Life insurance is a contract between a policy holder (insured person) and Insurance Company (insurer). In this contract, the insured pays a certain amount, monthly or yearly to the insurer in exchange for one or more insurance cover benefits. A benefit is a sum of money paid by the insurer to the insured’s beneficiaries upon his or her death or if the insured suffers a terminal or critical illness.
Life insurance is usually divided into two categories. Namely;
- Investment policies; – facilitate growth of capital through premiums. Include life, whole and universal life policies.
- Protection Policies –provide a benefit, usually a lump sum in the event of death of the insured. Includes Term Insurance or Term life insurance.
Term life insurance is a policy that provides cover for a specific period of time or specified term i.e. until death of the insured. Meaning in the event of death, the insured’s beneficiaries are paid a certain amount of money. With a term life insurance policy, the benefits are not paid if the policy term expires before the death of the insured. In this case, the insured can either forgo the cover or renew it.
Term life insurance underwriting involves evaluation of the insurance policy applicant’s living standards and physical health conditions in order to determinewhat kind of coverage to give the and how much premium he or she will need to pay. Underwriting is a way of risk assessment, which enables the Insurer to determine how much risk is involved in providing the applicant with a cover
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Upon application for an insurance policy, you will be asked to give information regarding your family and medical history, your age,(the older you are the less your life expectancy) sex, (females have a higher life expectancy)occupation, smoking habits, (non smokers have a longer life span)alcohol habits, height and weight, whether or not you have a driving license and drive, if you travels to foreign countries. You will then be sent to an appointed doctor, who will perform medical exams such us blood, urine tests, blood pressure check etc. Based on this report, the underwriter will put you under a certain category. If healthy, you will be put into the most preferred category, which means the premium will be a standard amount. If you have a history of medical conditions individually or in the family, you will be put into the preferred category, which means that your premium charges will be higher or you could be denied cover. If your job or occupation comes with high risks, then you will be put into the standard category, where most people fall. The standard category has standard premiums and terms.
The process can take a long time depending on the examining doctor’s efficiency and how well the policy application has been done. Incomplete and poorly done applications, medical records and information will greatly delay the Insurance Company’s underwriting process.It takes about 6 or more weeks to complete and send medical reports and records to the insurance company. Knowing how long a particular hospital or doctor will take, enables you to start the process earlier by completing your application fully and taking your medical exam in time so as to receive your policy within your desired time frame.