The world of Insurance revolves around risk – when you purchase a policy, the insurance company is taking on the risk of paying out for any future claims that you make. Whether it is a death, disability or accident, the role of the insurer is to be there should something unforeseen happen to you or a loved one.
What is Underwriting?
Life insurance underwriting is a part of the insurance process where an individual and their application are evaluated. This evaluation is used to decide the success of the insurance application, and if accepted then it can also contribute to the overall price of the policy. This two-part post is going to dive into the world of underwriting to help you better understand what is going on behind the scenes during an insurance application. Part one will be looking at the different types of life insurance policies and underwriting involved.
The Different Kinds of Underwriting
There are a few different ways to obtain a life insurance policy, but the two main ones are through an insurance broker (known as a retail policy) or online/via telephone (known as a direct policy). The major differences between these two types of policy has been outlined below:
- Convenient, user-friendly application process that can be completed in a few minutes
- Generally purchased over the phone or online
- There is no underwriting performed during the application stage – usually has no medical underwriting either
- Your maximum insurable amount is capped
- Intimate application process with a broker that lasts anywhere up to one hour
- Usually purchased face-to-face with broker following policy advice
- Policy is underwritten, with medical underwriting included, during the application stage
- No caps on your insurable amount – it is chosen by you
Statistically speaking, you are much more likely to have an application declined (chances are about 70 % higher) with a direct policy when compared to a retail policy.
Fully Underwritten Policies
Almost all retail policies will be subject to substantial underwriting at the application stage of the process. This is a comprehensive step that scrutinises complete medical histories and might even require new blood tests and examinations.
Alternatively, direct policies only require a barebones, over the phone underwriting process. It is a much less extensive process, but as a result premiums tend to be a lot more expensive. This, coupled with higher rates of claim rejections, might make this type of life insurance less appealing.
The post Everything you Need to Know About Underwriting in Life Insurance Part 1 appeared first on Superhero Insurance.