What Does Life Insurance Policy Underwriting Entail?

By Patrick Cooper Posted in Life Insurance News

What Is Underwriting

Underwriting is how insurance companies, all insurance companies, determine how much to charge you on your insurance policies. Underwriters look at your risk class, which in life insurance is determined by age and general health at the time the policy is purchased. The purpose of the underwriters is to “write” up a policy that has the least potential to lose money. The goal is to make the insurance company money. Underwriting is basically the business of issuing insurance policies. Underwriters are specially trained to calculate the risks and value of individual life insurance policies.

How It Got Started

Remnants of life insurance can be traced back to ancient Rome when burial clubs were formed to help cover funeral expenses and help widows. Life insurance in its modern form is the grandchild of shipping insurance started by Lloyd’s of London in the 17th and 18th centuries. They would underwrite life insurance for sailors before they shipped out on an extended voyage. Sometimes they would even provide life insurance for slaves before they were shipped to the Americas. Of course, with these policies the slaves owners would receive the death benefit if the slave died because they were viewed as property.

What Underwriting Means To You

Unfortunately, you really don’t have much control over life insurance underwriting. The underwriters determine your risk level based on several factors, include market trends and viola, determine how much you pay in premiums. Your risk level is evaluated by the possibility of the insurance company having to pay out your death benefit. The insurance companies are really out to make money. If you are young and in good health with a low risk job, then the chance that you will die unexpectedly is relatively slim. The possibility of the insurance company pocketing your premium is greatly increased, depending on what type of insurance policy you have.

Related posts:

  1. Why Is Life Insurance Important?
  2. What Is A Guaranteed Death Benefit On A Life Insurance Policy?
  3. What Are Life Insurance Policy Limitations?
  4. What Is A Payer Benefit Clause For Low Cost Life Insurance?
  5. When Someone Dies, Who “Owns” A Life Insurance Policy?

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