There are two main types of health insurance, group insurance and individual health insurance. Group insurance is the type of insurance that companies purchase to cover all of their employees while individual insurance is bought direct from the insurance company by the person. Although all insurance companies use underwriting to evaluate the cost of their insurance plans, people who purchase individual insurance are more likely to feel the direct effects of the system. To help you better understand the factors that influence the price of your insurance, this article is going to explore how the underwriting process works.
Underwriting is a process that financial service providers use to assess their customer's eligibility to purchase their products. It has been around for a long time and is used in several industries besides the group and individual health insurance market such as securities, banking, and real estate. The goal in underwriting is to minimize the risk of loss while maximizing profits for the insurance carrier. As such, an underwriter will take several factors into consideration when evaluating you for coverage. These factors include vital statistics, such as age and weight, the type of lifestyle you live, your health status, and sometimes even occupation.
Some of the factors that affect the cost of your health insurance coverage are under your control. For example, if you indulge in unhealthy habits, such as smoking, or your are overweight your insurance premiums will likely be higher. The insurance company is anticipating that you may need major care, such as cancer treatment for lung cancer, and want to mitigate their losses by charging you more for your individual health insurance. Other factors may make it difficult for you to obtain insurance. Due to the high risk of financial loss they pose for the carriers, people with major preexisting conditions will find it difficult to find companies that will offer coverage.
Underwriting processes and practices differ from company to company. Therefore, conceivably, being rejected by one insurance company does not mean you will not be able to get individual health insurance from any of them. What one company deems as risky, another insurance company may see as no big deal. It is highly recommended that when shopping for insurance you work with a local independent health insurance agent that works with several carriers as they are well versed in the underwriting processes of each. They can evaluate your individual needs and make suggestions as to which carriers will be the best choice based on your current health situation.
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