But in between steps one and eight, you get classified: someone figures out if you actually get the rate you were originally quoted by looking at your health information.
You probably have lots of questions: Who does that? What’s that process called? How much information do they look at?
Here are your answers: An underwriter, underwriting, and a lot.
An underwriter works for an insurance carrier and it’s his or her job to look at how risky you’re going to be to insure – that is, how likely you are to die before the end of your policy’s term is up. (They’re a lot of fun at parties.) The latest statistics show over 100,000 underwriters employed in the U.S. Why so many? Because insurers use them for all of their products to gather the information necessary to set appropriate premium rates for all of their customers.
But it’s not a black box. Check out our infographic on how the underwriting process works, then read on for step-by-step details from the moment you submit your application to when you sign the final papers.
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Application quality check
Before life insurance underwriting even begins, the carrier will go through your application to make sure all of the correct information is there. Your application is the first step in actually getting life insurance, so it’s something you – and the insurer – want to get right.
The carrier is looking to make sure that all of the information is accurate and completely filled out. Maybe you were just so excited to apply that you skipped over a few questions, but either way it’s not uncommon for applications to be accidentally incomplete. Fortunately, unless the missing information is related to medical history, most changes that need to be made to an application won’t slow down the underwriting process.
Depending on the carrier, you may need to do a phone interview as well (in addition to the initial phone call you have with an agent). You’ll usually need to do this if you only gave the most basic information on your application, like your date of birth, address, and coverage needs, and the carrier needs to dig a little deeper into things like your hobbies.
After that, you’ll go into the official underwriting process. Each of the following checks can add some time to your application, but it’s important in getting you the premium price you’ll need to pay over the life of your policy.
The underwriting manual
Every carrier has it’s own underwriting manual. This defines the guidelines that an individual carrier will use to determine your final rates.
An underwriting manual will state things like what service a carrier’s underwriters should use use for ordering an Attending Physician Statement online, when they require a prescription history report, how height and weight correlate to health classifications, and more.
Of course, since each carrier has their own guidelines, that means that the other steps of the underwriting process – which tests are ordered, what tools are used, and what all of this ultimately means for your final life insurance rates – varies, too. Everything that follows is a pretty standard set of tools and tasks for an underwriter, but the specifics of what’s used, when, and how won’t be the same across companies.
The paramedical exam
We’ve talked about this before, but here’s the gist: you’ll be set up with a free-to-you medical exam that, in a lot of ways, is like a regular ol’ physical you’d get at your doctor. The difference is that this happens, conveniently, at your home or work, and instead of your own doctor performing the tests, you’ll get an unbiased technician to do the checkup.
So what exactly is a carrier looking for? The information a underwriter uses falls into three main categories:
Basic measurements. Height, weight, blood pressure – the boring things that you get a report on at a typical physical. Your height-to-weight ratio plays a big role in how you’ll be classified and, ultimately, what you’ll pay for your life insurance policy. High blood pressure, which becomes a particular concern as you get older, is also required for setting your rates.
Blood test. No one really enjoys getting blood drawn, but you can get a lot of information on potentially risky health concerns with a simple blood test. Heart disease, stroke, diabetes, blood-borne illnesses, and more can all be found out with a few vials of blood.
Drug test. Some of this is covered with the blood test, but a urine test for a full drug panel will alert the carrier to the use of drugs like amphetamines, cocaine, barbiturates, and more. Why the concern? Because, generally speaking, drug use makes you riskier to insure and raises your premiums (unless it’s marijuana, which is sort of in a legal, social, and insurance grey area at the moment).
Attending Physician Statement
If there are red flags coming out of your paramedical exam, the underwriter will order an Attending Physician Statement, or APS, to answer some outstanding questions.
An APS is a summary of your medical history from your doctor’s point of view, with basic health information on it. Why does an underwriter need it if you just went through the paramedical exam? Because, while the exam is a snapshot of your health, an APS can provide a more comprehensive photo essay, so to speak.
Say, for instance, you’re showing signs of high blood pressure. An APS, along with a prescription check (more on that in a minute) can let an underwriter know that the high blood pressure is a temporary side effect of medication you’re taking and not necessarily indicative of a larger problem. Basically, an APS lets the underwriter see the full picture of your health so they can make the right decisions regarding how to classify you.
