Life Insurance Underwriting in Canada: Steps, Timelines & Eligibility

Applying for life insurance is straightforward, but what happens behind the scenes often feels like a mystery. That’s where underwriting comes in, the process that determines your eligibility, coverage amount, and final premium.

Underwriters assess your health, lifestyle, and financial background to match you with a plan that reflects your personal risk profile. While it might sound technical, understanding this step helps you prepare and avoid surprises during approval. Several key factors, such as your health, lifestyle, and financial background, are considered by underwriters when evaluating applications.

In this guide, we’ll break down how underwriting works in Canada, what affects your rates, and how to navigate the process smoothly.

What is life insurance underwriting?

The underwriting process for life insurance begins with the submission of a life insurance application, which initiates the evaluation of an individual’s risk profile to determine the appropriate terms and premiums to charge for life insurance coverage. The risk profile assesses the likelihood of the insured’s death during the policy’s term. The evaluation is done based on their personal and medical information. The underwriter assesses factors like age, gender, health, lifestyle, and medical history.

If you are relatively healthy, take minimal medications, and avoid risky activities, you could qualify for accelerated underwriting, a quick process that only takes a few minutes.

The approval process begins with the submission of a life insurance application and involves several steps, including risk assessment and verification of information, before a final decision is made.

However, your application might undergo standard underwriting, which typically takes six to eight weeks. During this process, you might be required to undergo a medical examination or have your medical records sent to the insurance company. Although this could extend the time for underwriting, it enables the insurance company to verify all necessary information to provide suitable coverage.

How does life insurance underwriting work?

Each life insurance provider establishes its own criteria for determining premium costs. Although the process may differ across companies, most underwriters adhere to similar fundamental steps such as application, medical exam, and risk assessment. The underwriting process includes application submission, application review, and final risk classification decisions. Underwriter reviews involve a detailed evaluation of the applicant’s health, lifestyle, and financial information.

The time required for underwriting can vary depending on several factors, such as the complexity of the applicant’s case and the provider’s internal processes.

Step 1: Application

The process begins when an individual applies for life insurance. The insurance company examines the application, which includes a phone interview, to verify the accuracy of the provided information. The phone call typically lasts 15 to 30 minutes, during which the applicant offers personal and health-related information, including age, gender, occupation, medical history, lifestyle habits (e.g., smoking, drinking), and family medical history.

As part of the financial information review, underwriters may request tax returns and bank statements to verify income and assets, especially for self-employed applicants who may need to provide additional documentation. A thorough review of the applicant’s financial situation helps underwriters assess their ability to maintain premium payments.

Medical history

• Medical history refers to a comprehensive record of an applicant’s past and current health conditions, any pre-existing medical conditions, medical treatments, surgeries, hospitalizations, and any significant health events that have occurred throughout their life.

• Underwriters evaluate the severity and stability of these conditions to assess the applicant’s overall risk level. Well-managed and stable conditions may have a milder impact on the risk assessment than chronic or more severe health issues. For example, a history of heart disease, cancer, diabetes, or other chronic illnesses may lead to higher premiums due to the associated mortality risks. Medical history significantly influences life insurance underwriting decisions.

Prescription history

• In some cases, underwriters in life insurance often check the list of prescribed medications and how consistently the applicant follows their prescribed treatment regimen. Adherence to prescribed medications can indicate how well the individual manages their health, which can be a factor in risk assessment.
• Underwriters consider the potential impact of medications for chronic conditions on the applicant’s overall risk profile. They may also look for potential drug interactions if the applicant is taking multiple medications, which could raise concerns about possible health complications.

Family Medical History

• In addition to the applicant’s medical history, underwriters also consider the medical history of the applicant’s immediate family (parents and siblings). A family history of certain illnesses, such as heart disease or cancer, may influence the applicant’s risk classification.
• The insurance company may request additional information from the applicant to complete the underwriting process. This can include medical records, lab tests, and possibly a medical exam conducted by a licensed healthcare professional.

