Which statement about underwriting in life insurance is correct?

Underwriting is a critical process in life insurance that involves evaluating the risks associated with an individual seeking coverage. The primary purpose of underwriting is to determine the eligibility of an applicant for the insurance policy based on that risk assessment. Factors such as the applicant's health history, lifestyle, occupation, and family medical history are considered to gauge the likelihood of a claim being made.

This risk assessment allows the insurer to make informed decisions about whether to offer a policy, what terms to include, and how to set premiums. A lower risk may lead to more favorable terms, while higher risk may result in higher premiums or even denial of coverage altogether.

In contrast, processes like paying premiums or claims processing are separate and occur after underwriting has been completed. Moreover, underwriting is a standard practice applicable to both life and health insurance, so the notion that it only pertains to health insurance is inaccurate. Therefore, the statement regarding underwriting's role in assessing risk and determining eligibility for coverage is fundamentally correct and essential to understanding the insurance application process.