What Is Medical Underwriting?

    In the world of confusing terminology, “medical underwriting” might just be sitting near the top of the list. As it turns out, it’s something you should know about if buying the right life insurance is anywhere on your list of priorities. Let’s take a look at what medical underwriting is, exactly, and how it plays a role in your ability to get insurance.

    Medical Underwriting Defined

    Simply put, medical underwriting is the process insurers use to evaluate an applicant’s medical history and current health status when they are seeking out a policy.

    The underwriting process allows insurers to determine whether or not they can offer an applicant a policy. It’s also a means by which insurers decide the coverage limits of that policy, the pricing of an applicant’s premiums, and whether or not there will be any exclusions based on pre-existing conditions included in the policy.

    When it comes to health insurance, medical underwriting on a whole has undergone a number of changes and restrictions since the implementation of the Affordable Care Act back in 2010. This means insurers will not always use underwriting in their decision-making process.

    When individuals are applying for health insurance during open enrollment and special enrollment periods, for instance, insurers aren’t supposed to take the medical history of those applicants into consideration. The only possible exception to this, in most cases, being if said applicant is a regular user of tobacco products.

    The rules for large group coverage are different, though, and insurers are still allowed to use underwriting and base premiums on the group’s overall medical history. Because of this, less healthy groups will often pay more and healthier groups will enjoy lower total premiums. Individuals within the group, though they may be healthier or less healthy than the average, will be covered based upon the insurer’s assessment of the whole.

    Life insurance is in a whole different ballpark. In nearly every circumstance, life insurance is going to be medically underwritten, with the possible exception of group life coverage offered via an employer. If you’re looking for individual life insurance, you should expect your insurer to, at minimum, pull your medical records to get an idea of your overall health.

    In many cases, though, insurers will also require a basic medical exam and will be more stringent based upon the amount of coverage you’re requesting.

    Key Takeaways

    Medical underwriting is how insurers assess your medical records, determine if they will extend a policy to you, and decide upon the particulars of that policy.

    Generally speaking, medical underwriting is less common for health insurance, but almost always a factor if you’re applying for a life insurance policy.

    With life insurance policies, you might also have to undergo a physical health exam so that insurers can fully ascertain your overall health.