Everything you Ever wanted to Know about Life Insurance Underwriting

The life insurance underwriting process can appear intimidating.  There's a lengthy application where you'll disclose a lot of deeply personal information, and then you have to wait to find out if the insurance company even wants to do business with you.

Much like applying for a mortgage, the process can be a little nerve-wracking.  But probably the most intimidating part of the entire process is simply not knowing what to expect.  That's exactly why we put together this guide to help you understand the process.  With this, you can face the life insurance underwriting process head on and limit surprises in the process.

What is the Underwriting Process for Life Insurance?

The life insurance underwriting process seeks to collect information on you and usually includes some or all of the following four items:

  1. Personal questionnaire
  2. Medical Examination
  3. Background Check
  4. Medical Records

The purpose of collecting this information is to categorize applicants based on the risk they might die sooner or later than the average human being.  Life insurers place applicants into broad categories (we'll revisit these a little later) to price policies accordingly.

Personal Questionnaire

The life insurance personal questionnaire is usually part of the life insurance application process.  This is a list of numerous questions that ask about your personal history such as where you were born, what you do for a living, and what your personal income is.  This information gives the insurance underwriter an idea of your typical lifestyle.

Medical Examination

Many life insurance products require the applicant to go through a medical exam to assess his/her overall general health.  The other common term for this exam is a paramedical exam.  The exam is performed by an individual with a medical background similar to a registered nurse.Life Insurance Medical Exam

The paramedical exam includes a medical history questionnaire, physical measurements (e.g. height and weight), and commonly a bodily fluids sample collection–usually a blood and urine sample.

The medical exam plays a crucial role in assessing an applicant's risk profile.  However, evolving technology is displacing medical exams with some life insurers.  It's extremely likely that sometimes in the next several years, these exams will be more of an exception than a rule for the underwriting process.

Background Check

The background check performed for a life insurance applications involves a motor vehicle report, a prescription drug database check, and a review of past life insurance application activity reported by the Medical Information Bureau (MIB).

The motor vehicle report looks at an applicant's driving record.  The life underwriter is especially interested in any major moving violations (like speeding) or records indicating risky behavior like driving under the influence.

The prescription drug database check is a tool life insurers use to verify information disclosed (or sometimes not disclosed) in the health questionnaire.  Some people may have a hard time remembering all the details of their prescription drugs, and the “script check” can help complete the needed information.  Additionally, not everyone who applies for life insurance tells the full truth about their health background, and this is one of the ways insurers can uncover information the applicant omitted from his/her answers.

The Medical Information Bureau (MIB) is a database created and maintained by the life insurance industry.  Its a repository of past life insurance application activity among individuals.  Usually, when you apply for life insurance, the insurer submits an entry to the MIB, and any life insurer who queries the database about you will learn that you applied for life insurance with that company.  This database plays a crucial role in combatting insurance fraud.

Medical Records

Medical records are exactly what they sound like.  The notes taken by your doctor(s) that he/she keeps on file per regulatory requirements and for the purpose of refreshing his/her memory at your next visit.

These records often contain detailed information about your medical history and any diagnoses you may have.  Life insurance underwriters often use records to get a more complete understanding of your medical background and how serious or trivial a condition you might have is.

While medical records still play a role in the underwriting process, life insurers have come to depend less and less on them.  They can take a while to receive and they do cost the insurer money.  the industry continues to seek alternative methods to assess risk that is both quicker and less costly.

Your personal Experience

Of the four items discussed, only two of them typically involve the applicant.  You normally don't have any involvement in either the background check or the medical record process.  The personal questionnaire comes as part of the application process and the medical exam is a step that the applicant definitely has to be a part of.

What do Life Insurance Underwriters Look for?

Life insurance underwriters are looking for aspects of your life that have a tendency to shorten life expectancy.  Smoking, having a dangerous job or hobby, having poor health, or having a history of risky behavior are all things that will cause a life insurance underwriter to assess you as high risk and place you in a category that makes life insurance more expensive for you to buy.

Life insurance underwriters do also commonly look for aspects of your life that tend to suggest longer life expectancy.  Being fit and having long term professional employment are examples of attributes that might help boost you into a better risk assessment category.

How Long Does the Underwriting Process take for Life Insurance?

The time to complete an underwriting assessment depends on several factors, but many times underwriters can complete their assessments of an applicant within 48 hours.  That DOES NOT mean the application process usually takes just 48 hours.

The application for life insurance can be a much longer process as the collection of data key to making an underwriting assessment can take several weeks.

Once the application is complete and submitted to the insurance company, the company begins the process of ordering the necessary information.  Background checks usually happen quickly–normally taking less than 24 hours to complete.

Ordering, scheduling, and completing the paramedical exam can often drag out the timeline on the application process.  This is up to the examiner's and applicant's schedules.  Once the applicant completes the exam, the examiner must submit paperwork and mail off the body fluids for assessment at a lab.  This process can take several days before being complete.

If medical records become a required piece to an underwriting assessment, they can delay the information collection process by several weeks.  The timeline to order and receive medical records varies significantly from one medical practice to another.

As a general rule of thumb, it's good to anticipate an application process that takes at least 30 days to complete.  If you are experiencing a timeline that seems longer, you shouldn't necessarily worry.  This isn't usually a sign that something bad is afoot.  Most commonly delays are simply caused by increased application volume or decreased manpower due to a number of cyclical reasons employees are out of work at any given time.

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