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Underwriter Helps with Financial Issues

A financial underwriter is important because of the uncertainty that always exists in the economy and financial transactions or situations. Doing anything financially, especially making big decisions where large amounts of money are at stake, is always a risk. You never know how it will work out or if you will make money or lose it. Sometimes, though, it is necessary to have a little extra insurance in the case that things go less successfully as planned. Although the price of this "insurance" may be another extra expense, in some situations it could mean the difference between a minor setback or a complete failure.

Defining Financial Underwriter

The exact definition of a financial underwriter can vary depending on the specific situation. Broadly speaking, a financial underwriter is someone or something--often some kind of financial institution--that provides a form of insurance or guarantees a financial transaction. Wachovia defines an underwriter as an insurance company that is essentially paid to be responsible for fulfilling a contract. They make decisions concerning whether or not a company should take certain business and financial risks. Basically, the financial underwriter guarantees that financial obligations will be satisfied, even if the person or company with the obligations cannot pay them itself.

Financial underwriters are important because they provide a guarantee, meaning that any risk taken is less of a risk than without a financial underwriter. Money is always a high stakes issue in business, or even in life in general. New businesses or companies continually need capital and investments to get up and running, and then new investments are often required along the way to keep things on track. However, investing in something is always risky because people can never be certain if that investment will be repaid with benefits or if money will be lost. Financial underwriters can make the decision about investing easier for potential investors by eliminating some of the risk involved and acting as insurance for the company and its investments.

Financial underwriting is a bit like co-signing. When people are attempting to make big purchases like houses or cars, sometimes the financial institution giving the loan requires there to be a co-signer. This co-signer helps assume some of the responsibility for the repayment of the loan, meaning that the loaning institution takes less of a risk in giving the potential buyer the needed money. A financial underwriter is very similar in many respects because it is a guarantee, a safety net, and added assurance.

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