People always wonder how underwriting works for life insurance. It is a personal thing to go through. I don’t think anyone is truly comfortable with a life insurance company digging through their personal medical history. We all know that they are looking for the bad things not the good. The question is do you know how they go about underwriting a life insurance policy?
Develop a baseline
The first thing they want to do is fit you into the model. The underwriters at the life insurance company will take the information passed on to them through your application and your paramed exam. Much like auto insurance companies reviewing your driving record, life insurance companies are looking for red flags in order to get a baseline of where you fit. What this means is if everything looks normal you start at a standard baseline which is the best place to start.
If something is questionable from the information the applicant provided then they begin to fit you in a table. If the applicant’s build (height/weight) is not in normal ranges, there is a medical concern in your history, etc, you begin to get put in a table rating baseline. What this means is your starting point would be below standard. Don’t get worried yet, stay with me.
There are seven main areas the life insurance company looks at to establish a starting point through underwriting (not necessarily in order of relevance):
- Aviation: Any private aviation?
- Cancer: Any previous history with cancer?
- Driving History: Number of moving violations and/or DUI/DWI?
- Drug/Alcohol: Any history of drug or alcohol treatment or abuse?
- Ratings: Any medical impairments?
- Residency: Meets residency guidelines (citizenship, country of residence, etc)
- Tobacco/Nicotine: Do you currently or have you ever used? Urinalysis results to support this.
At this point you’re not really a person to the life insurance company. You are information on a piece of paper. It is just a matter of matching the information with the underwriting charts to establish the starting point for your life insurance. Keep in mind that most of the areas listed above will go back either 5 or 10 years. Before that time and depending on the application you might not be required to disclose information. It is important to read the application closely. The questions asked will usually mention a time frame. If it doesn’t then do your best to remember back. You should always be as honest as you can.
Medical Records
Now that the underwriting has established a baseline, if it is below standard the first thing the life insurance company will probably do is review the information that was provided to them. Their main purpose in doing this is to determine follow through on whatever red flag they noticed. They might reach out to the applicant and/or the insurance person that took the application to get some clarification but ultimately they are most likely going to order the medical records from your doctor.
This seems to be the longest process through all of life insurance underwriting. The life insurance company sends out a written request to the applicant’s doctor. The doctor has 30 days to respond. Now not all doctor’s offices are the same. Some might respond right away but most likely the request will be put in a pile. It will be processed when they get to it. If the doctor is affiliated with a larger practice or a hospital they most likely have a separate department that handles all the medical records. I haven’t figured out if this is better or worse.
Keep in mind that if you have a somewhat complicated medical history this could involve a few different doctors. If the applicant had a cancer history, even if they have been cancer free for years, it is not unusual for requests to go out all of their doctors. They might have seen an oncologist, a radiologist and then specialists depending on the location of the cancer. Then that is just one red flag that the life insurance company is looking for more information on, there could be other things as well.
Tip: If time is of the essence the applicant has every right to contact their doctor’s office and request a copy of their medical records. Most doctor’s offices will be able to produce these in a matter of days at the patient’s request versus weeks at the insurance company’s request.
Credit System
Most life insurance companies use a credit program or a point system during underwriting. Once the baseline is established applicants earn credit, or points to reach a better underwriting class. One thing to keep in mind is, if your baseline is below standard then you are most likely not eligible to earn a better rating than standard. In other words, a starting point of below standard probably makes standard the best rating you are eligible to receive.
The point systems will vary from company to company. Some of the most common areas are:
- No rating for aviation
- Blood pressure averages
- Body mass index (height/weight charts)
- Cholesterol/HDL ratio
- Family history
- Lab results
- Nicotine/Tobacco use
- EKG (age specific criteria, usually 60+)
The areas listed above are all areas in which the life insurance applicant can earn points. Some areas may only offer a point while others might offer points at different levels. For example, the applicant might get one point for having blood pressure below 136/86 and another point for below 130/72 (don’t hold me to these numbers). These requirements can vary from life insurance company to life insurance company.
Use of Credits/Points
Points are used under two different circumstances during underwriting. First, if the applicant’s starting point is below standard then they can earn credits to climb the table ladder. Otherwise if the applicant’s starting point is standard then they can earn points to be in either the preferred or better underwriting class. How many points you need and how far you climb is the hardest part to determine because of variations from company to company.
The good news is that the credit system allows applicants to improve their underwriting class by showing patterns of good behavior. What I mean by this is even if you might have been unfortunate enough to go through a bout with cancer, you might still be able to earn a standard rating by showing healthy habits. If your health history is good, good blood pressure and cholesterol and you’re in good shape then you very well might earn enough credits to bump you up t0 standard life insurance rates.
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