Life insurance underwriting is the process by which insurance companies evaluate the risk of insuring an individual. In India, this process is crucial for determining the applicability of issuing the life insurance policy and the premium an individual will have to pay.
This article will provide an overview of the life insurance underwriting process and explain what everyone should know about it.
Underwriting In Life Insurance
When an individual applies for life insurance in India, the insurance company will conduct an underwriting process to assess the applicant’s risk.
The life insurance underwriting process typically includes the following steps:
Application
The application process is the first step in the life insurance underwriting process. It is a critical step as the individual interested in purchasing a life insurance policy provides the insurance company with information about themselves. The application form typically includes questions about the individual’s age, occupation, health, and other relevant factors.
With the advancement of technology, online application forms have become increasingly popular as they are more convenient and easy to use.
For example, Tata AIA Life Insurance provides a well-established online system that helps policy seekers view, compare and analyse the different life insurance plans, calculate the premium using online calculators and determine the best product for all their financial needs.
Medical Examination
The medical examination is an important step in the life insurance underwriting process. Insurance companies use it to determine an individual’s overall health and any pre-existing medical conditions. The examination typically includes a physical examination, a review of the individual’s medical history, and laboratory tests.
The individual’s medical history will also be reviewed during the medical examination. In addition, it will include information about any previous illnesses, surgeries, or hospitalisations. This information is used to determine any pre-existing medical conditions that may affect the individual’s risk of death and impact their life insurance policy premium.
Annual income and financial liabilities
Annual income and financial liabilities are important factors to consider when assessing an individual’s financial situation. When assessing an individual’s annual income, it is important to take into account not only their current income but also their potential for future income. It can include education, job history, and industry trends.
On the other hand, financial liabilities can include various debts and loans, including credit card balances, mortgages, car loans, and student loans. Also, it is important to consider the total amount of these liabilities and the individual’s ability to repay them.
Background check
A background check is an important step in the life insurance underwriting process. It is used by insurance companies to gather additional information about an individual and to verify the information provided on the application form. During the background check, the insurance company will gather information from various sources, such as hospitals, clinics, and previous insurance companies, to verify the information provided on the application form.
Risk assessment
Based on the information gathered during the above steps, the insurance company will assess the individual’s risk and determine the premium they will charge for the policy. However, it’s important to note that the underwriting process can vary depending on the type of life insurance policy applied. For example, term life insurance policies require less underwriting than whole life insurance policies. Additionally, some insurance companies may use different underwriting criteria than others. Therefore, it is important to research the best policy for specific financial needs.
Finally, to ensure that the life insurance application is approved, it is important, to be honest, and transparent when providing information during the underwriting process. Providing false or misleading information can result in the denial of the application.
Conclusion
The life insurance underwriting process is essential in assessing the risk of insuring an individual. It includes various steps like application, medical examination, background check, and risk assessment. Providing accurate and honest information during these steps ensures that the individual gets the most suitable policy with an appropriate premium.
