Not every life policy is underwritten. However, because there are many that are, it’s essential that you know what this means.
Underwriting is the word that life insurance companies use to describe the process of determining risk, ensuring that the cost of cover is in proportion to risks faced by an individual. People who have the same or very similar risk profiles will pay more or less the same premium rates.
The underwriting process occurs from the time that your application for life insurance is submitted and to determine your risk, insurance companies rely on information obtained from various sources. If you happen to be applying for a life insurance policy that is underwritten, you will normally be asked to fill out an application form and general medical questionnaire at minimum.
Just over 90% of life insurance applicants that go through the process of underwriting won’t experience any challenges and as a result, will pay standard life insurance premium rates. However, anyone who has a higher risk of developing severe illness or who works in what is considered to be a high risk profession will be asked to fill out additional paperwork. They may also be required to pay higher premiums for their policies to compensate for the higher risk. This only occurs with very few applicants, with even fewer of them being denied cover of any sort.
It is important to remember that if you have access to insurance through an employer or super fund, the insurance provider may not always assess risk for each policy holder individually. In cases like these, the risk will be evenly spread across each person. This is what is referred to as a group policy.
If you would like to find out more about how the underwriting process works or you simply have questions regarding your existing life insurance policy, contact our experienced team here at Find Life Insurance today.