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Secrets of life insurance: Know what insurers look for when you apply

Couple with life insurance application

There’s some good news for the insurance sector: Applications for life insurance policies are on the upswing.

Individual Life insurance applications grew 4.6% in February, according to MIB Group. It’s the 19th month out of the past 20 that individual life insurance application activity rose on a prior year-to-year basis.

Several factors are driving life insurance applications northward, says MIB Group CEO Lee Oliphant.

See also: 3 big tax benefits of life insurance

All sorts of different strategies are making potential buyers much more knowledgeable in terms of the products they are buying,” Oliphant says in an interview with SNL Financial. “Besides simplified issue workflow, automated underwriting is another investment so the underwriters themselves do not have to be involved, per se, in the underwriting process unless there is some issue that manifests itself through the automated underwriting process.

“Product design itself is being changed to market more simplified products, maybe with riders that are more appealing to younger folks and easier to understand — for example, putting a life product together with a long-term care rider. Bundling in that way is, I think, a trend as well,” he adds.

That’s all well and good for the life insurance industry, but what about those new customers? What can they do to increase their odds of getting the best life insurance policy possible?

Your life insurance application: Know what insurers focus on

One answer to that is to know what insurance companies focus on when they review customer life insurance applications. Understanding what things drive insurer decisions based on application data can translate into stronger policies, greater savings on fees and premiums, and better claims outcomes.

For life insurance consumers, it helps to know going in how the process works — before they fill out any application paperwork.

“Insurance companies typically quote rates and then take an application,” notes Michael Kuhn, president of GLG America, in Fishers, Indiana. “Once you apply, they gather information from your answers to the questions on the application, your medical records and any blood or urine tests they might do. This is called the underwriting process. Once they have all that information, they make you an offer. This premium could be higher or lower than you were originally quoted.”

Adds Kuhn, “Insurance companies are mainly looking for an accurate picture of your health and lifestyle to assess the risk of insuring you so they can establish what premium you get.”

That gives you a good platform for understanding what application factors drive insurance company decisions – good and bad.

First consideration: Primary elements on your life insurance application

Here’s how Kuhn breaks it down:

“Insurance companies focus on the following application elements,” he says:

  •  Is there an insurable interest? You can’t just go buy life insurance on someone you don’t like and hope to profit on it.
  •  Are you male or female?
  •  Do you use tobacco products?
  •  Do you have any medical problems?
  •  Do you have a substance abuse problem?
  •  Do you do any hazardous activities like auto racing or skydiving.

“Those are the primary factors that determine what kind of offer you get,” Kuhn adds.

See also: 5 factors that can influence you life insurance rates

Next consideration: Insurers look for inconsistencies — and other factors

Other industry insiders advise consumers to focus on application inconsistencies and items that are grossly misstated.

“An example would be someone who goes to the doctor frequently for lung-related issues, but don't state they are a smoker on the application,” says Stephen Alred, founder of Ignite Financial in Atlanta, Georgia. “Red flags will waive and insurers will dig a lot deeper to confirm an applicant's claims.”

Life insurance analysts will also look for clues about family history – a big factor in arriving at life insurance policy premiums.

“Family history plays a big role on if someone has the potential for early heart disease or cancer,” says Mike Raines, founder of Raines Insurance Group, in Cummings, Georgia.

“Also, certain height and weight guidelines differ for each carrier, but some companies will allow quite a bit of discretion if other factors are good.”

Knowing what life insurance companies look for when they review policy applications can save big money for consumers.

Start with the tips above, and see if they don’t make a difference when paying your life insurance bills.

See also: Weight loss shrinks waistline, insurance bill

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