Life Made Simple: Life Insurance Underwriting and Costs | Allstate Insurance


Ever wonder how life insurance companies come
up with your monthly payment amount? And why it might be different for similar
people? Well, you’re not alone. Life insurance payments—or premiums—are
determined by a process called underwriting. You’ve probably heard the word before, but
how many people really understand what it means? Underwriting is simply the process insurance
companies use to determine how your health, lifestyle, and risk profile compare to a statistical
norm. The closer you compare to Norm’s, the closer
your premiums will be to the standard rate for specific insurance coverage. Underwriting is designed to help give everyone
the fairest price possible. Let’s take Ryan, for example. He wants to
get some term life insurance so Michelle and the kids won’t fall on hard times and possibly
even lose their home if he dies. When he talks to his insurance agent about
his needs, they decide to look at $500,000 20-year term life insurance policy. Ryan is provided with a quote at a Standard
rate class…based on the norm. But after submitting his application and underwriting,
the cost actually goes down. What gives? There are many different rates for available
for life insurance…from healthy low-risk lifestyles – what we call preferred elite – to rates for
people with health and other risks. When you apply, your results will be used
to determine your rate class and the premium you pay. You can be declined if you have a serious
health condition. On the other hand, if you’re in excellent health, your rate could be better. Either way, your cost is primarily determined
by your medical history and a physical exam that’s typically required, though your occupation,
hobbies, and driving record are also factors. For example, if Ryan reports on his insurance
application that he is being treated for high blood pressure, but his exam shows it’s
well controlled—and he’s otherwise healthy—he might qualify for a better than standard rate
class. This explains the difference in his quotes
before and after underwriting. What can you expect? When you contact your insurance agent, you’ll
get a quote based on some preliminary information you provide. When you fill out an application, you’ll
be asked questions about your health history and likely be given a contact at a medical
exam company who will visit you in your home or office
to collect blood and urine samples; take height, weight, pulse, and your blood pressure; and
if needed, request an EKG. With Allstate, once the exam is complete,
you’ll get an online personalized Wellness Report with your exam results and an explanation
of what they mean in plain English. The Wellness Report provides recommendations
for leading a healthier life and a summary that can easily be shared with your doctor. Plus, you’ll have an understanding of how
your life insurance cost was determined. Once you accept your policy, your life insurance
rate is locked in, even if your health declines. But if your health improves over time, you
may be eligible to improve your underwriting rating class. It’s nice when things are one way—your
way— right? So there you have it. Life insurance costs
made simple. Learn more today!

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