The whole process of getting insurance, especially life insurance relies on the underwriting process. What exactly is an underwriting process?
Underwriting in life insurance is the process by which an insurance company assesses the risk of insuring an individual and determines the terms and pricing of the policy. So there are various types of underwriting approaches used in life insurance. Let’s check them out.
- Full Underwriting: This is the traditional underwriting where the applicant provides all the details about their health, lifestyle, occupation, and medical history. The process typically includes a medical exam, blood tests, urine analysis, and sometimes additional tests or physician statements.
- Simplifies Issue Underwriting: This underwriting process is less comprehensive and does not require a medical exam. Applicants answer a series of health-related questions on the application, and the insurer may access databases for prescription history, medical records, and driving records.
- Guaranteed Issue Underwriting: This is the most lenient form of underwriting, where coverage is guaranteed regardless of the applicant's health status. In this process, no medical exams or health questions are required.
- Accelerated Death Benefit: This is a unique style of underwriting that combines elements of traditional underwriting with the speed of simplified issue underwriting.
- Automatic (or Algorithmic) Underwriting: It is a technology-driven process in which algorithms assess risk based on data inputs. Applicants provide information online or through a digital platform, and the insurer’s algorithm processes this data to make an immediate decision. So, the process is fast and provides instant approvals or denials.
- Group Underwriting: As the name speaks, group underwriting is used for group life insurance policies, typically offered through employers or organizations. This underwriting is based on the overall risk profile of the group rather than individual assessments. The best part - you don’t need to give any medical tests.
- Medical Underwriting: This type focuses mainly on the applicant’s medical history and current health status. It involves detailed medical questionnaires and often a medical exam. It may also include reviewing medical records and performing lab tests.
So, these are the various types of underwriting methods used in Life Insurance.
