Underwriting is the process of an insurance company trying to quantify your risk to properly price your life insurance policy. Traditional life insurance underwriting involved answering a medical questionnaire and seeing a medical professional to get a physical and blood/urine analysis done. This lead to a long and not fun application process. The industry has started to expand accelerated underwriting which often skips the in-person medical exam and allows for faster placement decisions.
What is accelerated underwriting for life insurance and does it make sense for you?
Key Takeaways:
- Accelerated underwriting allows for a less burdensome process and quicker placement rates – sometimes within minutes
- Traditional underwriting required both a health questionnaire and seeing a medical professional for a physical and blood/urine analysis
- If you are very healthy, traditional underwriting will likely result in better pricing still as it tends to have a ‘super healthy’ rating class that accelerated underwriting doesn’t offer
- A simplified underwriting process saves the insurance company upfront costs and allows them to set competitive rates on their products
What Is Accelerated Underwriting?
Accelerated underwriting, often called “express underwriting” or “simplified underwriting”, makes it faster and more accessible for people with good health to get life insurance. You are able to get policies up to $1 million typically and do so with no medical exam.
Accelerated underwriting is great for those who don’t like doctors, needles, or are too busy to schedule an exam. With this new streamlined process, which often only takes a few minutes, there is no excuse to get the financial protection your family needs.
It has been around for years, but it has really picked up speed recently. Many insurers are coming out with their own versions. It isn’t a separate, distinct type of life insurance though. It is a way to process applications faster and issuer policies in less time.
Traditional underwriting could take an average of 90 days from when the customer first applied to when the policy was placed and went into affect. Accelerated underwriting is cutting that time down significantly. Some insurance companies are placing products within minutes of the application being submitted, and most cases are placed in under 2 days.
How Does Accelerated Underwriting Work?
Accelerated underwriting allows a healthy, qualified candidate to purchase a policy with:
- No visit with a medical professional
- No drawing blood, giving urine, and taking vitals
- No physician statement about the applicant’s health
- No copy of medical records
Eliminating these 4 steps drastically improves the process and speeds up a decision.
The insurance company uses big data and a proprietary algorithm to calculate your risk. It is replacing the traditional, human-based underwriting decision with an algorithm that needs less inputs.
Generally, accelerated underwriting policies are capped at a max death benefit of $1 million, with many insurers having lower caps. Additionally, older ages may be excluded from being able to go through the accelerated process.
After your policy gets placed, it is no different than a traditional policy though. You will have a set level premium to pay and can include many of the same life insurance riders. The only difference is the process you go through to get the policy.
Is Accelerated Underwriting a Good Fit For You?
The ideal person to go through accelerated underwriting tends to be below retirement age and looking for a modest sized policy. Additionally, being in average health or better and having no major medical conditions (diabetes, hypertension, cancer, etc.) is beneficial. Also, healthy blood pressure and cholesterol as they are typically included in the assessment.
If you have family history of heart disease or cancers it may be an impediment to the process.
Non-health factors also play a role in the decision. You preferably have:
- No history of bankruptcy in the last 10 years
- No felony charges or convictions
- No drunk or reckless driving infractions in last 5-10 years
- Less than 2 moving violations in the last 3 years
Each insurer has their own list of ‘knock-out’ questions that would disallow you from being accelerated.
[Professor B.T. Effer Note – Insurers have found a strong correlation between non-health items and life expectancy. If you drive drunk, it may be correlated with other risk-taking behaviors that make you a less safe risk, for example.]
But, getting kicked out of the accelerated process often just sends you to the traditional underwriting process. And some insurers will select applicants at random to go through full underwriting as a way to test their algorithm vs full underwriting results.
It is worth noting, if you are super healthy, you may get better rates in full underwriting vs accelerated underwriting even if you qualify. Many insurers reserve their lowest premium rates for traditional underwriting of super-healthy candidates. They may remove the ‘super-preferred’ underwriting class from their accelerated underwriting results.
How Much Faster Is Your Decision Made?
Under traditional underwriting, the process takes from 2 to 12 weeks depending on the information. This means you start an application and it takes up to 3 months later for the policy to be placed.
