Origin of word Underwriting : In medieval age, traders look for insurance of there ships or goods. Traders who wants insurance for there commodities writes there name under the risk cover, this is how this term came into existence.
What is underwriting : Insurance company takes risk when they sell insurance. To access risk of customer they have underwriting team. Underwriter checks your earning, health status, dependents, habits,etc. Based on such details provided by customer, underwriters analyzed risk. Based on customer application,underwriter decides approval or rejection. Underwriter when analyzed higher risk then loading is applied. Loading is an additional premium. Ex. If life assured has diabetes problems, his premium gets increases compare to non diabetic person because insurance company is taking higher risk on diabetic person.
Types of Underwriting : Financial and medical underwriting are two types of underwriting.
i) Financial Underwriting : The underwriter will look into financial details such as annual income, dues as well as dependents. Based on customers annual income underwriter will check whether you can get required coverage or not. Above this, he will also check whether you can pay premium or not. In a nutshell, he will check whether your documents are inline with your requirements or not.
ii) Medical underwriting : The underwriter will check your age,lifestyle(he wants to know whether you drink alcohol or not. If yes, then how many times a month or week), medical history of your family, present health, habits,occupation,etc. If you have existing disease or smoking habits, he will increase your premium because there is more risk in covering you. In a nutshell, medical underwriter focus on details that will effect your mortality.
Risk factors underwriters do check :
i) Age : Young people are probably free from disease. So, the first thing underwriter does is to check your age. If your older, then chances of disease gets increases, which impact your mortality. So,there is more risk in covering older than younger.
ii) Medical history : There are cases where diseases like cholesterol, diabetes are hereditary.Medical history of yours as well as your family is primary requirement which underwriter will check.
iii) Smoker or Non Smoker : He will analyze risk on the basis of smoking habit, whether it is occasionally or daily. It is a big risk for life insurance company to cover a smoker, so they will charge more premium. In short, Smoker will pay more premium than non smoker.
iv) Alcohol : If you drink alcohol, insurance company will ask you further more details like how often you drink. Based on your answer, underwriter will apply loading as there is more risk in covering alcoholic person.
v) Height and Weight : Underwriter will observe your Body Mass Index. If you are over weighted, loading can be applied because obese person catches the disease more quickly, so risk of getting obese person cover is too high.
vi) Overseas travelling : Underwriter will check how often you travel to different countries. If yes, then for how many months and reason behind your travelling. Travelling to insecure countries is matter of concern for underwriter.
vii)Driving Reputation : Underwriting may check your driving history with motor department so that they could know more about your way of driving, For ex. whether you violate traffic rules or not. Chances of accident leads to higher risk for insurance company.So, underwriter may increase your premium if he found some discrepancies in your driving.
Comparing Premium in multiple life insurance companies : Premium rates as well as Loading( extra premium charged by insurance company if you are suffering from illness) varies from company to company. So, it is a good decision to save your penny by comparing premium with multiple life insurance companies.
Disclaimer :
This article is not sponsored and not meant for endorsing any particular insurance company. Please Check Terms and Condition of respective organization along with inclusion and exclusion before buying insurance policy