Tuesday, June 15, 2010

Life Insurance Underwriting Standards

Every life insurance company has its own underwriting standards


There is often a delay of several weeks, and sometimes months, between the time an insurance company receives a life insurance application and the time they it finally decides acceptance, coverage terms and price.

During those weeks or months, the carrier is “underwriting” the proposed policy, or evaluating every aspect of the applicant to analyze risk. Every life insurance company has its own internal underwriting standards, and while some carriers have specialized underwriting for certain risks or ailments, a consensus has evolved over the years, resulting in generalized standards for a large portion of the industry.

Family History


Many diseases and conditions that shorten natural life span have proven to be genetically-based and passed from parent to child. If either of your natural blood parents or siblings have been treated for, diagnosed with, or died from cancer or any heart-related ailments, you will be unable to obtain the best underwriting classification.

Depending on the type of disease, severity, age at onset, and age at death, you will be placed into a lower category, resulting in higher premiums.

Cholesterol


Cholesterol is a proven cause of cardiovascular difficulties, which could lead to an early death, and is therefore a concern for life insurance companies. If your paramedical exam and related lab testing shows a cholesterol/HDL ratio below 5.0 and levels below 220, the majority of life insurance companies will consider you for their top tier classification.

Ratios between 5.0 and 8.0 with levels between 220 and 300 will typically qualify you for one of several other underwriting classes. Ratios above 8.0 and levels over 300 may result in significantly higher ratings classifications and more expensive policies, or you may even be declined coverage.

Blood Pressure


Blood pressure is another standard indicator of cardiovascular health, and one that every life insurance carrier examines. If your blood pressure is typically at or below 140/85, and you have no history of blood pressure problems, you will likely qualify for the carrier’s best underwriting classification.

Readings between 145/88 and 155/95, even with incidences of treatment or medication, can still qualify you for acceptable underwriting categories, provided your blood pressure has been successfully under control for at least two years.

Alcohol / Substance Abuse


Any history of alcohol abuse or substance abuse problems or treatment will automatically disqualify you for a life insurance company’s best possible underwriting classification. However, if your issues and treatment were more than seven years ago, and there have been no incidences of relapse or residual problems, you may still qualify for Preferred or Standard underwriting categories.

Any alcohol or substance abuse issues within the past five to seven years will result in substandard underwriting classification and possible declination entirely.

Driving History


The quality of your driving history will have a large impact on your life insurance underwriting classification. If you’ve had no more than one minor moving violation in the past two years, and no convictions for driving under the influence or reckless driving in the past five years, the majority of carriers will consider you for their best underwriting category.

If you’ve had two or three moving violations, you will still qualify for acceptable classifications, provided those violations are not reckless driving or DUI. Any convictions for DUI within the past three years may immediately disqualify you for coverage for most major life insurance companies.

Aviation


Recreational aviation is a serious concern for life insurance companies, and the length of your experience as a pilot will determine your underwriting classification. No major life insurance carriers will allow recreational pilots into their best categories, but most will still grant coverage for an additional cost commensurate with your experience.

Some carriers will leave the premium unchanged, but issue the policy with an exclusion specifically stating that death resulting from recreational aviation will void the contract. Commercial pilots, however, are not penalized or charged extra money based solely on their occupation.

Hobbies / Avocations


Certain recreational hobbies that are extremely dangerous may result in additional premium to cover the increased risk, or exclusions for death occurring as a result of those hobbies. General underwriting standards list several hobbies in this category, although every insurance carrier may have their own list with more avocations.

The most common hobbies that are cause for concern to life insurance carriers are skydiving, hang gliding, bungee jumping, SCUBA diving, spelunking and car/motorcycle racing. Simply put, any hobby that puts you far above the ground, far below the ground, or traveling extremely fast can result in higher life insurance premiums.

References


AmericaQuote: Your Parents Did It To You
QuickQuote: General Life Insurance Underwriting Guidelines
1stQuote: General Life Insurance Underwriting Guidelines

Resources (Further Reading)


MSN Money: The Lowdown On Life Insurance Medical Exams




This article is a Twisted Nonsense Exclusive! (06/15/2010)