How Do Underwriters Approve Life Insurance?

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Underwriters approve insurance based on a number of factors. How do underwriters approve life insurance with help from a member of the California Department of Insurance Curriculum Board and insurance professional in this free video clip.

Part of the Video Series: Life Insurance & More
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Video Transcript

Hi, I'm Tony Steuer, the Life Insurance Sage. And this is my tip about how underwriters approve life insurance. Underwriters approve life insurance based on a number of factors. The basic factors though, are very simple to understand. They take a look at whether there is, what's called an insurable interest. For instance, you can't buy life insurance on a stranger, just because you feel like it. You have to have a vested interest in that person's income. For example, in the case of the spouse. You may be dependent upon your spouse's income, to pay for some of the household needs, that's an insurable interest. So, the insurance company is going to take a look and see if there is that insurable interest. Then, they take a look at whether you medically qualify. Just as they won't provide home insurance, while your house is on fire. They won't provide life insurance to you, if you've had four by-pass heart surgeries, or you have terminal cancer. Insurance companies are looking to make a profit, and they take a look at your medical history. In a way, whether or not they're going to have to pay a benefit and when that benefit might be payable. Now, that's not to say that if you do have a health history, that you cannot obtain an insurance. It just may make it more difficult to obtain that life insurance. The last factor that insurance companies also take into account, is what's called financial underwriting. And this is often overlooked. They also take a look at whether you have financial justification for the amount of insurance that you're applying for. If you make 40,000 dollars a year, and you apply for 40 million dollars of life insurance. They're going to question, why that amount of life insurance is needed. So, that's the other thing that they'll take a look at, is seeing if the amount you apply for, is justified by your actual financial planing needs. It's not a lottery, it's a financial leverage tool. I'm Tony Steuer, the Life Insurance Sage. And that's my tip on how underwriters approve life insurance policies, thank you for watching.


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