What is the purpose of underwriting in life insurance?

The purpose of underwriting in life insurance is fundamentally about assessing risk and determining the appropriate premiums for coverage. Underwriters analyze a variety of factors related to an applicant's health, lifestyle, occupation, and family medical history to evaluate the likelihood of a claim being made during the policy's term. This thorough evaluation helps the insurer decide on two main aspects: whether to accept the application and how much to charge the insured in premiums.

Setting the right premium is crucial as it ensures that the insurance company can cover future claims while also remaining financially viable. By accurately evaluating risk, underwriters enable insurers to maintain a balance between offering coverage to individuals who need it and protecting the company's financial health. Therefore, underwriting serves a key role that not only affects the premiums but also contributes to the overall sustainability of the life insurance market.