A Guide to Understanding Life Insurance Underwriting
The Underwriting Process
While the underwriting process can vary somewhat between carriers, these are the main checkpoints.
Step 1: MIB Check
The MIB (which stands for Medical Information Bureau, not Men In Black) is a computer database that stores medical and some non-medical information for fraud-detection purposes.
It allows underwriters to see your coded medical details from any previous life insurance applications you may have submitted. It’s a way for insurers to make sure an applicant isn’t hiding anything which may have caused them to be declined previously.
Step 2: Verification
Insurance companies want to make sure everything on your application is accurate before proceeding. After submitting your application, the carrier will reach out over the phone or via email to verify you are who you say you are and confirm the information you provided on the application.
Step 3: Medical Exam
After the verification step, a third-party examiner will reach out to schedule a quick medical exam if you’re required to get one.
This exam only takes 20-30 minutes and will include a blood draw, urine sample, height and weight measurements, and blood pressure readings.
These exams can be done at your home or office, wherever it’s most convenient for you.
The medical exam gives the carrier a good overview of your current health status.
Step 4: Medical Records
Carriers don’t order records on all applicants, but they do if you have a significant medical history or unfavorable results from your exam.
This step can prolong the underwriting process depending on how long a doctor’s office takes to comply with the request.
Step 5: Prescription Check
Carriers will review all the medications prescribed to you over the last few years.
Step 6: Motor Vehicle Report
Your driving history can affect how carriers evaluate your risk. If you have recent accounts of reckless driving or DUIs, it will impact your coverage.
Step 7: Background Check
Life insurance carriers will review criminal records. Having a record doesn’t mean you’re automatically denied coverage, although it can negatively impact life insurance rates.
Step 8: Assign Risk Class
Life insurance underwriters consider all their findings and use actuarial tools to estimate the statistical probability of you dying prematurely. This enables them to calculate the risk they take on by insuring you.
The carrier will either approve or decline your coverage. If approved, they assign you a risk class. This life insurance classification will determine your final rate.
Life Insurance Classifications Explained
Life insurance risk classes are assigned based on the carrier’s underwriting evaluation. Applicants will fall into one of these categories.
Preferred Plus/Preferred Best – excellent health, low mortality risk, best price possible
Preferred – good health, low mortality risk
Standard Plus – above average health
Standard – average risk
Preferred Tobacco – tobacco users in excellent health
Standard Tobacco – tobacco users in average health
Substandard/Table Rated – higher risk than average to insure, price will include additional percentage on top of standard rate
