{"id":1218,"date":"2012-05-10T13:00:13","date_gmt":"2012-05-10T20:00:13","guid":{"rendered":"http:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/?p=1218"},"modified":"2022-03-08T08:22:26","modified_gmt":"2022-03-08T15:22:26","slug":"insurance-underwriting","status":"publish","type":"post","link":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/2012\/05\/insurance-underwriting\/","title":{"rendered":"Insurance Underwriting"},"content":{"rendered":"

How Risk Affects an Insurance Application<\/h4>\n

When an insurance company ‘underwrites’ a health or life insurance application, it assesses the risks associated with the applicant.\u00a0 As a licensed insurance<\/a> agent, it is important to understand that the goal of an insurance company is to maintain a profit while providing financial protection to its customers.\u00a0 In order to measure the amount of risk that is associated with the applicant, the insurer’s underwriting department reviews the application according to its \u2018underwriting guidelines<\/strong>.\u2019<\/p>\n

Simply stated, an insurance company determines an applicant\u2019s eligibility and premium amount based on the total overall risk, and how it is classified according to the company\u2019s risk limits and standards.<\/p>\n

Underwriters<\/strong> are individuals who are employed by the insurance company to review and determine whether an applicant is acceptable or declinable, based on the medical history of the applicant.\u00a0 The \u2018underwriting guidelines\u2019 used to determine the class of risk associated with an applicant can vary from each insurer, according to the amount of risk the insurer can assume.<\/p>\n

Each applicant is \u2018rated\u2019 according to sex, age, height, weight, medical conditions, medical history, smoking status, occupation, and even hobbies (riding motorcycles, rock climbing, etc).\u00a0 The policy\u2019s risk classification and associated premium rate (monthly cost) are determined using this rating system.<\/p>\n

4 Classifications of Risk:<\/strong><\/h4>\n

1.\u00a0 Preferred Risk \u2013<\/strong> This class of risk is reserved for people with good health and good habits.\u00a0 Based on age, height, weight, and smoking status, individuals that fit within this classification are considered a low or \u2018preferred\u2019 risk, and will often pay less premium than a standard risk policy.<\/p>\n

2.\u00a0 Standard Risk \u2013<\/strong> Simply means an applicant has been approved for the policy as applied.\u00a0 This classification is the average, or normal classification for the majority of applicants.\u00a0 Insurance companies commonly promote \u2018anticipated rates\u2019 based on a standard risk classification.<\/p>\n

3.\u00a0 Sub-standard Risk \u2013<\/strong> This class of risk includes applicants with pre-existing conditions that are within<\/em> the risk acceptance levels of the insurer, and can include a higher premium payment to offset the increased risk.\u00a0 This risk class can also exclude certain benefits of the policy, or types of medical conditions from receiving coverage in order to prevent abnormal loss to the insurance company.\u00a0 An applicant rated as \u2018substandard risk\u2019 is commonly in poor health, has already manifested a preexisting condition that is beyond the standard risk classification (based on the underwriting review), or might engage in a dangerous hobby or occupation.<\/p>\n

4.\u00a0 Declined Risk \u2013<\/strong> Unfortunately, some risks are uninsurable and are not accepted by the majority of the insurance industry.\u00a0 These risks can include specific life-threatening conditions, a combination of multiple conditions, or even an applicant\u2019s extreme weight limit.\u00a0 An insurer will try to increase premium or exclude a risk in order to accept an applicant (remember profit); however, some risks are beyond<\/em> the risk acceptance levels of the insurer and are declined.\u00a0 Keep in mind that every insurer is different and each follows its own underwriting guidelines, so just because an applicant is declined or rated as \u2018substandard\u2019 by one insurance company does not mean that the next insurer will result in the same outcome.<\/p>\n

Remember, an insurance agent\u2019s responsibility is to provide the best available options to an applicant (often times from several insurance companies), weigh the pros and cons of each option, and help the individual accurately apply for the insurance.\u00a0 When the insurer knows the correct and complete background of an applicant, it can provide the best result for both parties.<\/p>\n","protected":false},"excerpt":{"rendered":"

How Risk Affects an Insurance Application When an insurance company ‘underwrites’ a health or life insurance application, it assesses the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[52,53,3],"tags":[74,85,84],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/1218"}],"collection":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/comments?post=1218"}],"version-history":[{"count":16,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/1218\/revisions"}],"predecessor-version":[{"id":1416,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/1218\/revisions\/1416"}],"wp:attachment":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/media?parent=1218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/categories?post=1218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/tags?post=1218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}