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Underwriting in Life Insurance – Simplified

What is underwriting? Find out more about it, why it’s necessary and how it can help you when you are applying for life insurance.

During the process of applying for life cover, you need to be assessed by an underwriter. This involves being asked a number of questions – some of them quite personal – for example about your age, occupation, hobbies, and medical history. But what is underwriting in life insurance, and what do these questions actually have to do with applying for a life insurance policy?

Definition: Underwriting is the process of assessing the level of risk presented to the insurer in order to determine the cost of a premium for a life insurance applicant.

Underwriting makes it fairer for everyone

No one wants to pay more for life insurance than they really need to. That’s why Insurers use underwriters to evaluate the risk of each of their clients, including the likelihood that they will die or become ill or disabled and that there will be a claim against his or her policy.

Life insurance underwriters decide if the amount of cover you’ve requested is justified by your individual risk. In the process, the underwriter also ensures that, as a client, you’re charged the correct life insurance premium in accordance with your risk profile. This means that you don’t end up paying more than you should in order to cover the cost of someone’s else life risk within the group of people we’re insuring. Essentially, it’s a way of making things fairer for everyone.

How do Insurers underwrite?

To ensure that the clients are charged the correct premiums for their life insurance policies, Insurers make an underwriting assessment for each client based on the following:

Medical disclosure: This considers the health status information you give to Insurers. They will then determine whether you need any medical examinations or tests to evaluate your risk of death, illness or disability.

Occupation: Here Insurers determine the risks in your work environment that could increase the probability of your death, disability or illness.

Avocational activities or hobbies: Insurers look not only at what you do at work but also at what you do in your spare time that could increase the risk of a claim against your life insurance policy. Some examples of avocations or hobbies that could pose an additional risk are skydiving and scuba diving.

Financial information: Here Insurers gather and assess your financial information, so your application is consistent with the likely financial loss you could suffer. This process helps you to avoid being overcharged for life insurance cover, and also makes it easier to claim.

What do Insurers do with this information?

When Insurers underwrite, they need the details outlined above to make two major decisions: whether to offer you cover or not and what premium rate to set for your life insurance policy.

Why is underwriting necessary?

If the underwriters don’t do a good job and quote very high premiums, the insurance provider stands to lose out on a lot of business to its competitors. Similarly, if the underwriters undermine a person’s risk and quote lower premiums, the insurance company stands to lose a great deal of money by covering high-risk individuals at lower rates.


Every insurance company has its own set of underwriting guidelines that help its underwriters determine whether or not to accept the risk of a particular client, and how much to charge them.

Hopefully, this explains a little more about what underwriting is and why it’s vital for both insurers and clients. Underwriting makes things fairer for everyone and ensures that when there is a claim against your life insurance policy, it will pay the full value and provide the support that is really needed.

About the Author

Mr. Paramesh Kumar S has a diversified work experience of 27 years. He has worked with McMillan Press as an Editor for 2 Years, 22 Years in various Capacities in leading Insurance Companies including LIC, HDFC, Reliance, Exide Life. He was heading South India for the Training needs of Apps Daily, mobile App. The company, before joining Manipal.

Currently, he is associated with MABFSI since November’16 as Assistant Professor with Life Insurance vertical.

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