Underwriting, Claims, and Premiums
Core concepts
Underwriting assesses risk using medical history, occupation, avocation, age, and lifestyle. Outcomes include standard, substandard (rated), exclusion rider, or decline. Claims require notice, proof of loss, and insurer investigation. Premiums reflect morbidity, expenses, reserves, and profit.
Traps in questions
- Confusing substandard rating (higher premium) with exclusion rider (coverage removed).
- Forgetting that claims must be filed within stated time limits.
- Overlooking occupational classification changes that affect premium.
- Assuming premiums are based only on age - occupation and health matter.
Rule of thumb
Underwriting answers "how risky?" and claims answer "is it covered?" Keep the two separate when reading a question.
Worked example
An applicant with controlled diabetes is rated substandard and charged a higher premium rather than declined. A claim for an unrelated injury is still payable under the policy.