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Insurance Underwriting Process, What Is It? How Does It Work? What information is required by the insurance company? How to lower premiums rate and get a better underwriting process result?

We’re going to discuss all these things in this article.

First, you should understand that not everyone, who applies for an insurance policy, is approved by the insurance company. Because they want to know all the risks associated with the applicant.

What is Underwriting?

If you’re applying for an insurance policy for the first time, it’s normal to be curious about understanding the whole process and what happens after you submit the application for the insurance policy.

Underwriting is the process of an insurance company to evaluate the risks associated with the applicant and to decide whether they’re going to accept the application or not. These risks are evaluated by reviewing your hobbies, lifestyle, financial and material status, age and gender, etc.

Based on this information, the underwriter determines whether the company is in profit or not if they accept your application. If they decide to accept your application, the underwriter will also determine the amount, also known as insurance premium, you’ll be paying for the policy. This premium can be monthly, quarterly or annually depending upon the type of insurance policy you’re going to buy.

Determining the Risk

Your application will be approved only when the underwriter is confident that the risks associated with your life are small. Because it’s the responsibility of underwriter to make sure that the company is not in loss.

To determine the risk, the underwriter uses the following information of the applicant:

  1. The habit of foreign traveling.
  2. Smoking Habit.
  3. Hobbies (the underwriter uses this because some hobbies are very dangerous and involve higher chances of death. For example, sky diving, rock climbing, etc.)
  4. Medical History (very important for Health Insurance)
  5. Age
  6. Material Status
  7. Children (if any)
  8. Gender
  9. Purpose of insurance policy
  10. Occupation (because some occupation are also dangerous. For example, drivers, steelworkers, etc.)
  11. Financial condition (to make sure that you’ll be paying premiums on time)

This is the information that most of the companies ask for the underwriting process, but they can also ask for additional information.

Make sure you provide all the required information and don’t miss or hide anything. If the insurance company finds that information later that was required in the underwriting process, it may result in the permanent cancellation of your policy.

If you’re rejected for the reason of high risks, you can still apply for high-risk life insurance. But in this case, your premium amount will be much higher.

You should understand that underwriting doesn’t happen overnight, it takes a lot of time.

How Does the Underwriting Process Work?

The underwriting process can be either automatic or manual. In the case of the automatic underwriting process, insurance companies use some computer software to determine the risks.

In the case of the manual underwriting process, following steps are followed.

  1. You submit the application for the insurance policy.
  2. You’re required to submit the additional information(like medical history, etc.)
  3. The underwriter determines all the risks associated with your life.
  4. If they decide to accept your application, the underwriter also decides the amount of your premium.

How To Get Better Results From The Underwriting Process?

The final result of the underwriting process plays an important part in the selection or rejection of your application. If your application is approved, this result will also play its part in the premium amount calculation.

Here are a few tips to improve the results of the underwriting process.

1. Maintain a Healthy Diet and Exercise Regularly:

Make sure you follow a healthy diet plan and do some exercise on a regular bases. Both of these are going to help you lose weight and maintain a healthy lifestyle.

2. Stop Smoking and Alcohol

If you have a habit of smoking and alcohol, stop this immediately for better underwriting process results.

3. Stop Dangerous Hobbies

If you have dangerous hobbies like rock climbing, skydiving, and cliff diving, etc, stop them. Because the underwriter is going to look at your hobbies for the underwriting process risk calculation.

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Congrats! You’ve purchased your first car after months by doing a lot of research and saving. We know you’re feeling pride and joyful and that’s indescribable, and it’s natural that you value your car. But even the smallest bump or scratch can be a nightmare for you. To get peace of mind, you need auto insurance.

Auto insurance falls under Umbrella Insurance that protects you from incurring losses and your car from damages as well. Most of the experts will tell you to buy as much auto insurance as you can afford, but the premium that you pay depends upon different things like the type of coverage you want, your car value, the classification of your vehicle, your accident history, etc.

To help you in this matter, we are mentioning everything you need to know about car insurance, so when you decide to buy auto insurance, you should have strong knowledge about all the processes and coverages.

