Underwriting is the process an insurance company follows to help classify the health risk of a person being insured by an insurance policy. Health risk helps to determine the probability an insured person will die prematurely. An insurance company creates their own insuring requirements of an applicant based on their personal, physical, and health characteristics in order to accept or deny coverage to an applicant.
Underwriting is completed in order to determine the premium. In general, the more rigorous the underwriting process, the lower the premium and the higher the allowable coverage limit of a life insurance policy.
An insurance policy is either fully underwritten, partially underwritten, or not underwritten. Fully underwritten insurance requires applicants to have excellent health. Simplified issue insurance requires applicants to have fair to excellent health. Guaranteed issue insurance requires applicants to have poor to excellent health.
People with low health risks are considered to have excellent health. People with moderate health risks are considered to have fair to good health. People with high health risks are considered to have poor health. Low to high health risks are determined by the amount of health risks and the severity of each relative to mortality.