Define Mortality & Risk Expense in Life Insurance
Mortality and risk expense in life insurance is the basis for the premiums charged for a life insurance policy. The information gathered about the prospective insured during the application process is used to determine his mortality and risk classification.
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Mortality Classification
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The mortality expense classification is based on the applicants gender and age at the time of application. Some insurance companies will allow an applicant to use his age up to three or six months prior to the application date for a more favorable mortality classification and premium rate.
Risk Classification
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The risk expense classification is based on many factors.
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Health
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The applicants health is a big determining factor in risk classification. An applicant in poor health would be considered a big risk. Some pre-existing medical conditions will cause the applicant to be considered too much of a risk to insure.
Profession
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The profession of an insurance applicant could cause him to be considered a high risk. Careers that entail an inherent risk of death, for instance a career in law enforcement, would place the applicant in a high risk category.
Tobacco Use
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The use of tobacco, the applicants cholesterol level and the weight of the applicant will be taken into consideration when determining his risk classification.
Risk Assessment
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An insurance underwriter assesses the applicant's risk classification based on the application, advises the insurance company and may reject the applicant. An insurance company will often choose to accept the risk and charge a higher premium to cover possible risk expenses.
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