Financial Underwriting

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Definition

Financial underwriting is the process of evaluating whether the sum assured proposed by the insured is in line with the family requirements or not.

Description

Financial underwriting is defined as the analysis whether the sum assured that the proposer has chosen is in line with the future goals and objectives. Life insurance companies deploy the underwriters to check whether the collected information about the policyholder and the requirements is correct or not. Their job of financial underwriting is to establish how profitable the business will be after accepting the proposed risk.

Example

NEC Insurance Company Limited received a proposal from Ankit who was a smoker. Ankit wanted a term plan to secure his family. This involved higher risk for the insurance company as Ankit was at a higher risk of diseases and illness. His life cover requirement for Rs.1 crore will be fulfilled after the insurance company completed their prudent financial underwriting.