Which statement correctly describes the term "underwriting" in life insurance?

Underwriting in life insurance refers to the evaluation of risks associated with insuring an individual. This process involves assessing various factors, such as the applicant's health history, lifestyle choices, occupation, and family medical history, to determine their risk profile and whether they meet the insurer's criteria for coverage. By analyzing this information, underwriters decide if they will approve the application, and often what premium rate should be applied to the policy.

This risk assessment is crucial for insurers as it ensures that they are not taking on an excessive risk that could lead to significant financial loss. It also helps in determining appropriate premium rates relative to the level of risk associated with insuring an applicant. Understanding underwriting is vital for both insurers and policyholders since it directly affects the availability and affordability of life insurance products.