Full definition
Underwriting is how insurance companies decide whether to cover you and at what price. Underwriters analyze your risk factors — for auto insurance: driving record, age, credit score, vehicle type, location, claims history. For life insurance: age, health, occupation, lifestyle. The riskier your profile, the higher your premium. Some high-risk applicants may be declined entirely.
Real-world example
You apply for auto insurance with two at-fault accidents in the last three years. The underwriter flags you as high-risk. You're approved, but at 1.8x the standard rate.
Quick summary
The process insurers use to assess your risk and set your premium.
Related terms
- Premium
The amount you pay for your insurance policy, usually monthly or annually.