When is a credit or consumer report used in life insurance underwriting?

• A. In some jurisdictions for high-risk or high-face policies.
• B. For all policies and applicants.
• C. Only for term life policies under a high face amount.
• D. Never used in underwriting.

Answer: (A)

In underwriting, a credit or consumer report is used selectively rather than for every applicant. It’s typically considered in jurisdictions where insurers have the option to pull a consumer report for life insurance, and the decision often centers on policy size or risk level. This means it’s most common for high-face-value policies or cases where the applicant is deemed higher risk. The report can help the underwriter assess financial stability, the likelihood of premium payment, and potential issues with misrepresentation, complementing medical information and other underwriting data. Because this use varies by location and by insurer, it’s not a universal requirement for all policies or all applicants, and many standard cases rely mainly on medical underwriting. Regulations generally require consent to obtain a report and provide protections around how the information is used and disclosed.