How does the life insurance underwriting process work?
If you're in the market for a life insurance policy, here's what you should expect during the underwriting process.
Step 1: Complete a life insurance application form
Before underwriting begins, you must undergo the life insurance application process. You should have the following information when completing the form.
Personal information: You must provide your date of birth, name, address and contact information.
Health and medical history: Your insurer will need your height, weight, any preexisting medical conditions, medications you're taking and any surgeries or hospitalizations you've had. Things like your BMI (body mass index), blood pressure, cholesterol may come into play here.
Family's medical history: If your family has been diagnosed with a mental or physical illness, insurers want to know because it increases the likelihood you develop it too.
Lifestyle/occupation: Participating in high-risk activities (are you a skydiving enthusiast?) or working in hazardous jobs can increase your risk factor to insurers. Other factors that might come into play are your drug use or tobacco use, criminal history and history of risky behavior like DUIs.
Policy details: Your insurance company will inquire about the type of policy you're looking for (term life insurance or permanent), the length of the coverage and the death benefit amount. It may also ask for your designated beneficiary and their contact information.
Step 2: Complete a phone interview
A life insurance agent will call you a few days after submitting your application. A phone interview takes place to verify the lifestyle and health information on your application, fill in any incomplete answers, and ask additional questions.
After the phone interview, you'll usually be asked to schedule a date for your medical exam, if applicable. Not all insurance carriers require the medical exam, depending on your age and answers during the application process.
Step 3: Take a medical exam
Underwriters use medical examinations to determine your susceptibility to illnesses or injuries, indicating how likely you are to pass away soon. This information is used with underwriting guidelines to set your life insurance rates.
After your phone interview, a medical technician will conduct the examination at your home or a medical facility. The exam will typically consist of various body measurements, blood work and urine sample. To prepare for the medical exam, your insurance company may recommend you fast before a blood test or avoid caffeine and nicotine.
Step 4: Application quality check
Whether you have a diagnosis for a preexisting condition like high blood pressure or have a high-risk lifestyle, you'll want to be transparent in your application. Insurance companies have a contestability period. This period typically lasts for two years and allows your insurer to deny your claim if you've falsified information on your application.
Application quality checks will identify discrepancies in your application. Accurate risk assessments also ensure that insurance companies place you in the right risk class and in turn offer you a fair life insurance quote. Underwriters will use these documents to verify the information on your life insurance application.
Attending physician's statement (APS): A report written by your doctor that details your medical history and current health status.
Medical Information Bureau (MIB): Underwriters check this database for previously submitted insurance applications and reported health conditions.
Motor vehicle report: Most insurance companies will check your driving record. If you have a driving history that demonstrates recklessness and serious traffic violations, that will affect your rates.
Prescription history: Insurers will check your previous prescription records to see current and past medicine usage.
Credit history: Insurance companies will view your credit score to see if you can make payments. While a poor credit score won't bar you from getting coverage, it may result in higher premiums.