisted some other criteria that influence one’s risk assessment:

• Age of the applicant: Individuals who are still under or in their thirties are considered low-risk applicants and, hence, may qualify for affordable life insurance policies with low premium rates.
• Gender of the applicant: As per scientific research, it has been found that women have longer life expectancy as compared to men; hence, their chances of getting an affordable policy is higher.
• Personal as well as family health history: If someone in your family suffers (or has suffered) from serious ailments such as cancer or heart problems, then you will also be considered as a high-risk applicant. Additionally, if you have gone through some serious surgeries in the past or if you regularly fall ill, your application might be rejected by underwriters on the ground of higher risk involvement.
• Number of dependents: If the applicant is married and has children, chances are s/he will be offered family floater plans, wherein one can avail a lower premium amount.
• Smoking Habits: If the applicant happens to be a smoker, the premium rates for her or him can increase by 100%.
• Nature of the applicant’s job: In case the applicant’s occupation requires him/her to regularly be in a hazardous environment or situation, such as fire-fighting, mining, etc., underwriters will regard his/her case as high-risk and hence s/he may be granted the life insurance policy at a very high premium rate, or in the worst case scenario, s/he might be denied the insurance.

Thus, one can conclude that there are dozens of factors that determine if the underwriters will approve one’s application or not. Knowing these factors can help individuals assess their risk and accordingly estimate their premium.

What should a High-Risk Applicant do?

Due to many factors contributing to the approval of one’s application, there is always a possibility of people falling into the high-risk category. Such individuals either have their applications rejected or end up paying high premiums.

Thankfully, there is an abundance of middle life insurance companies that specifically focus on high-risk applicants. These companies not only offer the best life insurance policies at affordable rates but also have a wider range of experience when it comes to dealing with high-risk applicants.