The Underwriting Process for Life Insurance

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Application

The first step in the underwriting process for life insurance is to complete a life insurance application. This consists of multiple pages of questions, starting with contact data such as name, date of birth, Social Security number, etc. The rest of the application consists of financial and medical questions. Be sure to answer as honestly as possible because of the two-year contestability period that begins once the new policy is inforce. If you die within 24 months of the issuing of the policy, the insurance company will investigate to see if there was any misrepresentation on the application. If found, the company may deny the death claim.

Medical

The second part of the underwriting process may consist of medical requirements. This can include a paramedical exam--which is a mini-physical. Your height and weight will be measured, along with your blood pressure. You may also be required to submit urine and blood samples. For advanced cases, certain ages and high death benefit amounts, a visit to a doctor of the insurance company's choice may be required. Here treadmill tests and electrocardiograms can be performed.

APS/MIB

Typically, an insurance company will also want to order an attending physician statement (APS) and compare all of the information you provided on the application and the result of your lab work with the Medical Information Bureau (MIB). The MIB is where all of our medical information is stored, and once you sign the application, you are authorizing the insurance company to pull your MIB information and order your medical records if it so chooses.

Ratings

When you sign an application, you are making an offer to the insurance company to insure you. Once the insurance company has gathered and reviewed all the information it needs to consider your offer, it will make an offer back. This offer may be consistent with the one you made (the same premium and death benefit), or the insurance company may make a counteroffer. The insurance company will give you a rating--ranging from preferred to standard to sub-standard. If you are a tobacco user, this will also affect things. If your rating is sub-standard, the insurance company will offer you the death benefit you request but at a higher premium. Then you must decide whether to accept the insurance company's offer or deny it.

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