This step can skew the timeline for the life insurance underwriting process, adding anywhere from a few days to a few months depending on how long it takes for a doctor’s office to comply with the request and whether or not they use a third-party record-keeping company, which can add another layer of complexity.
Electronic health records can help speed up the process as well, but it’s a less-than-perfect system at the moment.
Medical Information Bureau check
The MIB is not, in fact, the Men In Black, a clandestine government organization centered around extraterrestrials, but is instead the Medical Information Bureau, a trade group that helps insurers share medical data. Less exciting but equally as important.
An MIB database check helps a carrier fend off fraud by seeing where and when you’ve previously applied for life insurance in a general window of six months. It’s not a bad thing if you’ve applied for life insurance with different carriers in the past, but it will let carriers see what sort of information you’ve been disclosing on some applications that you may have "accidentally" left off others.
Tested positive for drug use on a previous test but failed to disclose it on your current application? They’ll find out.
Underwriters use a prescription check with the paramedical exam and APS to lock down just what your medical history looks like – whether it’s making sure you’re on the prescriptions you say you’re on or see if you’ve omitted any medication up to this point.
Keep in mind that, per the carrier’s underwriting manual, this check won’t always happen. It depends on what the underwriter finds in other areas of investigation or even what the coverage amount being applied for is (higher-coverage policies tend to be under more scrutiny).
Motor vehicle report
"Wait a minute," you’re saying. "This is about my life insurance and you’re talking about motor vehicles! What’s the big idea?"
Weird, right? But it’s true! A motor vehicle report, or MVR, detailing your driving history plays a role in your life insurance rates just like your health history does.
An MVR notes officially-documented driving violations like traffic citations (think speeding or reckless driving tickets), vehicular crimes, accident reports, driving record points, and DUI convictions and can look as far back as five to seven years. Why do these sorts of things matter? Because the overall picture an underwriter is getting is how risky you are to insure – the likelihood that you’ll die during the term of your policy. If you have a tendency to speed, drink and drive, or engage in other dangerous driving habits, you’re riskier, and your rates will be higher than someone who’s a defensive driver and calls a cab at all the right times.
Wish you could see exactly what an underwriter’s going to see on your MVR? You’re in luck! You can request (or, in most cases, pay) to see your MVR from your state so you don’t have any surprises. It’s also used when determining your auto insurance rates, so if you’re in the market for that, too, a copy of your MVR can be nice to have.
Underwriters love tables. It’s hard to blame them: tables take a lot of information and puts it into an easy-to-read format. As we’ve seen, underwriting has a lot of information.
A mortality table is a table showing mortality probability for a given population, usually based on age and gender and assuming all other things being equal. Think of it as a baseline for when, statistically speaking, you’re most likely to die. Morbid, isn’t it?
A build table takes your body mass index (BMI) based on your height and weight and translate it into information that’s relevant to setting your classification. This can be a major deciding factor in your classification, and a poor build can automatically set your classification to Standard.
These tables are built on with the other information we’ve looked at to build the picture of your unique circumstances. After that’s done, the underwriter is almost ready to report your final classification and premium.
After the underwriter has gone through all of the tests, tool, and checks needed to set your classification, the last thing they may do is use a credit system to give you a little bump to help you get better rates. For example, a coronary artery disease usually results in a standard (or worse) classification, but the credit system can bump you up a class and make your premium more affordable.
This is largely dependent on whether or not you’ve taken steps toward preventative care for any conditions that are hurting your rating. The APS and prescription check will let an underwriter know what you’re doing to keep health problems from getting worse, which can be a boost to both your health and your wallet.
Your final rating
Congratulations, you did it!
Or, more specifically, the underwriter did it, but still, congrats! You’re now the proud owner of a life insurance policy, and that’s what really matters. The whole process can take anywhere from 3-8 weeks depending on what information needs to be gathered, and relying on outside sources – like a doctor’s office for an APS – can add time. All that’s left is to sign the policy to put it in force, and your family is protected.
The best part is, this is the only time you’ll have to go through the underwriting process during the life of your policy because your premium will be locked in after your first application.
So sit back, relax, and enjoy the next ten to thirty years with a little extra peace of mind.