Underwritten and non-underwritten insurance cover – What’s the difference?

Underwriting is all about measuring risks

You’ve most likely heard the term ‘underwriting’ mentioned in insurance ads and weren’t sure what it meant and why it’s important. Underwriting is a key element of life, critical illness, and disability insurance. It forms the basis of what premiums you pay and what you are covered for. Underwriting helps the insurer decide what the level of risk is for them to cover you. In other words, what the likelihood is that you will claim and when you will claim.

Underwriting involves sharing details about your lifestyle and health

To tailor your cover and decide what premium you should be paying, insurers will require detailed information from you. This kind of information usually involves questions about your health, your lifestyle habits, and your family medical history. Most insurers will also need you to have some minor medical tests done, such as blood tests. These are usually done at no cost to you and at a place and time convenient for you. Non-underwritten cover does not require as much information, and therefore usually has higher premiums, as you are riskier for the insurance company to insure because they know less about your health and lifestyle, and when they can expect you to claim.

Having fully underwritten cover means your premiums and level of cover are more accurate

Undergoing the underwriting process allows you to know when the policy starts that you’ll be covered in full from day one and that the premium you are paying is appropriate. Some people want to avoid the underwriting process because they believe the results of their medical tests, or their medical history might exclude them from cover on certain conditions. Although this can occur with certain insurers, it’s also important to note that these pre-existing conditions might be excluded anyway on a policy where no, or limited, underwriting has been done – this is called a pre-existing exclusion clause. Alternatively, you may need to pay a higher premium to have these conditions covered on a policy with full underwriting.  

It’s important to share as much information as you can during the underwriting process

Sometimes underwriting can seem a bit overwhelming, as there can be many questions to think about and answer. Bear in mind, though, that your insurer is asking for essential information that can help them assess what cover they can give you. Even something that you may think is minor can be important. Share as many details as you can and be truthful.

A financial adviser can help you

Insurance products can be complicated. Making the wrong decision can have serious consequences for you and your family, so it’s worthwhile to shop around for the best advice. Fortunately, many well-qualified financial advisers can answer your questions, provide clear explanations, and help you understand what you’re buying when it comes to life insurance. Financial advisers must meet strict regulatory requirements and be properly licensed with the Financial Sector Conduct Authority (FSCA) and product providers.  You have the right to ask your adviser for their credentials and ask whether they are independent or work for a specific product provider.

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