Underwriting in Life vs General Insurance
One judges a life for decades, the other a property for a year. That changes everything.
Every insurer underwrites, but a life underwriter and a fire underwriter look at very different things. One is judging a person's chance of dying early over the next 20 or 30 years. The other is judging the chance that a building, vehicle or cargo will be damaged in the next 12 months.
That difference in subject and time horizon drives almost every other difference: the information sought, the tools used, the terms imposed and how hard it is to change course later.
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Life vs General Underwriting at a Glance
What is assessed
Life insurance
A human life: age, health, family history, habits, occupation, income
General insurance
Property or liability: construction, occupation, location, protection, use, past claims
Main hazards
Life insurance
Physical (health, lifestyle) and moral (over-insurance relative to income)
General insurance
Physical (fire load, theft exposure) and moral (overvaluation, claims record)
Key tools
Life insurance
Proposal form, medical examination, tests, income proof, agent's report
General insurance
Proposal form, pre-acceptance survey, valuation reports, claims history
Contract length
Life insurance
Long term, often decades
General insurance
Usually one year, renewable
Basis of benefit
Life insurance
Fixed sum assured (benefit contract)
General insurance
Indemnity up to the sum insured
Typical special terms
Life insurance
Extra premium, lien, reduced cover, exclusion
General insurance
Loading, deductible, excess, warranty, exclusion
Chance to revisit
Life insurance
Little after issue; after three years, section 45 bars any challenge
General insurance
At every renewal, when terms and premium can change
| Feature | Life insurance | General insurance |
|---|---|---|
| What is assessed | A human life: age, health, family history, habits, occupation, income | Property or liability: construction, occupation, location, protection, use, past claims |
| Main hazards | Physical (health, lifestyle) and moral (over-insurance relative to income) | Physical (fire load, theft exposure) and moral (overvaluation, claims record) |
| Key tools | Proposal form, medical examination, tests, income proof, agent's report | Proposal form, pre-acceptance survey, valuation reports, claims history |
| Contract length | Long term, often decades | Usually one year, renewable |
| Basis of benefit | Fixed sum assured (benefit contract) | Indemnity up to the sum insured |
| Typical special terms | Extra premium, lien, reduced cover, exclusion | Loading, deductible, excess, warranty, exclusion |
| Chance to revisit | Little after issue; after three years, section 45 bars any challenge | At every renewal, when terms and premium can change |
Life Underwriting: One Decision for Decades
A life underwriter usually gets one chance. Once a term plan is issued, the insurer cannot raise the premium because the life assured later takes up smoking or develops a heart condition. And under section 45 of the Insurance Act, after three years from issue, commencement of risk, revival or rider (whichever is later), the policy cannot be questioned on any ground at all.
So life underwriting is front-loaded. The underwriter checks age proof, calls for medicals above the insurer's non-medical limit, and checks income to make sure the sum assured is sensible. A ₹2 crore term proposal from someone earning ₹4 lakh a year is a moral hazard signal, whatever the medical report says.
Substandard lives are graded with a numerical rating method: start at 100 for a standard life, add points for adverse factors and subtract for favourable ones. The total decides whether the proposal is accepted at standard rates, with an extra premium, with a lien (reduced benefit in the early years) or declined.
General Underwriting: Re-Rated Every Year
A fire underwriter looking at a textile mill in Surat wants to know the construction, what is stored and how, the distance from the fire station, the sprinkler system and past claims. For large risks a surveyor inspects the site before acceptance. A motor underwriter looks at the vehicle, its age, the insured's declared value (which IRDAI treats as the sum insured), and the driver's claims record.
Because most general policies run for a year, the underwriter can adjust at renewal: raise the premium after a bad claims year, add a deductible, or require a safeguard. That makes general underwriting more of a continuing relationship and less of a single bet.
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Limits on General Insurers Too
General underwriters have less freedom mid-term than many assume. For retail general policies, IRDAI's 2024 master circular lets the insurer cancel a policy only on the ground of established fraud, with at least 7 days' notice to the policyholder, and bars repudiating a claim for a warranty breach unrelated to the loss.
How IC-01 Tests This
Questions describe a feature and ask which branch it belongs to: medical examination (life), pre-acceptance survey (general), numerical rating method (life), deductible (general). The trap is assuming both branches work on indemnity. Life insurance pays a fixed sum assured, so the life underwriter controls over-insurance through income checks, not through the indemnity principle.
FAQs
What is the difference between life and general insurance underwriting?expand_more
Life underwriting assesses a person's mortality risk once, for a long-term contract paying a fixed sum. General underwriting assesses property or liability risks, usually for one year at a time, on an indemnity basis, and can be revisited at each renewal.
What is the numerical rating method in life underwriting?expand_more
A system that starts a standard life at 100 points, adds points for adverse factors such as weight or family history and subtracts for favourable ones, and uses the total to decide the terms of acceptance.
Why is a pre-acceptance survey done in general insurance?expand_more
To let the underwriter see the physical hazards of a large property risk, such as construction, storage and fire protection, before deciding on acceptance and rate.
Can a life insurer change the premium after the policy is issued?expand_more
Not because the life assured's health or habits change after issue: the risk is priced once, at acceptance. That is why life underwriting gathers all the information it needs before acceptance.
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