In the context of life insurance, what does 'underwriting' refer to?

Underwriting in the context of life insurance primarily refers to the process of evaluating the risk of insuring an applicant. This evaluation involves assessing various factors, including the applicant's health history, lifestyle habits, occupation, and other relevant information. The underwriter uses this data to determine the level of risk the applicant presents to the insurance company and decides whether to approve or deny coverage.

If approved, the underwriter also plays a crucial role in setting the premium amount based on the assessed risk level. This process is essential to ensure that the insurance company remains solvent by appropriately pricing policies according to the probability of claims arising from the risks accepted.

Other options pertain to different aspects of the insurance industry. While determining coverage limits for high-risk individuals can relate to underwriting, it does not encompass the full scope of the underwriting process. The calculation of investment returns and managing claims occur after the underwriting phase and are separate activities within the insurance operations. Therefore, focusing on the core function of evaluating risk, option B accurately defines underwriting in the context of life insurance.