The process by which a life insurance company determines who is eligible for a life insurance policy and what they will pay for it is called underwriting.
There are several critical factors in underwriting an individual life insurance policy. These include, but are not limited to:
- Age
- Health
- Medical History
- Gender
- Occupation
- Martial Status
- Lifestyle - Which includes alcohol use, tobacco use, sports and hobbies
- Tobacco Use
- Driving Record
If the results of the underwriting evaluation determine that the applicant for life insurance is insurable, they will then usually be issued a risk classification rating.
Individuals applying for life insurance who are of the lowest risk are rated as “Preferred”, and receive the lowest rate for their coverage.
How the risk rating is assigned differs from insurance company to company, and this is why it is recommended that those who fall into the “rated” category, and therefore have to pay higher premiums for their life insurance shop around for the best rates available.