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What is life insurance underwriting?
Life insurance underwriting is the process in which an insurer assesses an applicant’s risk of death during the policy term. Simply put, the insurance company uses your application information to determine the likelihood of paying out a claim.
This assessment is important because it helps life insurance underwriters tailor your cost specifically to you. It ensures that everyone pays a premium that accurately reflects their individual risk, so you can be confident that your monthly rate is fair and sustainable for your level of coverage.
How underwriting affects your policy and your rate
Generally, the more risk you pose, the higher your monthly rate will be. Some factors, like your age, medical history, or pre-existing conditions, are out of your control. On the other hand, maintaining healthy habits, like eating a balanced diet, getting regular exercise, and quitting smoking, can help lower your rates.
If your risk level is too high for an insurer, it may affect whether you are eligible for a policy.
What factors are considered in life insurance underwriting?
Now that you understand how underwriting impacts your rates, let’s break down the specific factors that are considered during this process. Since each provider sets their own life insurance underwriting guidelines, rates and eligibility may vary between insurers. Common life insurance underwriting factors include:
- Age and sex at birth
- Lifestyle habits (such as smoking, drinking alcohol, or regular exercise)
- Occupation and hobbies (such as high-risk jobs or extreme sports)
- Health status (such as medical history, BMI, or lab results)
- Family medical history
- Driving and criminal records
- Financial situation (how much coverage your qualify for based on your income)
These factors can also affect the time it takes to process your life insurance application. For example, if you have a health situation requiring medical follow-up, it may take longer for an insurer to determine your eligibility and monthly rate.
How does the underwriting process work?
Here are the steps to expect when applying for life insurance, and how the underwriting process fits in.
1. Get a quote
Basic details, like your age and sex at birth, are typically all that’s required to estimate the rate for the coverage you want. That’s why many providers, like Blue Cross Life, can give you an online life insurance quote in a matter of minutes.
2. Submit your application
As you continue through the life insurance application, you’ll provide more detailed information about your lifestyle and medical history. This can include health-related questions, as well as general questions about your habits and day-to-day life.
3. Review
Once you submit your application, underwriters review your information and use various tools to understand your overall risk.
During this process, the insurer may request additional details to help complete their assessment. This could include follow-up medical tests, your driving record, or evidence of employment.
If you’re asked to provide more information, don’t worry. This simply allows the insurance company to provide the most affordable and reliable coverage for you.
4. Decision
After reviewing all the factors and requirements, the insurer will make a decision on your eligibility and set your monthly rates.
How long does the underwriting process take?
The timeline for life insurance underwriting can vary, ranging from a few days to several weeks.
While the traditional application process involved lengthy paperwork and in-person appointments, technology has allowed insurers to accelerate their review process. Today, many Canadians can get a quote and activate their life insurance coverage within a single day.
At Blue Cross Life, we use a fully digital, data-driven approach to underwriting. This allows us to make the life insurance application process easier for you:
- Convenient: Our streamlined digital application means fewer questions and an application you can complete from home.
- Faster: Our data-driven underwriting allows many eligible applicants to get approved instantly.
- Personalized: Advanced algorithms assess your risk fairly, helping you secure coverage tailored to your specific needs.
- Affordable: By operating efficiently and reducing costs, we pass on the savings to you while still offering comprehensive coverage.
Keep in mind that applications with complex health factors, or those requesting high coverage amounts or longer terms, will typically require a longer underwriting timeline.
What are the possible outcomes of the underwriting process?
Once the underwriting decision is made, you’ll receive one of the following outcomes:
- Approval as applied: This means you’re approved for coverage with a standard rate, likely the rate provided in your initial quote.
- Approval with rating: This means you’re approved, but certain risk factors require a monthly rate that is higher than the standard price.
- Postponed: The insurer is delaying a final decision because they need more information or want to wait for a specific health condition to stabilize before moving forward.
- Denied: The insurer has determined that your risk is too high and is unable to offer coverage at this time.
What can cause a life insurance denial?
An insurer may decline your coverage if they determine your overall risk level is too high for their guidelines. This can happen for several reasons:
- Age: You are older than the maximum age for the policy term you applied for.
- High-risk lifestyle: Factors like having a hazardous job, criminal history, or extreme hobbies.
- Health issues: You have pre-existing or severe health conditions, such as a terminal illness or chronic disease.
- Uncertain health status: You have undiagnosed symptoms or conditions that require further medical review
- Missing information: Your application was incomplete or certain necessary details were missing.
- Inaccurate information: Intentionally or unintentionally failing to disclose, or misrepresenting, key information on your application.
It’s important to remember that a decline doesn’t mean you can’t get life insurance at all. Different insurers have different risk tolerances and underwriting rules. Some may also have guaranteed issue life insurance plans available, which typically require no medical exam.
The best way to find out your options is to complete an application. It's a simple, risk-free way to check your eligibility.