What is underwriting in insurance?

Underwriting in insurance primarily refers to the process of determining the insurability of an applicant. This involves evaluating the risks associated with the applicant and assessing whether they meet the criteria set by the insurance company for coverage. Underwriters examine various factors such as health history, lifestyle choices, occupation, and other relevant information to decide if an individual or entity can be insured and at what terms.

This process helps insurance companies manage risk effectively. By carefully scrutinizing each application, underwriters can ensure that they are taking on acceptable risks and are not exposed to potential losses beyond what is manageable. Ultimately, this evaluation informs the decision-making regarding coverage options and premium calculations, which are also related to the underwriting process but do not encapsulate its primary function.