Insurability: How to Know if You’re Insurable
What is Insurability?
Insurability refers to whether an insurance company is willing to take on the risk of insuring an individual or asset.
Insurability depends on the assessed level of risk and the insurance company’s underwriting guidelines. Essentially, it determines who or what is eligible for insurance coverage.
Insurable vs. Uninsurable Risks
An insurable risk is a risk that insurance companies are willing to insure because the chance of the loss occurring can be calculated and premiums can cover potential losses. Examples of insurable risks include auto insurance, home insurance, life insurance, and business property insurance.
An uninsurable risk is a risk that insurance companies are not willing to insure. This is usually because the risk is too high to reasonably calculate or would result in premiums that are unaffordable. Examples of uninsurable risks can include natural disasters in high-risk areas or pre-existing medical conditions.
Factors That Determine Insurability
Insurance companies use underwriting to determine insurability based on several factors related to the risk, such as:
- Loss history – Higher past losses mean higher risk
- Health and lifestyle – Poor health or dangerous hobbies increase risk
- Age – Higher age often correlates with higher risk
- Geography – High-risk locations increase chance of loss
- Finances – Companies evaluate if applicants can pay premiums
By evaluating these factors, the insurance company can determine if a risk falls within their acceptable level of risk. If the risk is too high, the applicant may be declared uninsurable.
The Underwriting Process
Underwriting is the process insurance companies use to evaluate insurability based on risk profiles. Common steps include:
- Reviewing the insurance application
- Checking medical history and other records
- Ordering additional medical exams or vehicle inspections if needed
- Determining the probability and impact potential losses
- Calculating suitable premium rates
- Deciding whether to accept or decline the risk
After the underwriting process, eligible applicants are deemed insurable while high-risk applicants may be declared uninsurable. Most policies also include clauses allowing the insurer to cancel if the risk increases.
Improving Your Insurability
If you’ve been declared uninsurable, steps you can take to potentially improve your insurability include:
- Making lifestyle changes to reduce health or driving risks
- Taking preventative measures to minimize chance of losses
- Checking if there are insurers specializing in higher-risk coverage
- Waiting until the hazardous issue is resolved
With a clear understanding of insurability and the underwriting process, you can take steps to qualify for insurance and confirm your eligibility status. Reach out to licensed insurance professionals for personalized insurability assessments or advice.