life insurance guide

Applying for life assurance may for some people be as simple as filling out a few forms. Many of us, however, will not be so lucky, and more assessments will be involved before an assurance company decides to offer a policy, and at what cost.

Insurance companies use what they call mortality tables to determine the premium for a particular individual. These tables assess the chances of a person dying within the term of a policy, based on factors such as their age, sex, occupation, smoker/non-smoker status and so on. Mortality tables will be used to assess the premium for a person in normal health. To these premiums the insurance company may then add a 'loading', after taking into account other factors relating to medical history and lifestyle.

In order to determine whether a loading will apply and if so, how much, it is not uncommon for a life assurance company to request additional reports from your GP or even a medical examination. The likelihood of this happening will depend on various factors such as how much cover you are seeking, your age, medical history and general health and lifestyle.

It is important to ensure you disclose the truth about your health and any conditions you may suffer from to the insurer; failure to disclose such information could result in your life assurance policy being null and void upon your death.

The underwriting process

Once you have completed an application for life assurance, your proposal is assessed for risk and appropriate premium rates are calculated during the underwriting process. Rates are normally expressed per £1,000 worth of cover guaranteed by the policy, and will vary according to the factors described above. Insurance companies will also employ the services of qualified doctors to interpret reports and medicals from GPs and to help determine the amount of any premium loading.

Once the underwriters have assessed the application, you will be offered terms and the cost will be confirmed. In most cases this should be the price that you have been quoted, as most people will be accepted at normal rates. However, in some cases a loading will be applied which will increase the costs and in some more serious cases the underwriter may refuse to offer cover at any price. In these cases the insurance company will usually send details to your GP so that he can advise on the reasons.