10 underwriting myths that won’t quit

Life insurance underwriting is frequently misunderstood. Over time, several persistent myths have taken hold. These myths shape inaccurate perceptions about how underwriting works, how information is shared and what options are available to applicants with complex profiles. As a result, misconceptions can complicate the underwriting process and lead to missed opportunities for both financial professionals and clients.

Here are some common myths encountered in life insurance underwriting and why they are incorrect. When misconceptions are replaced with clarity, applicants and financial professionals can make more informed decisions and achieve better outcomes.

Myth 1: Insurance companies share decline decisions with the Medical Information Bureau

✅ Reality: Insurance companies do not share final underwriting decisions, including declines, with the MIB.

Instead, insurers exchange limited underwriting information using encrypted MIB codes. These codes serve only as alerts that identify areas warranting further review, such as medical conditions or lifestyle factors. They may be medical or nonmedical, admitted or unadmitted. For example, a condition such as diabetes may be coded, but the underwriting action itself is not.

Myth 2: Closing a case before a final decision prevents information from being sent to MIB

✅ Reality: Closing a case early does not prevent the transmission of MIB codes.

Although underwriters typically review MIB information early in the process and transmit codes near the end, codes may be exchanged at any point during underwriting. Well-managed underwriting departments often follow a “code as you go” approach. Closing a case before making a formal decision does not block this process.

Myth 3: Reinsurance is rarely helpful and should be avoided

✅ Reality: Reinsurance is often a powerful underwriting tool.

Reinsurers can help carriers offer more favorable terms, sometimes saving insureds thousands — or even tens of thousands — of dollars in annual premiums. Reinsurance is especially critical for large face amounts, unusual risks, professional athletes or individuals in high-profile roles. Experienced underwriters know when reinsurer involvement can meaningfully improve outcomes.

Myth 4: Suicide is not a meaningful new-business underwriting risk because policies contain suicide clauses

✅ Reality: Underwriters are trained to assess mortality risk independently of policy provisions designed to limit claims exposure.

Suicide remains a significant underwriting concern. Underwriting and policy administration involve real costs. Profitability depends on sound mortality expectations and persistency, not solely on contractual protections such as suicide clauses or contestability periods. For these reasons, suicide risk is evaluated as a core mortality factor during underwriting, independent of policy design.

Myth 5: Younger individuals deemed uninsurable should be placed on short-duration term policies

✅ Reality: Product duration does not eliminate mortality risk.

Underwriters evaluate mortality risk without regard to product duration. Issuing short-term policies to individuals with unpredictable or elevated mortality risk is not a sound underwriting practice. More appropriate strategies include exploring other carriers, considering different products or planning for a future reconsideration when circumstances improve.

Myth 6: A primary care physician record contains a complete medical history

✅ Reality: PCP records often function as only one component of a broader, specialist‑driven medical history.

Relying solely on a PCP record can lead to delays and incomplete underwriting assessments, particularly when care has been managed by specialists whose records are not reflected in the primary care file. Providing accurate specialist contact information and confirming where relevant care has occurred helps underwriters obtain the appropriate records and complete a more efficient and reliable review. When applicants approach underwriting as the “seller” of mortality risk rather than merely the buyer of insurance, they recognize — as any seller would — the importance of making sure what is being presented is clear, complete and accurate.

Myth 7: A standard offer means the client is viewed as unhealthy

✅ Reality: Standard doesn’t mean something’s wrong.

A standard underwriting classification represents baseline risk, assigned a value of 100%. Only additional mortality risk results in extra ratings and higher premiums. Standard risks are expected to experience good longevity, just not better-than-average outcomes. For example, a 55-year-old nonsmoking woman offered standard risk has a life expectancy exceeding 29 years, according to reinsurance underwriting data. Presenting both standard and preferred rates can help clients better understand the value of favorable classifications.

Myth 8: A medication list alone is sufficient for informal underwriting

✅ Reality: Context is critical.

Life insurance companies underwrite people, not medications. A medication list without context often provides little insight since many drugs are prescribed for multiple conditions. Accurate underwriting requires understanding the diagnosis, symptom history and degree of control. Supplying meaningful clinical details leads to more reliable and actionable underwriting feedback.

Myth 9: Individuals with defibrillators are always uninsurable

✅ Reality: A defibrillator doesn’t always mean no coverage.

Although most applicants with defibrillators present significant risk and are uninsurable, select cases involving Brugada syndrome may be considered. Brugada syndrome is characterized by a structurally normal heart with elevated arrhythmia risk, and underwriting typically requires a postponement period following device placement before consideration is possible. After an adequate period of stability, some Brugada cases may be considered at high table ratings when supported by appropriate clinical documentation.

Myth 10: Policy owners and beneficiaries can be selected to meet underwriting requirements and then altered soon after the policy is in place

✅ Reality: Ownership and beneficiary arrangements that raise concerns during new business underwriting do not cease to warrant review solely because a policy has been issued.

Underwriters evaluate these relationships to confirm insurable interest and avoid speculation. If an ownership or beneficiary structure raises concern during underwriting, it will raise the same concern after placement. For this reason, requested changes within the first two policy years are typically referred back to underwriting for review.

While legitimate changes made in good faith can and do occur, ownership and beneficiary structures should be established accurately at the time of application, and any uncommon or complex arrangements are best discussed with an underwriter before submission.

Understanding underwriting can be an advantage

Misunderstandings about life insurance underwriting can lead to unnecessary frustration, delays and missed opportunities. By dispelling these common myths and approaching underwriting with transparency, preparation and guidance, applicants and financial professionals alike can navigate the process more effectively. Knowledge remains one of the most valuable tools in achieving favorable underwriting outcomes.

Paul Holland is an underwriting consultant with Crump Life Insurance Services. Contact him at [email protected].