Medical Records

• Underwriters may request access to the applicant’s medical records and reports from healthcare providers to validate the information provided in the application.
• The insurance company usually asks the applicant to sign an authorization form to obtain the medical records. This form allows the insurance company to contact the applicant’s medical providers and request relevant medical records. The authorization form ensures that the process complies with privacy and confidentiality regulations.

Lifestyle

• Lifestyle habits such as smoking, excessive alcohol consumption, participation in hazardous activities, or engagement in risky behaviors can affect mortality risk. For example, smoking is a significant risk factor for various health conditions, including heart disease, lung cancer, and respiratory issues. Individuals who smoke or use tobacco products generally face higher premiums compared to non-smokers.
• Participation in hazardous hobbies or activities, such as extreme sports, aviation, or scuba diving, can increase the risk of accidents or injuries, affecting the underwriting assessment.
• Chronic stress and mental health conditions can also impact overall health and well-being.

Driving history

• Insurance companies may also review applicant’s driving history as an additional factor in assessing their overall risk. A poor driving record may suggest a higher likelihood of accidents or increased risk, which could affect the underwriting decision and premium rates.

Step 2: Medical exam

A life insurance medical exam is a standard part of the underwriting process for many life insurance policies, especially for higher coverage amounts or when the applicant is older. The medical exam assesses the applicant’s overall health and detects any pre-existing medical conditions that could affect risk classification and premium rates.

The information used in underwriting may include blood tests, urine tests, and other medical examinations for certain applicants. For applicants over 71 years old, a mature focus interview may also be conducted to assess mobility and cognitive function as part of the risk evaluation.

The medical exam is free and typically conducted by a licensed medical professional, often a nurse or paramedic, and is generally scheduled at a time and location convenient for the applicant. The exam may take place at the applicant’s home or workplace.

Step 3: Risk assessment

• Actuarial analysis:Underwriters analyze historical data and mortality tables to determine the likelihood of the applicant’s death based on all the information collected to assess the applicant’s risk. Life insurance underwriters refer to two different actuarial tables:

• Mortality table: The mortality table provides statistical data on the probability of mortality based solely on age and gender. It serves as a reference point to estimate the likelihood of an individual’s death at different ages.
• Build table: The build table utilizes the individual’s body mass index (BMI), calculated from their height and weight, to evaluate their overall health status and project their life expectancy. This information aids underwriters in assessing an applicant’s health risk and potential longevity.
• Risk classification:Based on the assessment, underwriters classify the applicant into different risk categories. Typical classifications include “preferred,” “standard,” “substandard” (or “rated”), or “declined.” Life insurance rates are directly influenced by the applicant’s risk classification, with higher-risk individuals paying higher premiums. Similar to how interest rates in lending are affected by credit risk, where a lower credit score or high credit utilization can lead to higher interest rates, life insurance rates are determined by health and lifestyle risk factors.
• Preferred: These are applicants with excellent health, who are non-smokers, and who have a clean medical history. They lead a healthy lifestyle and have no significant risk factors. Preferred-risk individuals are considered the least likely to make a claim and are offered the lowest premium rates.
• Standard: Standard-risk applicants are generally healthy individuals with average health and lifestyle habits. They may have minor health issues or participate in activities that pose some risk but nothing significant. Standard-risk individuals receive coverage at standard premium rates.
• Substandard (Rated): Substandard risk applicants have certain health conditions or lifestyle habits that increase their mortality risk. This category may include individuals with chronic health conditions, smokers, or those engaged in hazardous activities. They are considered higher risk and are offered coverage at higher premium rates (rated premiums).
• Declined: Some applicants may be denied coverage if their risks are deemed too high to provide coverage. For example, applicants with terminal medical conditions, significant pre-existing conditions, or high-risk activities may be declined coverage altogether.
• Preferred Plus: Some insurance companies may have an additional category called “Preferred Plus,” which offers even lower premiums than the “Preferred Risk” category. These applicants generally have an exceptional health history and lifestyle choices. Preferred Plus rating in life insurance underwriting is for applicants in excellent health with no red flags.

