When you apply for life insurance, you will be asked questions about your age, health, and lifestyle. You may also be required to complete other tasks, such as taking a medical exam. Here's an overview of the life insurance underwriting process.

What is life insurance underwriting?

Underwriting is the process by which a life insurance company determines whether you are eligible for a policy and determines your premium. Underwriters, who specialize in risk analysis, are typically in charge of this task. Traditional underwriting can take up to four weeks, sometimes longer.

Many insurers also use computer algorithms to analyze data about you in order to speed up the process. With the rise of instant life insurance and more insurers utilizing algorithms for underwriting, you may be able to obtain a policy the same day you apply.

When you apply for life insurance, you can expect some level of underwriting unless you get guaranteed issue life insurance.

The risk factor checklist: What are underwriters digging for?

Insurers consider the following risk factors as part of the underwriting process:

• Age. Because life insurance rates are primarily determined by life expectancy, younger people will almost certainly pay less for coverage.
• Gender. Women almost always pay less than men of the same age and physical condition. According to the most recent Centers for Disease Control and Prevention data, life expectancy in the United States is 79.9 years for women and 74.2 years for men. Unfortunately, the life insurance industry does not yet have clear guidance regarding transgender and non-binary people, so you may be asked to list the gender assigned to you at birth in your application.
• Medical history. Underwriters consider your BMI, blood pressure, cholesterol levels, and any preexisting conditions. If you can demonstrate that you are effectively managing your condition, you may be eligible for additional coverage or lower rates.
• Family medical history. If you have a family history of serious health conditions such as cancer or diabetes, your insurer may inquire.
• Criminal record. While some insurers will accept misdemeanors, convicted felons or people on probation will find it difficult to obtain life insurance.
• Smoking habits. Because tobacco use is associated with health problems such as respiratory and lung disease, life insurance for smokers is typically more expensive.
• Lifestyle. Risky activities such as skydiving, cave diving, or crop dusting can raise red flags, though some companies will accept high-risk life insurance applicants.
• Occupation. If you work in a dangerous workplace every day, you will be considered riskier than someone who works in an office.
• Driving history. If you have a history of DUIs, DWIs, or major traffic violations, you may face higher rates.
• Alcohol and drug use. If you have a history of substance abuse, your underwriter will consider your chances of relapsing.
• Financials. Based on your income and net worth, you should be able to justify the amount of coverage you're applying for. Insurers will also want to know if you can afford the premiums.
• Foreign travel. Traveling to war-torn or dangerous countries can render you uninsurable, though insurers will take into account the reasons for your visit as well as the length of your stay.
• Citizenship status. Some life insurance companies will not issue policies to people on temporary visas.
• Existing policies. Underwriters examine existing policies to ensure you are not requesting too much life insurance.

The different types of life insurance underwriting

The underwriting procedure varies depending on the policy. These are the primary routes:

• Full underwriting. This is the most thorough procedure, which includes a questionnaire and a medical exam. For most people, a fully underwritten policy will be the least expensive option.
• Accelerated underwriting. Algorithms and publicly available data are used to identify healthy applicants and to issue policies online. As a result, while prices may be comparable to fully underwritten coverage, not all applicants will be eligible.
• Simplified issue life insurance. The medical exam is not required, but you must complete a questionnaire. Because the insurer has less information to measure risk, premiums are typically higher than for a fully underwritten policy.
• Guaranteed issue life insurance. Coverage is provided with no medical exam and no questions asked. Applicants are accepted, but coverage is generally expensive and limited.

The life insurance underwriting process

For fully underwritten or traditional policies, this is the step-by-step procedure.

Fill out a life insurance application

Expect to be questioned about your health, family medical history, and smoking, drinking, and exercise habits. If you have a medical condition, you may be required to provide details about your treatment or medication.

The life insurance application will also request information about your finances, your job, and how you spend your free time.

Take a medical exam

Some policies necessitate a life insurance medical examination. Consider this a free annual physical, except that a nurse or medical technician comes to your home or office at a time that is convenient for you.

The technician will measure your height, weight, blood pressure, and cholesterol levels in addition to asking questions about your health and previous injuries and illnesses. These results assist underwriters in determining whether you have a healthy BMI range and whether your vitals put you at risk for future health issues.

Blood will most likely be drawn, which insurers will use to identify health conditions such as diabetes or blood-borne illnesses. In some cases, you may be asked to provide a urine or saliva sample to test for tobacco and drug use.

These tests will then be sent to a lab for analysis by the technician.

Get an attending physician’s statement

If the underwriter still has questions after reviewing the results of your medical exam, they may request an attending physician's statement, also known as an APS. A summary of your health and medical history is available from your doctor.

The APS can assist your insurer in better understanding any health issues. Your doctor, for example, could explain the underlying cause of high blood pressure discovered during your exam. This information enables the underwriter to accurately price your policy.

The underwriter cross-checks third-party records

Cross-checking assists the underwriter in ensuring that everything you stated in your application was correct.

Typically, the underwriter obtains some or all of the following records:

• MIB. The MIB is a trade organization that stores information from previous life insurance applications in order to prevent fraud. For instance, your report could include information about medical conditions, dangerous hobbies, or blips on your driving record.
• Driving history. Your state's motor vehicle report will also be requested by underwriters. This section summarizes your recent driving history, highlighting any tickets, traffic citations, accidents, or DUI or DWI convictions. This is used by your insurer to identify risky driving behavior, which can reduce your life expectancy and raise your life insurance rates.
• Medication prescription record. Underwriters look for prescriptions from the previous five to seven years that indicate more complex medical conditions.
• Credit history. If you apply for a million-dollar life insurance policy or more, your insurer may run a credit check. While the underwriter is primarily looking for bankruptcies, your credit report can indicate your ability to make timely premium payments.

The underwriter will calculate your life expectancy

The underwriter consults an actuarial table to determine your life expectancy. Tables are classified into two types:

• Mortality tables. This table displays the odds of dying for members of a specific population based on age and gender.
• Build tables. In this table, your BMI is used to assess your health and predict your life expectancy.

The greater the likelihood that you will die while the policy is in effect, the higher your life insurance premium will be.

Why? Life insurance is a business, and insurers want to protect their bottom line in the event that they have to pay out your policy.

You’ll be placed into a life insurance rating category

Your underwriter will assign you to a life insurance rating class based on everything they know about you. Your chosen group indicates your risk level and assists insurers in determining your premiums.

The criteria for each risk class are consistent across insurers, though the names may differ. These are the broad categories, ranked from best to worst.

• Super Preferred.
• Preferred Nonsmoker.
• Standard Plus.
• Standard Nonsmoker.
• Preferred Smoker.
• Standard Smoker.

Then there's "substandard," a term used to describe people who don't fit the mold of an insurer's predetermined rating classes. Subpar candidates typically have complex health conditions, a limited track record of managing conditions, or a poor driving record.

If you are deemed subpar, you will be assigned a "table rating" based on your profile. This means you'll have to pay an additional percentage on top of the Standard Nonsmoker premium. As shown in the table below, each table rating is worth an additional 25%.

You’ll get your life insurance rate

Finally, your life insurance company will send you a policy and premium proposal. Examine the documents carefully and sign off on the policy if everything appears to be in order.

Your coverage will begin on the date specified in the policy documents.