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Definition: A proposal form is a formal application document that an individual fills out when
applying for an insurance policy. This form is used by insurance companies to gather detailed
information about the prospective policyholder. Proposal form is the most important and basic
document required for life insurance contract between the insured and insurance company. It
includes the insured's fundamental information like address, age, name, education, occupation etc.
It also includes the person's medical history.
Description: A life insurance company offers a policy on the basis of a proposal form. The form
is the most basic requirement for the functioning of the life insurance contract between you and
the life insurance company. It needs to be completed by the proposer who may seek the assistance
of a life insurance advisor to fill it up.
A proposal form seeks basic information of the proposer and the life assured. This includes the
name, age, address, education and employment details of the proposer. The proposal form also
gathers information on the medical history of the life to be assured. There are questions pertaining
to the health status of family members of the life to be assured. The proposer and the life to be
assured have to mention their incomes in the proposal form to satisfy the insurer about their ability
to pay for the insurance and the need for insurance, respectively.
Proposal form helps the insurance company to calculate all the potential risks in relation to the
insurance policy and hence deciding the premium amount.

underwriting in insurance

Underwriting in life insurance is a detailed process that life insurance companies use to assess an
applicant’s eligibility for coverage and determine the appropriate premium. This involves two key
approaches: medical underwriting and financial underwriting. Medical underwriting examines an
individual’s health and lifestyle factors, including age, medical history, habits and occupation, to
evaluate the risk they present to the insurer. On the other hand, financial underwriting focuses on
ensuring that the coverage amount aligns with the applicant’s financial needs and circumstances.
Insurers may review income, assets, liabilities and other financial indicators, along with the applicant’s
credit history and existing insurance coverage.
The objective is to determine that the policy’s face amount is justified, preventing being over-insured
and underlining the policy’s role as a safety net rather than a financial windfall. Together, these
underwriting facets work to create a fair, balanced assessment of the applicant, guiding the insurer in
offering a policy that reflects the true risk and financial context of the individual.

Financial underwriting
It refers to the process that insurance companies use to assess an applicant's financial risk before
deciding whether to offer them a life insurance policy and at what premium rate. The

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financial underwriting process aims to ensure the applicant can adequately pay their policy
premiums and isn’t applying for more coverage than they can justify.
Factors are considered during the financial underwriting process
Financial information: Applicants must typically provide detailed financial information, such as
income, assets, debts, and expenses. This helps the insurer understand the applicant's financial
stability and ability to afford the policy.

Credit history: Insurers often consider an applicant's credit history, including credit score and
credit report, to assess their financial responsibility and payment behavior.

Occupation and industry: The applicant's job and industry may be considered since they provide
insights into job stability and income potential.

Policy face amount: The face amount, or death benefit, of the policy applied for, can impact the
level of financial underwriting required. Higher coverage amounts may trigger a more extensive
financial evaluation.

Existing policies: Insurers may want to know about any other life insurance policies the applicant
currently holds to assess their overall insurance needs and potential financial strain.

Financial ratios: Insurers may use financial ratios to assess an applicant's financial health.
Common examples include debt-to-income ratios and liquidity ratios.

Medical history: While medical underwriting focuses on health-related factors, financial

underwriting may also consider certain financial aspects of the applicant's medical history. For
instance, a history of serious medical conditions could affect the applicant's economic well-being.

Based on the information gathered during the financial underwriting process, the insurer will
decide whether to approve the application, deny coverage, or offer a policy with modified terms
(e.g., higher premiums). Applicants at higher financial risk may face increased premium rates or
be ineligible for specific policies.

During the underwriting process, it's essential to provide accurate and honest financial information,
as any misrepresentation can lead to the denial of a claim later on if the policy is issued based on
false information.

How to prepare for the underwriting process

During the financial underwriting process for a life insurance policy, applicants must provide
various documents to help the insurer assess their financial risk and eligibility. The documents
requested may vary based on the insurance company's policies, the type and amount of coverage
being applied for, and the applicant's situations.

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However, here are some standard documents that are often requested during the financial
underwriting process:

Life insurance application: The application form will require personal and financial information,
such as name, age, gender, address, income, assets, and debts.

Identification: A valid government-issued ID, such as a passport or driver's license, is typically

required to verify the applicant's identity and age.

