What is the primary purpose of underwriting in life insurance?

The primary purpose of underwriting in life insurance is to assess risk and set premiums. Underwriting involves evaluating the potential policyholder's health, lifestyle, and other relevant factors to determine the level of risk that the insurer would be taking on by providing coverage. This risk assessment helps to establish an appropriate premium that reflects the likelihood of a claim being made.

By accurately evaluating the risk, underwriting ensures that the premiums charged are commensurate with the risk presented by the individual applicant. This process is crucial not only for the financial sustainability of the insurance company but also for maintaining fairness in premium pricing among all policyholders. The outcomes of this assessment impact the overall profitability and viability of the insurance product offered.