Let’s dive into the details!

Here are the 8 most Important Things You Need To Know About Car Insurance.

1. Car Insurance Deductible Matters

We know you might have this question in your mind: “Should I Raise My Deductible on Car Insurance?” Well, to get the answer to this question, you need to understand that all auto insurance agencies decide cost on the estimate of the money they think that company will have to pay you in case of any incident like car damage or accident.

So, they will offer you a low premium in which the insurance company will have to pay you a low amount for your claim. This is the time when most of the drivers make a mistake while buying car insurance. Because drivers/car owners agree to raise their deductibles which substantially decreases the insurance claim amount. So choose this high deductibles option only when you can afford to pay the deductibles.

2. You Can Save Money By Changing The Way You Pay

Some car insurance companies offer you considerable discounts for having premiums deducted from your credit card or chequing account. These automatic payments can make your life easier because they reduce the risk of missed payments. Check your insurer’s website or talk with your insurance agent to find out if you qualify for such discounts on your payment option.

3. Car Insurance Prices Vary Company To Company

Auto insurance prices change significantly from one insurance company to another, because each company has its own criteria for the underwriting process. Underwriting is the process in which the company puts you in a group of drivers they want to accept. The insurance company also decides how much they will charge this group. This criteria is different for each company which means two insurance companies evaluating the same driver, will give different cost estimation.

If you are using the same company for years, there are chances that you are spending hundreds of dollars more than you should. So, do yourself a favor and start getting estimates from other car insurance companies and do auto insurance cost comparison and trust me you will be surprised how much you can save.

4. Collision coverage is not mandatory

If you have a brand new car, then you need full coverage. But if your car is an old one, then collision coverage can just be a waste of money, because most of the auto insurance companies will pay for the value of your car. So make a comparison of premiums cost with and without collision coverage, and make your decision wisely.

5. It’s Possible To Transfer NCB (No Claim Bonus)

If you’ve upgraded your car, then it’s possible to transfer your accumulated No Claim Bonus to your new car. It is also possible to transfer NCB to your new auto insurance company but you should check policy about NCB before moving to a new insurer.

6. You should consider Car Engine Insurance Addon

You might have a question: “Does Car Insurance Cover Engine Repairs?” Typical auto insurance covers repair only when your car was involved in an accident. But you can opt for engine insurance add-on that will save the cost of repairs that are not caused by accident.

7. You Should Consider Lost Key Assistance

Losing car keys can be a nightmare, don’t worry car insurance also covers these eventualities. But you should check with your insurance company or insurance agent to see if they provide this addon. If they provide this addon, then the on-road repair will help you with accidental repairs, towing your vehicle away, or even tyres/tubes replacement.

The lockout assistance covers the replacement of car keys and the locks. This plan is called a comprehensive car insurance plan.

8. Think Twice About Auto Dealer Insurance

We know that you’re very excited when sitting in an auto dealer’s office and doing all the paperwork very quickly because you want to drive away in your brand new car as soon as possible. Along with that paperwork, you are saying yes to every offer dealer is offering you. An auto dealer can also offer you motor insurance.

Wait and stop for a moment.

Because every offer is not good for you in the long run. Let me ask you a question, is it wise to sign a blank cheque? Definitely, No!

Just because you are getting this offer in a very easy way, it doesn’t mean that this offer is beneficial for you. Simply say “No” to auto dealer insurance, and do detailed research and compare dealer’s insurance policies with other insurance companies’ policies. Then make your decision accordingly, and make sure whichever policy you choose, it should be beneficial in the long run.

Conclusion:

All Car Insurance Policies give you peace of mind and financial security as well. If you choose a comprehensive car insurance plan, then you also have the peace of mind while driving on the road because this will cover roadside assistance and lost key assistance as well.

But make sure you take your time and do detailed research about auto insurance plans, don’t just rush for insurance. In the above-mentioned points, we explained things you need to know before buying car insurance, so keep those points in your mind. Happy Driving!