There comes a point in time when someone is explaining something to you and they throw in phrases and terminology that can leave you scratching your head. Fear not, because you are not the only one!
Unless if you are from the finance or insurance industry, the term underwriting is one that leaves people confused. Here are essential points when it comes to wrapping your mind around what underwriting is and how it will affect you.
What is underwriting?
Ever wondered why your premiums differ from the next person? This is all due to the underwriting process when you take out a life insurance policy. An underwriter is like a tailor who makes sure that your life insurance policy fits you like a glove. An underwriter will assess the risk you pose in terms of making a claim and how much coverage you will receive without placing an insurer at a loss. You can either fall into either a low, average, or high-risk category. This will then affect the premiums that you are likely to pay.
How does it affect me?
The risk factors are important because these determine your premiums. Underwriters will look at things such as:
Is there anything I can do to lower my risk and save on my premiums?
Insurers are human and can reward healthy life choices that you make. Should you be able to indicate that you are taking good care of your health this could lower your risk profile. Even if you have a genetic or chronic disorder, it is still possible to lower your risk by following the prescribed medicine given to you by your doctor. Always remember that honesty is the best policy.