San Leandro, CA Oakland, CA What is Insurance Underwriting?

You have probably heard this term before, but you may not know what it means with regards to your insurance. The very basic pinciple of underwriting is to evaluate the potential risk from writing a particular insurance policy. Underwriters may actually that determine the premium for some types of insurance, and in other cases an underwriter may approve or deny coverage. It really depends on the type of insurance being provided.

The term underwriting is believed to have originated by their famous insurance provider Lloyds of London. Lloyds of London started providing insurance coverage for ocean going vessels caring goods to be delivered by ship. Lloyds of London would evaluate the risk and determine a premium to be paid for covering the goods on any given vessel. The individuals paying the premium would literally write their names under the text describing their possessions or contents being transported on the insured ship. Thus the term underwriting was born.

In today’s world, the term underwriting is used in other areas of risk beyond insurance. For example, loans are often underwritten before the interest rate is determined. In other cases the interest rate may be pre-determined, but the loan is underwritten prior to the lender approving the funds to be transferred to the borrower. At the end of the day, it’s still in underwriting just for a different type of risk.

When it comes to your insurance, your agent may ask you for some sort of documentation telling you that the underwriter needs to approve the requested documentation in order to approve insurance coverage for you. This is very common and the underwriters ask for a lot of different types of documentation these days. At times it can be cumbersome and frustrating, but it may be necessary to provide the information in order for the agent to place or secure your insurance coverage.

If you have any doubts about the validity of the underwriters request, we encourage you to contact us for more information. Sometimes the information requested can be sensitive or even somewhat invasive!