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A life insurance policy is probably one of the top three purchases you will ever make in your life. After all, you will be relying on the policy to take care of the financial future of your loved ones in case of your unfortunate demise.So, for something as important as life insurance, it is wise to try and understand as much about the product and the processes involved as possible. One such crucial aspect of life insurance policies is the underwriting process. Take a look at what it is and how it works.
What is Life Insurance Underwriting?
It is the process of assessing the life insurance application of a potential customer. Insurers have underwriters who try to know as much about you, your finances, dependents, health, habits, etc. before approving your application.Insurers take a risk when they sell a life insurance policy. But the risk level can vary significantly between two applicants.For instance, the insurer will be taking a bigger risk by selling a life insurance policy to a smoker as compared to selling a policy to a non-smoker. So, it is the job of the underwriters to find out such details about you and then calculate the policy premium based on the amount of risk the insurer will be taking by selling you the policy.
What is the Underwriting Process Like?
The underwriting process is broadly divided into two parts- Financial underwriting and medical underwriting.
- Financial Underwriting Financial underwriting is all about assessing the financial needs of your dependents. The underwriter will focus on your income, debt (if any), and the total number of dependents you have to try and ascertain whether or not the policy coverage you have applied for is in line with your requirements.
- Medical Underwriting During the medical underwriting, the underwriter will focus on your age, medical history of your family, current health, existing health conditions, occupation, lifestyle, hobbies, and habits that could impact your mortality. This life Insurance policy helps the insurer know the amount of risk they will be taking by selling you a life insurance policy.
Preparing for the Life Insurance Underwriting Process
The underwriting process helps insurers fix accurate premiums based on the policyholder’s risk exposure. By planning ahead, purchasing insurance early in life, and keeping yourself healthy, you can positively influence the underwriting process and buy a feature-packed policy at a lower premium.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
FAQS - FREQUENTLY ASKED QUESTIONS
How many claims can I file under my insurance policy ?
In the case of Health and Vehicle Insurance, there is usually no limit to the number of claims you can file. However, the total amount cannot exceed the sum assured.
In the case of Life Insurance, claims can be made only once, as they are made once you pass away.
Do I need policy renewal ?
If you would like to stay covered under the insurance policy's benefits, it is essential to renew your policy regularly based on your policy term.
What is a waiting period ?
A waiting period means a time difference between the date of the issuing of the policy and the time that the policy or certain coverage comes into effect. This period is different for different types of policies.
What is cashless facility ?
It is a type of claim settlement process where the insurer directly pays a service provider (like a hospital or a car service centre) to settle the claim.
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