The amount of premium paid for a term life insurance policy varies by individual depending on a number of factors relating to the person covered by the policy. The process of investigating and resulting evaluation of the individual applying for the insurance coverage is called underwriting.

A term life insurance policy is basically a contract between an insurance provider and an individual that says in exchange for regular payments on the policy the provider will pay a cash amount to the named beneficiary of the policy in the event the insured dies during the term of the policy. In order for the contract to make business sense to the insurance company that would provide the payout, the company must determine the likelihood it will have to pay the money to the beneficiary.

The most common factors that insurance companies in the United States consider when determining the amount to charge for the policy premium is the age, sex, area of residence, dollar amount of the policy, the number of years for the term of the policy, and whether or not the individual is a smoker. The provider evaluates the statistical information collected by the insurance industry for the category of person described by the answers to each of these factors and sets the price of the policy accordingly. The price charged is meant to allow the insurance company to pay for its business expenses, including paying on all claims, plus make a profit.

So when you get a term life insurance quote the insurance company is calculating that after an examination of statistics on people like you, it will pay on a known number of such policies and won't pay on the majority of them. So underwriting is determining how much the payment should be for a given amount of coverage, or whether even to accept the risk and provide the insurance at all.