Durban - Underwriting is a term that is associated with insurance and is normally used by people who work in that industry.
However, it is a word that many people may not understand or how it relates to their insurance cover.
What is underwriting?
Underwriting forms the basis of what premiums people pay for insurance cover and what their insurance policy covers them for.
Clyde Parsons, chief innovation officer at BrightRock, said: “Underwriting helps the insurer decide what the level of risk is for them to cover you. In other words, what the likelihood is that you will claim and when you will claim”.
Underwriting involves sharing personal information
For insurers to tailor your insurance cover and work your monthly insurance, they require personal information about you.
The questions will relate to a person’s:
- health
- lifestyle habits
- family medical history
Insurance cover that is not underwritten will not require as much information. However, the premiums will be higher in comparison to an underwritten policy. The insurance premiums will be higher because the person will be riskier for the insurance company to insure because they know less about you.
Why is it better to have underwritten cover?
The underwriting process will allow the person to know that their policy will cover in full from day one and that the monthly premium that they are paying is accurate.
Is too much information, too much information?
The underwriting process can be overwhelming because there are too many questions to think about and answer. People need to bear in mind that the insurance provider is asking for essential information that can help them assess the cover. It is important to share as many details and be truthful.
How can a financial adviser help?
Financial advisers can answer your questions, provide clear explanations, and help you understand what you’re buying when it comes to life insurance. Ensure that that your financial adviser is licensed with the Financial Sector Conduct Authority (FSCA) and product providers. You, as the client, have the right to ask an adviser for their credentials and ask whether they are independent or work for a product provider.
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