Different insurance policies (e.g., term life, whole life, disability insurance) may have specific risk classifications based on the risks associated with that particular type of coverage.

Step 4: Premium determination

Once the risk classification is established, the insurance company calculates the applicant’s premium amount for coverage. Lower-risk individuals pay lower premiums, while higher-risk applicants pay higher premiums.

Policy offer:

• After completing the underwriting process, the insurance company presents the applicant with an offer outlining the coverage, premium, and any special conditions or exclusions that may apply.

• The applicant can accept the offer, negotiate changes, or decline coverage if he or she is unsatisfied with the terms. If the applicant accepts the offer and agrees to the terms, the life insurance policy is issued, and coverage becomes effective upon payment of the first premium.

What happens during a medical exam

Health questionnaire: The examiner will ask the applicant a series of health-related questions about their medical history, lifestyle habits, family medical history, and any current medications they are taking.

Physical measurements: The examiner will take various physical measurements, including height, weight, blood pressure, and pulse rate.

Blood sample: A blood sample will assess factors such as cholesterol levels, blood glucose, liver function, and other health indicators.

Urine sample: A urine sample may be collected to check for specific medical conditions or drug use.

ECG (Electrocardiogram): An ECG may be performed to check heart health for older applicants or those applying for more significant coverage amounts.

Attending physician statement: Should any concerns arise from your medical exam results, the underwriter will request an attending physician statement (APS). An APS summarizes your medical history from your doctor’s perspective. For instance, if your medical exam reveals high blood pressure, the APS would clarify the underlying cause for the underwriter’s consideration.

• The APS step can extend the underwriting process, adding several days to a few months, depending on how long the doctor’s office takes to comply with the request. 
• If an APS is needed, the insurance company will directly contact your medical provider for the necessary information, and you may be required to sign an authorization form allowing the provider to share your personal information with the underwriters.

Different types of underwriting in life insurance

In life insurance, insurance companies use several types of underwriting processes to assess an applicant’s risk and determine appropriate coverage and premium rates. Most insurance providers offer a range of insurance products, each with its own underwriting requirements and approval timelines.

Full or Traditional Underwriting

This is the most comprehensive type of underwriting. Applicants must provide detailed information about their medical history, lifestyle habits, occupation, and other relevant factors. In the traditional underwriting process, insurance companies may also request medical exams, lab tests, and access to medical records to assess the applicant’s risk thoroughly. Full underwriting allows for accurate risk evaluation and offers competitive premium rates based on the individual’s risk profile.

This process can take anywhere from a few weeks to several months, depending on the completeness and complexity of the applicant’s medical information and the efficiency of the insurance company’s underwriting department.

Simplified-Issue Underwriting

In simplified-issue underwriting, applicants provide essential medical information through a simplified application form. This type of underwriting may not require a medical exam or access to detailed medical records. Instead, insurers rely on the information provided by the applicant and sometimes use data from external sources to assess the risk. Simplified-issue underwriting is typically faster than full underwriting. In many cases, applicants can get approved within a few days to a week, but this may result in higher premium rates due to a need for more detailed information.

Guaranteed-Issue Underwriting

Guaranteed-issue underwriting is designed for applicants who have difficulty obtaining coverage through other underwriting types due to health issues. There are no health questions or medical exams involved. As long as the applicant meets specific age requirements, they are guaranteed to be accepted for coverage. Some insurance products, such as guaranteed issue life insurance, are designed for quick approval with minimal underwriting and specific eligibility criteria. However, guaranteed-issue policies often have higher premiums and lower coverage amounts. Guaranteed acceptance life insurance can provide coverage ranging from $5,000 to $25,000 regardless of current health or medical history.

Applicants usually receive approval within a few days of submitting their application. Guaranteed issue life insurance allows for quicker approval compared to traditional insurance policies.

No Medical Exam Underwriting

No medical exam allows applicants to skip the medical examination required in full underwriting. Instead, applicants only answer a series of health questions.

