What is underwriting?
You may have run across the term “underwriting” when looking into disability or life insurance, but what exactly is underwriting?
After applying for your insurance policy, your application goes to an underwriting team at the insurance company to review your individual information to determine your risk profile and set appropriate rates, coverages, and exclusions for the policy. To learn more about the process, we’ve broken down what you might experience during the underwriting process.
Medical History
After the initial application with the insurance carrier, they will need you to complete medical history questions to review. This is often an electronic questionnaire or even a phone interview where they ask specific details on medical conditions, medications, past procedures, and family history.
To be prepared, it is often helpful to have compiled a list of current medications and dosages, dates of visits to your physician, and even details on your family's medical history.
Medical Exam
This is actually becoming far less utilized by insurance carriers as they use technology to collect data and better assess their risk pool, however, there are still carriers and situations where a medical exam will be required. Typically with life and disability insurance, you can bypass this exam if under a certain age or policy amount, but each insurance carrier is different.
The medical exam is similar to a routine physical at your doctor's office. With this exam, a paramed team will often travel to your work or home to perform the exam when it is most convenient for you. They get typical vitals, height and weight and then a blood and urine sample to review current health status.
Doctor’s Records
Depending on the details from the medical history questions or the medical exam, the underwriter may request medical records from any of your physician’s. This process can be the most time consuming as the insurance company waits on records. The underwriter can use this additional information to better understand your medical situation to appropriately class your risk profile.
Financial Documentation
When you apply for life insurance or disability insurance over a specific threshold, the insurance company will often need financial documentation to be sure you are adequately insured. Most often, you can provide a W2 or recent pay stub as financial documentation. In some situations that involve business owners, a complete tax return could be required.
Offer
After the underwriter has reviewed your entire medical history along with your financial documentation, they will conclude their assessment of you as a risk to the insurance carrier. They can adjust pricing, coverages offered and even add exclusions to the policy based on their risk assessment. A formal offer is then presented where you can decide if you would like to accept or decline. If accepting the policy, there are some final delivery forms you need to sign and then submit payment to begin the coverage period.
Conclusion
Keep in mind that applying for a policy is not an obligation on your part to accept the policy from the insurance company. If you are not satisfied with the coverage or pricing offered, you can simply decline the offer and check with another insurance company.
The underwriting process can vary greatly in completion time. Some situations, you can have an offer approved within a day or two. Other times, it can take months to collect all records and information needed for the underwriter to make a decision. Being responsive is your best bet to a faster underwriting turnaround.
Hopefully you better understand what the insurance underwriting process looks like from the customer and insurance company perspective. It is important to understand what the insurance company is reviewing so you can be prepared and informed of your options.
