Life Insurance: Why Do I Need a Medical Exam?

 

When applying for a Greensboro life insurance policy, part of the underwriting process may be for you to submit to a medical exam.  Not all life insurance providers require applicants to undergo a medical exam as part of their underwriting prerequisites and some insurers even offer "no-exam" life insurance issuance.

For a "no-exam" policy, however, you'll be required to pay a greater premium amount than those charged for a standard life insurance policy.  Sometimes the cost can be as much as double.  The reason for the additional cost is because an insurer is taking on additional risk when they write you a policy without knowledge of your health history or your current state of health.  These policies may also have limited coverage options and include a waiting period of up to two years before payment benefits are available.

Getting Greensboro Life Insurance Without Getting a Medical Exam

In line with all types of insurance, the cost of a life insurance policy is proportional to the amount of perceived risk being taken on by the insurer.  The underwriting process your insurer goes through to determine whether a policy should be written and, if so, the amount of premium to charge for a particular policy involves figuring the relative amount of risk being insured.  With life insurance, the purpose of a medical exam is to provide your insurer with an in-depth snapshot of your health status.  

The results of the exam combined with the answers you provide on your insurance policy application should allow your insurer to determine which risk class you fall into.  These classes include:

• Preferred Plus
• Preferred
• Standard
• Substandard

The better your risk class, the healthier you are presumed to be, with a greater life expectancy, translating to lower premiums for your policy.

There are several ways of obtaining a life insurance policy without taking a medical exam and without going the more-expensive "no-exam" route:

Simplified Issue Life Insurance - this includes a health questionnaire that provides a general sense of your health.  The standard upper limit for death benefits on this policy is $500,000.

Guaranteed Acceptance Life Insurance - also known as guaranteed issue or final expense insurance, this policy is often used to pay burial and other end-of-life costs and is typically available limited to $50,000 or less.

Group Life Insurance - typically offered by your employer as part of a benefits package.  Benefits are generally low.

6 Risks That Increase Life Insurance Rates

When shopping for life insurance, there are a number of factors your prospective insurer will consider when determining your acceptability as an insurance risk and, if eligible for insurance with their company, the premium they'll charge. These life insurance rates will be determined using general factors such as age, gender and your health profile, and will also take into consideration any types of high risk behaviors you may demonstrate.

Bear in mind -- not every life insurance company looks at risk the same way. An example of this may be the pursuit of scuba diving. Some insurers may consider scuba diving a high-risk hobby and, as a result, increase the life insurance rates of policyholders who regularly scuba dive. Other insurers may not consider this a high-risk past-time, but may penalize you with higher life insurance rates if you like to race at the local drag strip on weekends. If you're a professional race car driver, you may find that some insurance companies will actually decline from insuring you altogether, while others may sell you insurance with a higher premium, sometimes much higher, than someone they consider to be a “normal” risk.

Risk vs. Reward

To life insurance companies, it's all about risk versus reward. They have untold actuarial data that tells them what their chances are when insuring a certain individual. They're in business to make a profit, which means they must be right more times than they're wrong when issuing someone a life insurance policy.

They're weighing the risk of you living or dying against the amount of premium you and others pay to secure your coverage. Following are some of the risk factors many insurers consider above average and that will likely cause your insurance premiums to increase compared to a more normal-risk individual. Consult your life insurance agent for information on specific companies.

1. Current health problems, including high blood pressure, as well as past history of health issues may both result in higher premium rates.
2. Overweight or obese individuals, based on weight to height ratios, are generally considered higher risks and will typically pay more for insurance.
3. If you have what's considered a risky job (see table here), this will be reflected in your life insurance rates.
4. Family health history such as heart disease or cancer will likely make you a high insurance risk.
5. & 6. Smoking or heavy drinking will both play against you when buying insurance.

What Is the Right Age for Life Insurance?

While there is no hard and fast rule regarding the right age for life insurance, the most logical answer to that question is, “immediately after birth.” Since the cost of life insurance, whether term life or whole life, is directly related to the age of the insured, the older you get the more expensive the premium becomes. Whole life coverage, which has a level premium cost for the entire life of the insured, will never be more affordable to take out than right now – today. Each year, your age brings on an increase in premium cost.

The same holds true for term life insurance, which typically has a level premium rate for 10, 20 or 30 years. The longer you wait to take out this coverage, the higher the premium rate will be for the entire term of the policy.

From Cradle to Grave

Let's take the concept of insurance from birth a little further. Assume a parent or other relative takes out a whole life policy on a newborn. The premium cost for this policy will never be lower than it will be during this child's first year of life and that premium rate will be guaranteed to never increase during the life of the policy.

This policy, when written on a child, can be prepaid in one lump sum. Then, when the child reaches the age of 18 years, ownership of the policy can be transferred to the insured, at which point it can be cashed in or continue to be funded on an ongoing basis. Cash value, which will have accumulated tax deferred for 18 years, may be used for whatever purpose the insured decides, whether as a down payment on a house, a vehicle or to help with college tuition. Or, this insurance coverage can be continued for as long as the insured elects to pay the current premium amounts due.

Who Really Needs Life Insurance

For most people, the right age for life insurance revolves around feelings of financial responsibility. Getting married, having children, buying a home or taking on credit card debt are all responsibility creating activities. Since these activities typically occur between the ages of 25-35, this may seem the logical time to become insured. When your family depends on your income to provide them a certain standard of living, insuring your income from loss due to premature death is important.

5 Reasons to Consider Whole Life Insurance

Back in the 1990s there was a move afoot in the U.S. that had people cashing in their whole life insurance policies in favor of a strategy called, “buy term and invest the difference.” This advice became popular because people realized how much more expensive whole life insurance was to purchase compared to term life and, although whole life policies contain a cash accumulation component lacking in term policies, this accumulation was slow and at only a slight interest rate compared to what was possible to make at the time in mutual funds or in stocks and bonds.

When the dot.com bubble burst in the year 2000, with the NASDAQ falling as much as 78%, many who had bought term and invested the difference saw the floor drop out from under their feet. While there are no guarantees in investing, the cash accumulation associated with whole life policies is guaranteed to increase each and every year for the rest of the policyholder's life, regardless of what the markets do. That's a big plus.

Whole Life vs Term Coverage

The major draw to obtaining term life insurance is that you can obtain a much higher death benefit for the same amount of premium you'd pay for whole life coverage. This makes the coverage attractive to younger individuals on a tight budget with a growing family to protect. The downside is that this premium level is only guaranteed for a certain “term,” after which the premium payments will increase. You'll also have to re-qualify for a new policy and any existing medical problems acquired could conceivably stand in the way of getting that new policy.

The premiums on whole life coverage are guaranteed for life, as long is your policy remains in force. You'll also never have to re-qualify for coverage even if subjected to failing health. Here are some other major reasons to consider whole life insurance coverage:

1. Your cash value won't be subject to losses in the market.
2. Any dividends you may receive aren't taxable.
3. You have access to your cash value at any time and for any reason you choose. This is without paying any taxes or paying other penalties.
4. Your insurance is guaranteed for life as long as you keep your premium payments current.
5. Benefits paid upon your death to your named beneficiaries are tax-free and guaranteed.

Here's more information. Consult an insurance professional for the whole story.