No medical exam underwriting is faster than full underwriting. Applicants may get approved within a day or a few days to a couple of weeks, depending on the insurer’s internal processes.

Applicants are not charged higher premiums because they skip the medical exam. Instead, the premium rates are primarily determined based on the applicant’s age, gender, coverage amount, policy type, and specific health-related questions answered in the application.

For healthy individuals with no significant health issues, no medical exam underwriting can lead to receiving the lowest premiums available. If the applicant is in good health, has favorable lifestyle habits, and meets the underwriting criteria for preferred risk classification, they may qualify for the most competitive premium rates.

The critical point in this type of underwriting is that skipping the medical exam does not inherently result in higher premiums. This means that the insurance company relies on the information provided in the application to assess the applicant’s risk profile rather than conduct a comprehensive medical evaluation.

That is why applicants need to provide accurate information during the application process. Failing to disclose critical information could lead to complications, such as a denied claim in the event of an illness-related death.

Underwriting process in Canada: Other factors considered in the underwriting process

In addition to the factors mentioned earlier, several other factors are considered during the underwriting process for life insurance:

Financial information: Underwriters may review an applicant’s financial information, such as income, debts, and assets, to assess their financial stability and ability to pay premiums. Insurance companies also aim to ensure applicants seek coverage that fits their needs.

The insurer can deny the request if an applicant applies for excessive coverage beyond reasonable. Financial status including income and net worth is evaluated in life insurance underwriting to correlate with coverage amounts. Similar to how closing costs are carefully considered in mortgage underwriting to ensure borrowers have sufficient funds to complete the transaction, life insurance underwriters review assets and financial obligations to confirm applicants can afford and maintain their coverage.

Foreign travel: Underwriters may inquire about an applicant’s travel habits, particularly to regions with higher health risks or political instability.

Criminal history: Some insurance companies may consider an applicant’s criminal history part of the underwriting process.

Insurance history: An applicant’s previous insurance policies and claims history may be relevant in the underwriting assessment.

Occupational hazards: The nature of an applicant’s occupation and any associated hazards or risks are considered.

What do life insurance underwriters look for?

Red flags for underwriters are factors or indicators that may raise concerns about an applicant’s risk profile and may lead to increased scrutiny or potential challenges in obtaining life insurance coverage. Underwriters may use statistical data, driving history, and prescription records to expedite risk assessments.

• Severe health conditions: Chronic or life-threatening illnesses, such as cancer, heart disease, or HIV/AIDS.

• Tobacco or substance use: Smoking, tobacco use, or a history of substance abuse can increase mortality risk, leading to higher premiums.
• Obesity: Being significantly overweight, as indicated by a high body mass index (BMI), can be a red flag for underwriters as it may be linked to health complications.
• Hazardous occupations or hobbies: Engaging in dangerous activities or working in high-risk occupations can be concerning.
• History of mental health issues: Past or current mental health conditions may raise underwriting considerations.
• High-risk family medical history: A family history of certain hereditary diseases may impact risk assessment.
• Risky driving record: Frequent traffic violations or a history of accidents may be red flags.
• Frequent foreign travel to high-risk areas: Traveling to regions with health or safety risks can be a concern.
• Unhealthy lifestyle habits: Poor diet, lack of exercise, or sedentary behavior can increase the risk.
• Financial instability: Significant financial debt or instability may impact an applicant’s ability to pay premiums.
• Declining health condition: Rapidly declining health or undergoing treatment for a severe medical issue.
• Previous insurance declines or lapses: A history of declined insurance applications or lapses in coverage can be concerning.

Insurance Underwriting and Credit

Your financial health plays a significant role in the insurance underwriting process, with insurance companies often reviewing your credit report as part of their risk assessment. A strong credit history can signal financial responsibility and may help you secure lower life insurance premiums, while a poor credit history could result in higher premiums or even impact your eligibility for coverage.

