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What is the life insurance underwriting process?

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Life insurance acts as a financial safety net for you and your family, ensuring your loved ones are taken care of in the event of your death.

When you apply for life insurance in Canada, your application goes through a process called life insurance underwriting. This involves the evaluation of your risk level to determine if you are insurable and how much your coverage should cost.

Underwriting makes the cost of insurance fair for everyone. It looks at your health, your job, and even your hobbies. Based on this information, the insurance company determines your premiums, which reflect the level of risk the insurer is assuming by providing the policy. Understanding underwriting helps you see why you get the rates you do, which can be helpful when shopping around for the best insurance plan.

Key takeaways on life insurance underwriting

  1. Life insurance underwriting is the process insurers use to evaluate the risk of insuring a person. It is essentially the way an insurer determines the likelihood that you will make a claim, and thus, how much you should pay for insurance.

  2. There are three steps to the life insurance underwriting process: the application (when you answer personal questions), the review (when the insurer evaluates your application – which can include a medical exam), and the decision (when the insurer classifies you based on risk). 

  3. If you're looking for life insurance without underwriting, there are a few options for you on the market which include group life insurance, guaranteed life insurance, and simplified-issue life insurance.

What is life insurance underwriting?

Life insurance underwriting is the process insurers use to evaluate the risk of insuring a person. It involves a detailed look at personal factors including health, medical history, lifestyle, job, and even hobbies. Essentially, underwriting is the way an insurer determines the likelihood that you will make a claim, and thus, how much you should pay for insurance.

What is accelerated life insurance underwriting?

Accelerated life insurance underwriting is not a different type of life insurance – it’s just a faster, simpler way to get approved for life insurance. This process skips some of the traditional steps involved in underwriting, like a medical exam or extensive medical history checks. 

Instead, accelerated life insurance underwriting uses data like driving history and prescription records to quickly assess your risk level. This can lead to faster approval times (often within 24 to 48 hours) and less hassle for those who qualify, making it an attractive option for people looking for immediate coverage.

The life insurance underwriting process

There are three steps to the life insurance underwriting process: the application, the review, and the decision. 

When you apply for life insurance, you start by answering a number of life insurance underwriting questions to determine the level of risk you pose to the insurance provider. These questions tell the insurer about your age, health, lifestyle, and work, including whether you smoke or exercise. 

Once completed, this information is sent to the life insurance underwriters to begin their assessment. 

Next, is the review. Underwriters use multiple tools to review an application, one of the most common being a medical exam. This could include blood tests, urine tests, and a physical examination. Sometimes, they might also ask for your medical records from doctors or hospitals to get a clearer picture of your health over time.

For applicants over 71 years of age, underwriters may also test your mobility and cognition levels through a mature-focus interview.

Next is the decision. After collecting all this information, the insurer classifies you into a risk category. These categories help determine your premium rates. The better your health and lower your lifestyle risks, the better your classification, which typically means lower insurance costs.

Factors that impact your life insurance rates

Several key factors can affect your mortality, and therefore how much you pay for life insurance, including:

  • Health status: Your overall health plays a significant role. Conditions like high blood pressure or diabetes can increase your rates.
  • Age: Generally, the younger you are when you apply, the lower your premiums will be.
  • Lifestyle/hobbies: Participating in risky activities like skydiving or scuba diving might lead to higher premiums.
  • Smoking status: Smokers usually pay more for life insurance due to the serious health risks associated with smoking.
  • Family medical history: Genetic illnesses in your family might also affect your rates.

Knowing about these factors can help you understand why your insurance costs what it does, and the changes you could make to help manage those costs.

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How long does the life insurance underwriting process take?

The time it takes to complete the life insurance underwriting process depends on several factors. It can take anywhere from a few days to several weeks. If your application is straightforward and doesn't require additional medical information, it will be processed more quickly, especially if you qualify for accelerated life insurance underwriting.

However, the process will take longer if the insurer asks for additional medical records or requires more detailed assessments.

Is there life insurance with no underwriting?

Many people look for life insurance options that do not require extensive underwriting because they’re simpler, they enable greater privacy, and they make it far easier for applicants with pre-existing health conditions to get approved. 

Here are a few types of life insurance policies that cater to these needs:

  • Group life insurance: Often provided by employers, group coverage requires minimal or no individual underwriting, making it a suitable choice for those with pre-existing health issues.
  • Guaranteed issue life insurance: These policies do not ask any health questions or require medical exams, and acceptance is guaranteed. However, they typically come with higher premiums and limited benefits.
  • Simplified issue life insurance: This requires only a few health questions and no medical exams, offering a quicker and more accessible option for those who may not qualify for traditional insurance.

These options are designed to offer life insurance coverage with fewer hurdles, providing easier access to this essential financial protection.

The bottom line

Understanding the life insurance underwriting process is important for anyone considering how to best protect themselves and their loved ones financially. This process not only determines if you qualify for insurance but also how much you'll pay. By learning the factors that affect your premiums, you can make informed decisions to lower your costs or make it easier to get approved.

Whether you’re looking for traditional policies requiring comprehensive life insurance underwriting or simpler, no-underwriting options, it’s important to choose the right type of life insurance. Each option offers different benefits, and choosing wisely can provide peace of mind that your family will be financially secure, no matter what life throws your way. 

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