Glossary

Underwriting

The process an insurer uses to decide whether to accept an applicant, on what terms, and in which pricing tier or company.

Also called: insurance underwriting, underwriter, underwriting guidelines

Underwriting is how an insurer evaluates risk before agreeing to cover it. For car insurance, an underwriter, or more often an automated system, reviews your application and reports such as your motor vehicle report, your CLUE report of past claims, your insurance history and, where allowed, a credit-based insurance score. It then decides whether to offer a policy, in which tier, and with what conditions.

Underwriting and rating are related but distinct. Underwriting decides eligibility and placement; rating applies the filed rates and rating factors to calculate the price. Many insurance groups own several companies or tiers with different base rates, and underwriting decides which one you land in. Example: two applicants with similar cars are both accepted, but the one with a recent DUI is placed with the group's nonstandard company, at a higher base rate and with an SR-22 filing (hypothetical).

Underwriting continues after the sale. Many states give insurers a short window after a new policy starts, often around 60 days, to cancel for underwriting reasons, such as discovering undisclosed accidents. After that, cancellation is limited to reasons state law allows, and the insurer applies its underwriting rules again when deciding whether to renew. Answer application questions accurately: misstatements can lead to repricing, cancellation or a denied claim. See high-risk car insurance: options when insurers say no.

Last reviewed October 4, 2026

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Related terms

Rating factors The characteristics insurers use to price a policy, such as driving record, location, vehicle, mileage and, where allowed, age and credit. Motor vehicle report (MVR) Your official state driving record, listing tickets, convictions, suspensions and license status, which insurers check to set your rate. CLUE report A LexisNexis database report of past auto or home insurance claims, which insurers pull to price and accept policies. Nonstandard auto insurance Coverage sold to drivers that standard insurers decline or price steeply, such as those with DUIs, many tickets, lapses or little license history. Prior insurance Your record of having been insured before you apply, which insurers use to set rates and which can earn a discount when unbroken. Insurance binder A temporary written agreement that puts coverage in force immediately while the insurer finishes issuing the formal policy.

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