Underwriters review your credit history, payment patterns, and overall financial profile to determine the appropriate premium rates and assess your risk profile. This approach is similar to the mortgage underwriting process, where factors like income stability and creditworthiness are evaluated to determine eligibility and terms. By maintaining good financial health and a positive credit history, you can improve your chances of securing affordable life insurance and other financial products.

Factors That Lead to Longer Processing Time

While some factors may be beyond an applicant’s control, providing accurate and comprehensive information during the application process can help expedite underwriting. Additionally, certain insurance companies offer expedited or accelerated underwriting options for healthier applicants with more straightforward risk profiles, which can significantly reduce processing times.  Factors that may lead to a longer processing time include:

• Medical information requests

• Additional underwriting requirements
• Complex medical history
• Specialist consultations
• Large coverage amounts
• Multiple policy riders or add-ons
• Incomplete or inaccurate information

Applicants must communicate with their insurance agent or representative to understand the status of their application and be aware of any potential delays.

How can you qualify for accelerated underwriting?

To qualify for accelerated underwriting, you typically need to meet specific criteria set by the insurance company. Accelerated underwriting is designed for healthier applicants with simple risk profiles, aiming to expedite the underwriting process and provide faster policy approval. Accelerated underwriting uses algorithms and external data sources to approve low-risk applicants quickly.

• Age and coverage limit: Most insurance companies offer accelerated underwriting for applicants within a specific age range, often between 18 and 60. Additionally, coverage amounts may have a limit, typically up to a particular threshold, such as $1 million or $2 million.

• Medical questionnaire: Applicants complete a medical questionnaire as part of the application process. The questions generally focus on health history, lifestyle habits, and family medical history. Accelerated underwriting relies heavily on the information provided in this questionnaire.
• No serious health conditions: Accelerated underwriting is usually reserved for individuals with no significant health issues. Applicants should be healthy and have no history of primary medical conditions.
• No tobacco use: Many accelerated underwriting programs require applicants to be non-smokers or have refrained from using tobacco products for a specified period, typically one to five years.
• No risky occupations or hobbies: Applicants should not engage in high-risk occupations or hazardous activities, as these may disqualify them from accelerated underwriting.
• Medical records review: Insurance companies may access electronic health records or databases to verify the applicant’s health information and assess their eligibility for accelerated underwriting.
• Prescription history check: Some insurers may review the applicant’s prescription history to evaluate potential health risks.

What happens if I omit medical info?

Failing to disclose medical details can lead to serious consequences. If the insurer discovers missing or inaccurate information during underwriting, your approval could be delayed, your premiums re-rated, or your application declined.

If discovered after issuance, it can void your policy or deny a claim during the contestability period (usually two years). Always be transparent. Full disclosure ensures the insurer can properly assess your risk, and guarantees your loved ones won’t face complications later.

Final Approval and Policy Issuance

The final approval and policy issuance stage marks the conclusion of the life insurance underwriting process. After the underwriter has thoroughly reviewed your application, medical records, and any additional documentation, they will make a decision about whether to offer coverage and at what premium rate.

If approved, the insurance company will issue a life insurance policy that clearly outlines your coverage amount, premium rate, and any exclusions or limitations. It’s important to carefully review your insurance policy to ensure it meets your needs and expectations.

The underwriting process, depending on the insurance provider and the specific life insurance policy, may also take into account factors such as your body mass index, current health status, and any risky hobbies you participate in to determine your final premium rate and risk profile. Once you accept the offer and pay your first premium, your coverage becomes active, providing you and your loved ones with valuable financial protection.

Life insurance underwriting – Conclusion

Underwriting isn’t just a formality, it’s how insurers keep premiums fair and coverage reliable. The more complete and transparent your application, the smoother the process and the stronger your final offer. If you’re healthy, you may qualify for accelerated approval without a medical. If your case is more complex, a little patience can secure long-term protection.

To explore personalized coverage and see if you qualify for no-medical options, get a quote with Oneday Insurance. Coverage for eligible applicants is subject to underwriting and provincial regulation.

Frequently asked questions about the underwriting process Canada

Sources:

1. FCAC, “Insurance”