Underwriting is an important step in your life insurance application because it determines the cost of your premium (monthly payments). This also impacts the amount of money that your beneficiary receives in the event that something happens to you. Learning about underwriting now can help you make better financial decisions later on — not to mention ease any concerns you may have when applying for life insurance.
When you submit your application, it’s sent to an underwriter whose job it is to review and to calculate the cost of insuring you (we’ll go more into this in the next section). New technologies such as those utilized by Ethos, can help with this process. This reduces implicit and explicit biases and increases time efficiency, meaning more families can get fair protection.
If there aren’t any questions or discrepancies on your application, you’re likely to be approved and a policy can be issued pretty quickly. But if your application needs to be reviewed more closely, receiving your policy can take a bit longer.
Just as speeding tickets and accidents increase the cost of your car insurance, a variety of life factors affect how much you’ll pay for life insurance. Your age and current health are taken into consideration. But calculating your risk isn’t limited to those factors. For example, your driving record can impact your life insurance rate. When you think about it, risky driving puts your life at an increased risk.
Here are some health factors underwriters may look at:
Your current and past activities may also impact your premium. A few may include:
Exactly which factors are considered and how much risk is assigned to each varies by company. This is why you’ll sometimes receive different quotes from different insurance companies (this also explains why it’s important to shop around and compare quotes). Insurance companies can withhold coverage if they believe you present too great a risk, but because each company’s underwriting process varies, their policy decisions will, too.
All things considered, health issues, a not-so-great driving record, or an affinity for extreme skydiving shouldn’t prevent you from applying for life insurance. Ethos, for example, has many customers with prior health issues.
The time it takes to underwrite and issue a policy depends on the complexity of your health and lifestyle, but can take anywhere from a few days to weeks. A 35-year-old in excellent health will generally take less time to underwrite than a 35-year-old smoker.
Making amendments to your application, waiting on health records from your doctor’s office (also called an attending physician statement, or APS), and requests for a high coverage amount are common situations that can delay the underwriting process.
Since the cost of your premium is highly dependent upon your health and lifestyle, positive changes to your life can influence the cost of your premium. For example, actions like quitting smoking and maintaining a healthy BMI can help decrease it.
Traditional underwriting can lead to numerous phone calls, doctor’s visits, and weeks of back and forth conversations. However, thanks to advancing technologies such as algorithmic underwriting, the industry is getting faster, and what was once known as a headache of a process is now much simpler.
To see how simple life insurance can be, get your free quote with Ethos.