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Health and Underwriting terms
How insurers judge health and habits, and what that does to approval and price.
ActuaryA specialist who uses statistics, mortality data and financial math to price policies, set reserves and measure an insurer's long-term risk.Adverse selectionThe tendency of people with higher-than-average risk to seek more coverage, which drives up costs if insurers cannot spot and price that risk.Attained ageThe insured's current age on a given date, used to price renewals, conversions and the rising monthly charges inside universal life.Attending physician statement (APS)A copy or summary of an applicant's medical records, requested from their doctor by an insurer during underwriting to confirm health details.BackdatingSetting a policy's effective date earlier than its issue date so the premium is based on a younger age, in exchange for paying the back premiums.Build chartAn insurer's table of height and weight ranges that maps an applicant's body size to the rate classes they can qualify for.Conditional receiptA receipt given when the first premium is paid with an application that can provide coverage before the policy is issued, if the applicant qualifies.CSO mortality tableThe table of death rates state regulators adopt as the minimum standard for life insurance reserves, guaranteed values and tax-law tests.Evidence of insurabilityHealth and other information an insurer requires to approve coverage, such as medical questions, records or an exam, often for amounts above guaranteed issue.Flat extraAn added premium charged per $1,000 of coverage for a specific risk, such as a dangerous job, hobby or recent cancer, on top of the base rate.Graded benefitA death benefit limited during a policy's first two or three years, often to premiums paid plus interest, unless the death is accidental.Guaranteed issueCoverage an insurer must approve regardless of health, with no exam or health questions, usually for small amounts and with a waiting period.Incontestability clauseA provision that bars the insurer from voiding coverage over application misstatements once it has been in force for two years during the insured's life.InsurabilityWhether, and on what terms, an insurer will cover a person, based on health, age, habits, occupation and other risks reviewed in underwriting.Issue ageThe age an insurer assigns you on the policy date to set your premium, counted from your nearest or your last birthday depending on the company.Life expectancyThe average number of additional years people of a given age are expected to live, calculated from mortality tables for a population or group.Life insurance applicationThe form a prospective buyer completes with personal, financial and health details that the insurer uses to underwrite and price coverage.MIB (Medical Information Bureau)A member-owned data exchange where life and health insurers share coded underwriting information to catch errors or omissions in applications.MorbidityThe rate of illness, injury or disability in a population, used to price coverage that pays while someone is alive, such as disability or long-term care.Mortality improvementThe long-term decline in death rates at each age over time, which actuaries project forward when pricing life insurance, annuities and pensions.Mortality rateThe share of people of a given age expected to die within a year, often shown as deaths per 1,000; it is the foundation of life insurance pricing.Mortality tableA chart showing, for each age, the probability of dying within a year and often the expected remaining lifetime, used to price and reserve for life insurance.Paramedical examA short health screening, done at home or an office by a trained examiner, that collects measurements, blood and urine for life insurance underwriting.PostponementAn underwriting decision that neither approves nor declines an applicant but asks them to reapply after a set time, often following recent treatment.Preferred plusTypically the lowest-priced underwriting class, reserved for applicants in excellent health with a clean family history and no high-risk habits.Prescription database checkAn underwriting search of pharmacy records that shows insurers which medications an applicant has filled, used to verify or flag health history.Rate classThe underwriting category, such as preferred plus, standard or substandard, that sets the price an insurer charges for a given age and coverage.Retention limitThe most an insurer will keep at risk on a single life before passing the excess to reinsurers.Simplified issueLife insurance underwritten from health questions and database checks, without a medical exam, usually at higher prices or lower coverage limits.Standard rate classThe underwriting class for applicants of average health and risk, priced at an insurer's baseline rather than a discounted preferred rate.Substandard rate classAn underwriting class for applicants with higher-than-average mortality risk, who are offered coverage at an extra charge above standard rates.Table ratingAn extra charge for higher-risk applicants expressed in numbered or lettered tables, each typically adding 25 percent to the standard premium.Temporary insurance agreementShort-term coverage some insurers provide while a life insurance application is in underwriting, if the first premium is paid and conditions are met.Tobacco rate classThe higher-priced underwriting class for applicants who use tobacco or nicotine products, which can include vaping, chew and nicotine gum.UnderwriterThe insurance company professional who evaluates an application's risk and decides whether to approve it, in which rate class, or to decline it.UnderwritingThe process an insurer uses to evaluate an applicant's risk, from health and lifestyle to finances, and decide whether and at what price to offer coverage.