Income verification: Proof of income, like pay stubs, tax returns, and bank statements, is crucial
for assessing the applicant's ability to pay the premiums.

Employment verification: If the applicant isn’t retired, the insurer may request an employment
verification letter or contact the applicant’s employer directly to confirm his or her employment
status.

Credit report: The insurer may request access to the applicant's credit report to evaluate their
creditworthiness and financial responsibility.

Existing insurance policies: Details of the applicant's other life insurance policies, including face
amounts and policy numbers, are generally evaluated.

Proof of insurance interest: At the time of application, there must be proof that the applicant has
a legitimate need for life insurance, such as getting married, the birth of children, starting a
business, etc.

Cover letter: While not always a requirement, having a cover letter written by the advisor can help
ensure a smooth underwriting process. The advisor will need to include the following:

 The client’s information like their name, birthday, and residence

 The purpose of the coverage, such as a buy-sell agreement or income replacement
 Sources of income
 The amount of coverage they’re applying for
 Additional policies currently in force
 An explanation of any financial issues like bankruptcy or poor credit history
 Any medical issues that can impact finances, like long hospital stays.

In addition, a cover letter can be useful when justifying additional coverage for a spouse that
doesn’t work. For example, if the insured spouse provides childcare in their absence, the surviving
spouse may have to pay for daycare expenses. These costs can be taken into account when
calculating coverage amounts.

Personal vs. business purposes

The underwriting process and the documents required may vary depending on why the person is
applying for the policy.

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For example, an individual applying for the policy for spousal income replacement will only need
to provide personal financial information. On the other hand, if the applicant is a business owner
and wants to purchase a policy to ensure business continuity, then a business valuation and profit
and loss statements may be required.

Insurance coverage for children

It’s common for parents to take out a life insurance policy on their children. This type of insurance
is often called "child life insurance" or "juvenile life insurance" and is typically for children under
18, though this can vary by carrier.

The underwriting process for a child's life insurance policy will differ from taking out a policy on
an adult.

Premiums and risk assessment: Child life insurance policies usually have lower premium rates
than adult policies because children are generally considered lower risk. Children are less likely to
have significant health issues, and the financial underwriting process for child policies focuses
more on the parents' financial stability and ability to pay premiums.

Financial information: Most children don’t generate any income, so the financial underwriting
process centers on the parents' or guardians' financial information.

Riders and convertibility options: Some child life insurance policies have optional riders or
convertibility features. These riders may allow the policy to be enhanced with additional benefits,
and the convertibility feature may enable the child to convert the policy to provide more extensive
coverage later in life without further medical underwriting.

If a family has multiple children, some carriers may require the parents or guardians to have similar
or equal coverage for all the children, not just one.

Medical Underwriting

Medical underwriting is the process of evaluating an application for health insurance coverage by
examining the applicant's medical history. The price of coverage is determined by the risk factors
of the applicant.

Depending on the insurance company's policies and federal and state regulations, medical
underwriting for high-risk candidates may lead to the exclusion of coverage for certain conditions,
denial of coverage altogether, or coverage offered only at a very high price.

Under medical underwriting, your overall health is evaluated by the insurance company based on
your medical conditions. How is your health currently and what was your condition in the past,
both are considered. This helps them to determine the following things: -

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 1. Whether you will be eligible for coverage or not

2. If yes, then the premium you will ultimately pay for your policy

3. If you are not eligible, your application is rejected

Types of medical underwritings

In India, medical underwriting in life insurance can be of two major categories:

 Full medical underwriting where a complete assessment of the applicant’s health condition is
ensured.

 Simplified issue underwriting where the assessment is based only on the information provided by
the applicant.

Full medical underwriting

While applying for life insurance, the applicant needs to share his/her medical history and records.
Full medical underwriting is the assessment process where alongside the available information,
the applicant needs to go through a thorough medical check-up that comprises a host of
examinations including blood and urine tests. In addition, the applicant needs to submit scan
reports, X-rays and other medical records.

Simplified issue underwriting

Simplified issue underwriting is based on the medical records and information shared by the
applicant and involves no further check-ups. Here, in addition, the applicant is asked a few
questions regarding their overall health and lifestyle. The information thus collected is assessed to
decide whether the policy proposal will be approved or rejected.