Definition: Underwriting of insurance refers to the act of assessing risk or uncertainty by an insurance company regarding a potential claim for financial loss, injury, or illness. This process involves determining the likelihood of a claim being successful, based on various factors such as age, health status, previous claims history, and other relevant information. The ultimate goal is to minimize the cost of a claim through proper risk management techniques and premium rates. Underwriting is an important step in the insurance process because it sets limits on what can be covered by a policy, helping ensure that premiums are reasonable and fair to both the insurer and its customers. Understanding the definition of "underwriting" can help individuals understand how the insurance industry works, as well as how policies work on an individual level.
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