Is your life worth insuring? You undoubtedly think so, but from a life insurance underwriter’s point of view, the answer could be a big fat NO! Understanding how life insurers determine whether or not to insure you and at what rating can be a big help when you’re ready to shop for a life insurance policy.
For the purposes of this article, we’ll be talking about the types of life insurance that require medical examinations, but you should be aware that even those term life insurers who don’t require a medical exam will want a truthful medical history. Basically, the more life insurance you’re applying for, the more closely the insurer will look at your health.
What Does the Medical Exam Involve?
In most cases, the medical exam can be performed at your convenience in your home by a paramedical professional or a nurse. It typically takes about half an hour, during which the examiner checks basic things like blood pressure, height and weight. You’ll be asked for a urine sample and there may be a blood test and other tests like an EKG as well. You’ll also be asked detailed questions about your health history and lifestyle habits. And you will be required to sign a form giving the insurance company permission to access your health records. The exam may actually discover a condition you didn’t know you had, which may result in you being declined coverage — something you’ll have to disclose if you apply for life insurance with another company later.
What’s the Point?
Essentially, anyone underwriting your life insurance wants to assess how likely you are to die before your policy matures, because the earlier you die, the more they lose on the policy payout. They factor in a number of things in addition to your medical records. These include your age, gender, occupation, tobacco, alcohol and drug use, occupation, hobbies, where you travel for business and pleasure, and family health history. They take all the information you provide and use actuarial tables to place you in a risk class. The better risk you are deemed to be, the lower your life insurance premium will be.
What’s an Actuarial Table?
According to Investopedia.com, an actuarial table (also called actuarial life table and mortality table), is a spreadsheet that calculates the life expectancy for people at different ages and the probability they’ll survive to a particular age. They are computed separately for men and women, because women outlive men statistically.
Life insurance underwriters divide people into two groups: smokers and non-smokers. If you are still smoking, that fact alone should serve as a wake-up call to quit. Within each of those groups are basic categories: Preferred Best, Preferred, Select, Standard Plus, Standard and Table. The Table category is further subdivided. The absolute worst ranking is Table 10, because actuarially speaking, you could drop dead at any moment, which makes you a very poor risk. The highest ranking, Preferred Best, means you’re in tip-top shape and could probably qualify for the Astronaut program. Life insurance policies for individuals are priced according to which risk class you end up in, like Preferred -Non Smoker or Standard Plus Smoker. According to the Insurance Information Institute, “A small percentage of people have health conditions or histories that disqualify them for even ‘standard’ rates. Many in this group will be offered insurance at ‘impaired risk’ or ‘nonstandard’ rates.”
What Conditions Make You Uninsurable?
There are a few conditions that may make you uninsurable or so adversely affect your premium that it’s cost prohibitive. According to an article on BankRate.com, these can include:
- High blood pressure that isn’t well-controlled. A high reading is not a deal-killer, and it is possible to getting a really excellent rating with less than optimum blood pressure. But it’s a condition that can lead to other serious diseases, so insurers are wary of it.
- Type 2 diabetes. Because it can lead to many complications and other life-threatening diseases, adult onset diabetes will definitely affect your rating.
- Sleep apnea. It can interrupt your breathing and sleep patterns, lead to stress-related conditions and impair your ability to drive and operate machinery. However, if it’s well-controlled, you may still be able to get a favorable rating.
- Heart disease. Since it’s not one thing but a bunch of conditions, underwriters will look at each condition individually along with the medical history of your immediate family before assigning a rating or determining that you’re uninsurable.
- Asthma. If you can demonstrate that it’s well-managed, it’s entirely possible to get a good rating.
- Cancer. The word alone is a red flag, but it doesn’t immediately kill your chances of getting life insurance at a favorable rate. Like heart disease, it will depend on the individual condition. Different insurers will underwrite differently, so it definitely pays to shop around.
- Obesity and Eating Disorders. Because these can contribute to so many other conditions and diseases, insurers give a lot of weight to yours. Too heavy or too thin, and you could be unfavorably rated or uninsurable.
- Organ Transplant Recipient. This, too, is assessed on a case-by-case basis because some organ transplants have statistically better outcomes, with fewer complications
Opinions varies. Even if one insurer has turned you down or given you an unfavorable rating, another may apply different standards or have different company policies. You can start your search for competitive life insurance quotes here.