What is meant by "underwriting" in life insurance?

Underwriting in life insurance refers to the evaluation process that an insurer employs to assess the risk associated with insuring an applicant. During this process, various factors are considered, including the applicant’s age, health history, lifestyle choices, and occupation, among others. This assessment helps determine whether to accept the application, what coverage to offer, and how much premium to charge.

By carefully evaluating these risk factors, the insurer can make informed decisions, ensuring that they maintain financial stability while providing coverage to policyholders. Underwriting ultimately helps ensure that the insurer is taking on manageable levels of risk while also setting pricing reflective of that risk. This process is crucial to the sustainability of the insurance business, as it helps in determining the overall health and profitability of the insurer's portfolio.