Underwriting is the process used by financial institutions, such as banks and insurance companies, to evaluate the risk of insuring or lending money to an individual or entity. This assessment helps determine whether to approve a loan or insurance policy and under what terms. Underwriters analyze various factors, including credit history, income, and the value of the asset involved. In the context of insurance, underwriting involves assessing the likelihood of a claim being made. Underwriters use statistical data and guidelines to set premiums and coverage limits. This ensures that the company remains financially stable while providing protection to policyholders, such as individuals or businesses seeking coverage for risks.