Accelerated underwriting drastically speeds this process up. Most programs can make a decision within 48 hours, while some insurers make decisions within minutes.
And it isn’t just the time to a decision that is significantly faster. Since you get to avoid a medical exam and gathering your medical history, the time you spend applying is significantly less.
The application process for accelerated underwriting is typically done electronically or over the phone. While traditional underwriting is still largely done on paper and through the mail.
Insurers will pull data from the Medical Information Bureau, credit bureaus, Department of Motor Vehicles (DMV), prescription processors, and other sources. They can do this instantaneously while you are filling out the app. If there is no major concerns, approvals can happen within minutes.
Does Accelerated Underwriting Result in Higher Premiums?
It depends. Insurers save a lot of upfront expenses using accelerated underwritings vs traditional underwriting. This offsets much of the higher uncertainty around your health, allowing for similar risk classes to get similar rates.
However, many insurers don’t offer their heathiest risk class under the accelerated program. This means even if you are super healthy, you may only get the 2nd best risk class going through the accelerated process. If this is you, going full underwriting would be the only way to get the lowest offered premiums.
Is it the same as Guaranteed Issue (GI) Life Insurance?
No. Accelerated underwriting is not the same as guaranteed issue policies. Under guaranteed issue, you only need to answer a few questions to ensure you aren’t actively dying or in hospice. Additionally, GI policies have very high premiums, limited death benefits, and a waiting period to make a claim.
Accelerated underwriting has a much longer questionnaire and gets third-party data pulls. However, accelerated underwriting offers much better premiums, a higher death benefit, and no waiting period.
Is it the same as Accelerated Benefits?
No. Accelerated benefits (ADB) are a life insurance rider that allows you to access your death benefit to pay for expenses while still living. It is offered as a way to help pay for medical expenses due to a qualifying terminal illness.
A life insurance rider is a policy add-on that allows for customizing your policy. This means you can add an accelerated death benefit rider on any policy that the insurance company offers it for.
Additionally, you can get your policy through traditional underwriting as well as accelerated underwriting. Therefore, you can have a policy you purchased through accelerated underwriting that also has an ADB rider attached.
The Final Word
Accelerated underwriting is a new and exciting development that has recently become very popular in the life insurance industry. As more and more insurers adopt faster underwriting and placement, we expect the type and sizes of the policies it is offered under to increase.
Additionally, as insurers get more comfortable with the risk and collect experience data, they will likely further lower the premiums on the policies.
If you have been avoiding life insurance because you don’t like the hassle of getting a policy, this may be a good time for you to consider reviewing your life insurance coverage needs. As long as you are in good health, have good credit, and a fairly clean driving record, there is a great chance you qualify.
Frequently Asked Questions (FAQs):
Accelerated underwriting is is a way to get your life insurance without needing a medical exam or to provide your full medical records and a physician’s statement. It allows for you to fill out a health questionnaire and get an approval decision within hours.
No. Life insurance that uses an accelerated underwriting process is not the same a guaranteed issue (GI) life insurance. GI typically has a few basic questions to ensure you aren’t actively dying or in hospice and then issues a policy. But GI insurance has very high premiums, a limited death benefit, and a waiting period before a claim can be made.
Accelerated underwriting still gives you a risk classifcation like traditional underwriting. It just does it with less manual inputs and uses big data tools to examine your risk.
No. Accelerated benefits are riders on life insurance policies that allow you to use a portion of your death benefit for qualified terminal illnesses. These benefits are there to help with end-of-life medical costs. Any acceleration of benefits reduces the remaining death benefit typically.
Traditional underwriting typically takes 2 to 12 weeks from when you first apply to when a decision is made. Whereas accelerated underwriting can make a decision anywhere from a few minutes to 48 hours after you apply.
Additionally, accelerated underwriting takes less of your time as you don’t need to undergo a medical exam or collect your patient history.
Yes and no. Typically, similar risk classes will have similar premiums between traditional and accelerated underwriting. Since the insurance company saves money on expenses in the underwriting process, they can price products close even with the higher uncertainty around your risk.
However, many insurers reserve their highest health class for full underwriting, meaning the highest health class you can get under the accelerated process is the 2nd healthiest. If you are super-healthy, you may be able to get a better price with full underwriting.