Underwriting is the process an insurance company uses to determine whether or not you are eligible for insurance, and if so, the rate you should pay for that insurance.  There are many things investigated by insurance companies when your application is submitted to determine the insurability of the applicant.  Attributes such as your health, age, habits, family history, driving record, financial status and history, hobbies and lifestyle can have a significant affect on the amount of risk involved for the insurance company. Below is a sample of the most common underwriting classifications used by the insurance industry.

 

Preferred Plus	Preferred	Standard	Substandard
Classification used for those individuals that are extremely healthy and who pose basically no risk to the insurance companies.	Classification given to those individuals that have only minor health or risk issues. (e.g. negative family history, heavy build, cholesterol)	This classification is used for those individuals having a major infraction that disqualifies them from receiving preferred rates. (e.g. on medication for cholesterol or high blood pressure)	This segment of the population has a very serious health condition or a multitude of other risk factors. Each case is looked at individually and assigned a premium based on the degree of risk involved.

Important Underwriting Factors

Alcohol and Drug Use:  Having been treated for or using these types of substances, or any recreational drug use poses a significant risk to the insurance company and will drastically affect your insurability and rates.

Family History:  Extensive scientific studies have proven many medical conditions to be hereditary.  Most important to the insurance industry are cancer and cardiovascular disease in the parents and/or siblings of the proposed insured.  If your parents died due to cancer or cardiovascular disease prior to the age of 60, you are a higher risk for the insurance company.

Financial Status and History:  The insurance company will not allow you to purchase excessive insurance.  You need to show why you are applying for the amount you want in addition to showing such things as past bankruptcies, net worth, liabilities and assets, earned and unearned income.  All these factors affect the amount of coverage you can purchase.

Health Factors:  High blood pressure, cholesterol levels, asthma, cancer, tumor, diabetes, medications, surgeries, mental disorder, lung or respiratory disorder, stroke, gastric or intestinal disorder, disease of the heart or blood vessels, kidney or urinary tract disorder, disorder of the blood or lymph nodes, HIV or AIDS can all affect the risk associated with insuring you.

Hobbies and Lifestyle:  Certain hobbies are considered high risk by the insurance industry.  Taking part in activities like scuba or skin diving, vehicle racing of any kind, skydiving, mountain climbing, hang gliding, ballooning, any type of flying, military duty, or foreign travel can have a significant affect on your rates and possibly make you ineligible for insurance through some companies.  Some companies offer what is called an aviation exclusion that would make the death benefit inapplicable should you die while engaging in private aviation in order to keep the premium more affordable.

Motor Vehicle Record:   Things such as multiple moving violations, serious accidents and convictions for driving under the influence of drugs or alcohol can all affect your insurability.

Smoking or Tobacco Habits:  Using any product that contains nicotine has a serious affect on the health of an individual.  To be considered for preferred non-smoker rates you must be free from smoking for a minimum of 1 year (every company is different).  Using chewing tobacco, a pipe, cigars, extremely light cigarette usage, or a nicotine supplement such as a patch or gum all have an affect on your insurability, but you may be considered for non-smoker rates through some companies.

Note: The insurance industry has conducted extensive studies to develop sophisticated mortality tables in an effort to more accurately assess the risk involved for each case, and the resulting business decision should not be taken personally.