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What is Underwriting?

Not everyone pays the same rate for the same life insurance policy. The process by which the insurance company determines who is eligible for a policy and what they will pay for it is called underwriting. There are various factors in underwriting an individual life insurance policy. These include, but are not limited to:

  • Age
  • General Health
  • Medical History
  • Sex
  • Occupation
  • Martial Status
  • Lifestyle, i.e. alcohol, tobacco use, sports and hobbies

If the results of the underwriting evaluation determine that the person is insurable, they will then usually be issued a risk rating. Individuals applying for life insurance who are of the lowest risk are rated as “Preferred”, and receive the lowest rate. How the rating is assigned differs from company to company, and this is why it is recommended that those who fall into the “rated” category, and therefore have to pay higher premiums shop around for the best rates.

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