Life Insurance – The Risk Assessment

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So many people apply for life insurance policies, but only a few of them get approved for the same. It is certainly not the easiest of jobs to get a life insurance policy. You may have enough money to pay the premiums, but it does not make you eligible for the policy. Your application for a life insurance will be assessed and analyzed. In other words, a thorough underwriting would be done on the application. Underwriting consists of the risk analysis to approve the application, and the decision on appropriate premium amounts to be paid by the individual.

Companies hires experts, called the underwriters to do the underwriting for them. At the end of the day, insurance companies need to earn profits that make them so choosy about accepting life insurance applications. There are three steps involved in the process of underwriting which are examine the application, decision to insure or not, determine the premium. Below is a discussion on these steps.

The first step needs the companies to gather information about the applicant. The application needs to be examined against many parameters, such as marital status, sex, type of living area, age, and current health status and so on. All these parameters are looked into one by one, and a final conclusion is then drawn.

After all the information about the life insurance applicant is handy, the risk assessment triggers. The applicant is remarked against all the above parameters one by one. These parameters are termed as the risk factors. The applicant needs to score low on these risk factors to get through this phase successfully. Each of the risk factors holds its own importance and value. However, most companies give extra significance to the age and health of the applicant. If the applicant is young and healthy, the chances of approval are very strong. As against this, if the applicant is old and ailing, the denial is on the cards. The living environment of the applicant has a huge role to play as well. If the applicant happens to live in a polluted and unhygienic area, the insurance company starts to feel a little edgy about approving the application. At the same time, a good and healthy living environment of the applicant makes it considerably easy for the companies to approve the application. Gender is another point of evaluation for many companies. Women are thought of living a better and healthier life as compared to men. This is because they are known to take lesser depressions in life. On the other hand, married men are believed to life a healthier life as compared to the married women. Another important aspect of consideration is the living habits of the individual. If the applicant smokes and drinks, there are likely to be negligible chances of an approval. The aim behind all these considerations is to ensure that the probability of the individual living longer is more.

The above risk factors also help in determining the premium amounts for the individual. A high score would get the individual to pay higher premiums. A young and healthy individual normally pays lower premiums as compared to an old ailing individual.

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