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:

• Your current health status will play a part in determining your premiums. The healthier you are the better. This also means that it is less likely that you may die soon after you have taken out a policy.
• Your age tends to go hand-in-hand with your health status, which is why taking out a life insurance policy while you are still young can be beneficial. It can also help you save a couple of Rands on your premiums.

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• Your Occupation also plays a vital part in terms of the risk you pose. For example, a person who works at an office has a lower risk of injury or death at the workplace compared to a fireman. The higher the risk your occupation poses on you the most likely it is that your premiums will rise.
• Your medical history helps underwriters determine a pattern on how likely it will be for you to place a claim. This will also ensure that should you need to place a claim you will be covered. However, telling white lies or omitting information that can be useful can come back later to haunt you.
• Your lifestyle choices are yours to make. However, in a nation where beer is more popular than vegetables, there can be a price to pay. During the underwriting process, you will be asked if you drink, smoke, or participate in any adventure sports and activity that can put you at risk. It is less likely that your application will be approved if you partake in excessive amounts of drinking or smoking.

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.