Life insurance underwriting involves a review of your application and your medical status, lifestyle, and financial needs. Based on that review, a life insurer determines what kinds of life insurance policies they’ll make available to you and the cost of those policies. Learn about the different ways a policy may be underwritten, what happens next, and how to correct or explain information before accepting a policy.
This article is informed by the federal guide to getting insurance, the Canadian Institute of Actuaries’ explanation of underwriting routes, Ontario’s Insurance Act, and federal and provincial privacy commissioners’ consent guidance.
How Does Life Insurance Underwriting Work in Canada?
When you apply for a policy, the insurer will ask for evidence and your permission to obtain it, then use that evidence to decide whether the requested type and amount of insurance meet its rules and on what terms it is willing to accept your mortality risk.
The possible outcomes are acceptance as applied for, a counter-offer on different terms, a request for more evidence, deferral, or declination.
Receiving a life insurance quote is not approval of a policy. A life insurance policy takes effect when all criteria specified in the contract are met.
In Ontario, unless the application or policy says otherwise, the Insurance Act stipulates delivery of the policy, payment of the first premium and no change in insurability between the application and delivery as criteria for the contract to take effect.
Temporary insurance, where offered, will have its own certificate, maximum dollar amount, exclusions and start criteria.
Choose the Underwriting Route Before Comparing Prices
| Route | What the insurer may use | Trade-off to check |
|---|---|---|
| Fully underwritten | May involve extensive questions about lifestyle and health, interviews, medical evidence, exams or lab tests. | Review times may be longer for routes that allow more coverage and more refined pricing. |
| Accelerated | Full applications are assessed using automated rules and authorized third-party data. Some applicants may be required to provide further evidence. | No exam doesn’t mean there is no underwriting. Ask what might trigger a manual review. |
| Simplified issue | Some routes involve a shorter medical questionnaire and fewer routine medical requirements. | Qualification questionnaires may be strict, with less total insurance or a higher price per dollar. |
| Guaranteed issue | This product does not include medical questions. You must meet basic eligibility criteria such as age or residency. | Benefits may be smaller or premiums may be higher. Read the policy for limits on non-accidental deaths during a specified period. |
Do not confuse the type of life insurance contract, such as term, whole life or universal life, with how it is underwritten, such as fully underwritten, accelerated, simplified or guaranteed issue.
Read More: See How an Attending Physician Statement Works
Read More: Compare Life Insurance Options
How Life Insurance Underwriters Evaluate You
| Area | What may be reviewed | How to prepare accurately |
|---|---|---|
| Health | Diagnoses, symptoms, test results, past or current treatment, prescription history and family medical history. | Be prepared to give specifics like dates, doctor’s name and medication. Don’t guess at your own diagnosis. |
| Tobacco and substances | Nicotine use, cannabis use, alcohol use and other substances. | Each insurer has its own definition of smoking. Ask about its definition and the time frame that applies to each question. |
| Work and activities | Occupation, aviation, diving, climbing, motorsports and other high-risk hobbies. | If the underwriting form asks, give information about how often you participate, training, location and safety measures. |
| Driving and travel | Your driving and motor-vehicle history and, as applicable, where you plan to live and travel. | Be clear whether it’s a one-time move or if you travel for business regularly. Distinguish a trip from a move or recurring work travel. |
| Financial need | Income, debts, assets, existing insurance, purpose of insurance and ownership of insurance. | Describe how you calculated the amount of coverage and disclose other life insurance you have or are applying for. |
There is not a universal scale in Canada used by all life insurance companies when rating an applicant’s health class. One company’s Preferred Plus or Preferred rate could be another company’s Standard Plus or Standard rate. Some policies don’t even have rating classes.
It’s important to look at all aspects of the policy, including the cost, benefits, exclusions, guarantees and renewability, because you can’t necessarily compare policies based on their health-class rating alone.
Read More: Read How Health Records Affect Life Insurance
What Actually Happens During the Underwriting Process?
- Needs and product discussion: Before an application is sent, the type of coverage, purpose, ownership, amount of coverage and length of the policy should be planned.
- Informal inquiry, if useful: Depending on the situation, your adviser may be able to inquire with insurance companies and find out what their basic position would be. This can save time and may avoid submitting an application.
- Application and consent: Answer all questions on the application thoroughly. Be sure to understand what you’re consenting to before you sign. Your health and financial information can be requested, used and shared.
- Evidence collection: Understand what evidence may be requested. This can range from an interview with the insurance company to a medical exam, lab work or a statement from your physician. There are some “no-exam” policies, but that does not mean there will not be a request for medical information, records or other proof of health.
- Underwriter review: The insurer or underwriter may ask for more information or wait for more tests, completion of medical treatment or a period of stability.
- Decision and policy delivery: Be aware of the terms you’re offered and compare them to the original application and illustration. Coverage is not in force merely because you submit an application.
Medical Information, Consent and Corrections
Remember that health and financial records are sensitive and personal. Privacy regulators say organizations generally need meaningful consent. That means they have to tell you what they’re collecting, why, who will see the information and the consequences.
An insurance application should make it clear what information is needed to consider your application. Keep a copy of your application, consent, follow-up answers, temporary-insurance certificate, decision letter, illustration and policy.
Read More: Learn How Genetic Testing Affects Life Insurance in Canada
Why Complete Disclosure Matters
The applicant and the person to be insured have a statutory requirement in Ontario to disclose material facts. Other provinces have their own Insurance Acts, and the policy wording still matters.
Answer all questions truthfully, taking into consideration changes in your circumstances up until the policy is in force. If you are unclear about what is being asked, stop. Get clarification and keep copies of all written clarification for future reference. A carefully considered answer is better than a guessed, omitted or manipulated answer intended to receive a better rate.