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You might understand the different uses of insurance by now, but one of the seemingly mystical parts about insurance is the underwriting process. This is the process where the insurance company reviews information about you to determine your level of risk. Different types of risk are grouped together so that each group represents a particular risk characteristic. Knowing the type and amount of risk allows the insurance companies to price their policies more efficiently, which is a good thing.
This still seems like a mysterious process to some, even agents and brokers. This is especially true because the emphasis placed on your information can vary depending on the type of insurance.
Health
With health insurance, a provider's primary concern is the frequency and amount of claims the company might experience. If you need to go to the doctor often, even if the condition is well under control, this will raise the risk to the insurer.
Hemochromatosis requires frequent blood treatments to stay well controlled. As long as you visit your treatment facility as prescribed, you can live a long and normal life. However, the cost of these treatments stacks up quickly, making hemochromatosis a poor risk for health insurance.
Disability Income
The primary risk that the insurer is taking on with disability income insurance is a financial risk due to fraud. Disability policies were easier to issue in the '70s and '80s, but a flood of fraudulent claims prior to HIPAA regulations put some companies out of business and tightened strings for the remainder.
A bad back or strained carpel tunnel is difficult to document and might keep you out of work for an extended period of time, making them poor risks for disability. Underwriters would also be concerned with the stability of your income, if you are self-employed or run a young company.
Life
Life insurers want you to live a long time. They not as concerned with injuries or illnesses that don't shorten your life.
Recreational aviation seems like a harmless past time, but if you don't have enough hours logged per year or are not instrument rated, you are not as well equipped to handle emergency situations while flying.
Melanomas, unlike some other types of cancer, rarely manifest themselves for an extended period of time with pain. In the event melanomas are not removed in situ, they could metastasize rapidly. For life insurance, this means “sun spots” and other skin legions are scrutinized closely and pathology reports are commonly ordered.
Long Term Care
Long term care is an increasingly concern for our aging population. Like disability insurance, long term care underwriting is more concerned with things that would cause morbidity without causing mortality.
Many people who have osteoarthritis will not see their life expectancies decrease, but the joint pain and inflammation could be crippling. In advanced cases, people with osteoarthritis might require help with dressing, bathing, or transferring – all things long term care insurance is designed to pay for that your health insurance or Medicare might not.
Conclusion
It's important to work with an agent or broker who has experience handling difficult cases, has access to a number of quality companies, and understands the peculiarities of each type of insurance. I am rarely impressed when someone tells me they can't get insurance because they were declined once. Not all companies view the same person as the same risk. I have seen declined cases turn into standard offers simply by applying with a more appropriate company. If you have been declined coverage or received a rated offer, now might be a good time to work with someone who can shop for a better deal.
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