Let’s use some common sense here. Insurance carriers can’t just give life insurance away to just anybody who applies. In order to qualify for a good rate, the applicant has got to meet certain criteria.
In the individual life insurance market, you must be in at least decent (not perfect) health in order to buy significant quantities of life insurance. Yes, we said decent health. Life insurance is designed to exclude the very, very sick, but it is also designed to be sold, not denied. Life insurance companies want to issue you a policy – but only at a premium that makes sense. Chances are very good that you can get a good, solid life insurance policy at a reasonable, affordable premium even if you have a few black marks in your medical history.
Life insurance companies make their decisions on whether to issue coverage based on a number of factors:
Your application. Generally, the life insurance applied for must be reasonable given your income and net worth. The carrier is going to balk at providing $5,000,000 of life insurance on an individual who earns $23,000 per year. The face amount should not be so large that someone has an obvious motivation to knock you off at the time of application (no spouse jokes here…).
Your profession. Some professions are higher risk than others. If you make your living as an accountant, you may be in a different risk category than a demolition expert, ice road trucker, or Alaskan crab fisherman.
Your health. Insurance carriers issue life insurance at different rates based on your health. The better your health and history the better the rating class and the lower the premiums. If you are Super Woman, perfectly healthy, run 16 miles a day then you’ll qualify for a super preferred insurance class. If you have controlled high blood pressure and a few other dings in your medical history you might qualify as a standard class or lower. The more dings you have in your medical history the lower the rating class and the higher the premium.
There are a few conditions that result in an immediate decline at most companies, though they vary from carrier to carrier. If you have a history of significant cancer within the last couple of years, you’ll have a hard time finding coverage. Your height and weight could also disqualify you if you are extremely obese – but insurance companies do routinely issue policies for people who are overweight at a lower rating class.
It is important to not assume you can’t get coverage or that it will be too expensive. Based on your medical history a quality insurance broker will reach out to the carriers that specialize in your particular risk. Going through the underwriting process will let you know exactly what your options are.
Your habits. If you are a smoker, expect to pay more in premiums. If you are an illegal drug user, that is usually a decline, though some companies do write business on occasional marijuana users. As marijuana becomes legal in more jurisdictions, we could see some changes in how insurance companies underwrite users.
Your medical history. Many people don’t realize it, but your health records aren’t 100 percent private between you and your doctor in many cases. Medical companies routinely report significant medical information to a central clearinghouse. This clearinghouse functions almost like a credit bureau for health: When you apply for health insurance, you authorize this organization to release certain medical records to the insurance company. The insurance carrier uses this information, in part, to guide its underwriting decision, as well as provide a reality check against what you write on your application.
Your medical exam. This could be anything from a questionnaire to a brief meeting with a nurse to a full evaluation by a medical doctor, including a fitness test and/or an electrocardiogram/EKG. Generally, the older you are and the bigger the amount of coverage you are applying for, the more thorough the medical exam that the carrier will require.
Consistency. Generally, your application, the medical exam and your medical history should tell essentially the same story. If you don’t report having diabetes, but your medical records indicate you’ve been taking insulin every day for years, expect a phone call from the broker or the underwriter to clear up the discrepancy.
Your gender. Women generally have greater life expectancies than men, all other things being equal. Premiums are generally lower for women, though some states require ‘unisex rates’ require rates for men and women to be the same, regardless of underwriting experience.
The decision process can take between a few days to a few weeks.
Furthermore, it is quite normal for either the broker or the carrier to call you up with a request for additional information. They are simply trying to put together a fuller, more accurate picture of your individual health status.
How to get the best health insurance rates.
- Fast the evening before the exam. Some foods can raise lipid levels or distort lab results to make you look less healthy than you are.
- Schedule the exam first thing in the morning, before you are tempted to have a big meal.
- If your blood pressure runs high, try to have them take your blood pressure standing rather than sitting.
- Avoid caffeine or sugar right before the exam.
- Buy life insurance when you are younger and healthier. Don’t wait. Buy what you can afford when you can afford it. If you wait too long, you may not qualify for life insurance at any price. Term insurance is very inexpensive and protects your family or your business.
Remember, the life insurance industry doesn’t expect your health to be perfect. Average or below average health for someone your age is usually just fine. Some carriers have stricter underwriting standards than others. If your application is rejected at one carrier, another carrier may be happy to have you.
If you do have some health issues, you may get “rated,” or put into a more expensive risk class. Take the coverage, if you can afford it and still need life insurance. Sometimes, by losing weight, getting your blood sugar or cholesterol under control, or making other positive changes, you may be able to qualify for a better rating down the road. Meanwhile, your family still has the protection of life insurance.
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