How medical illness history affects Term Insurance eligibility

After recovering from a major illness, you tend to be more aware of the consequences of poor health and lifestyle choices. You also value your life more than ever and make better choices each day. However, a healthy lifestyle does not guarantee the avoidance of life’s uncertainties.

So, whenever you decide to opt for term insurance, it is important to inform your insurance company about all the major illnesses you have suffered in the recent past. Based on your medical history (and a comprehensive medical test), the insurance company decides your eligibility and premium for the term insurance plan. Hence, when you provide the correct medical history to the insurance company, you might end up paying a higher premium. Still, the chances of your claim being rejected are reduced drastically.

Here is how medical illness history affects term insurance eligibility:

Understanding Term Insurance and eligibility criteria

Term insurance is a simple agreement between the insurance company and an insured individual. By paying a specific premium for a given period, you get the assurance that the insurance company will pay your dependents a pre-decided sum of money in case of an unfortunate event. After the period expires, coverage at the previous rate of premiums is no longer guaranteed, and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions.

Due to its cost-effective and simple operational nature, term insurance is quite a popular financial planning tool. Term insurance is available online and offline. However, if you have ever enquired about term insurance online, you might have been asked about your lifestyle choices, such as tobacco consumption and smoking habits. Based on your coverage requirement and age, some insurance companies also require a medical test to assess your health status.

Importance of disclosing medical history

Insurance companies need to assess the overall risk they are underwriting. For term and health insurance, an insurance company must look at the preexisting conditions and lifestyle habits. This assessment helps set premiums commensurate with the level of risk posed by the insured.

For example, if a diabetic patient approaches an insurance company for a term insurance plan, the overall risk underwritten by the insurer shall be higher. Since a diabetic is prone to heart and cholesterol-related ailments, the insurance company needs to charge a higher amount of premium for a term policy.

If you decide to hide any information from the insurance company, it can have serious consequences, including claim denials and rejections. Hence, you might end up paying premiums continuously for years, but the insurance company can still deny your claim, citing suppressing information from your end. Moreover, policies can be cancelled, and premiums can significantly increase once the truth comes to light.

It is critical that you provide all the relevant information to the insurance company related to any illnesses you have suffered in the past or any family (genetic) issues you might have. This can increase your premium amount but ensures that claims denials are out of the picture.

How different medical conditions affect eligibility

Here is a table describing how different medical conditions can affect term insurance eligibility:

A few insurers also have a mandatory BMI test before offering a premium or coverage. Age is another critical factor, as the overall physical vulnerability of an individual increases drastically after reaching a certain age.

Benefits of accurate health disclosure

When you provide all the relevant information about preexisting and previous ailments, you or your family receive numerous benefits. Some of them are:

1. There is a lower risk of claim rejection (on the grounds of non-disclosure) as you have already provided all the details about your illnesses and medical history.

2. You have the potential of receiving more favourable premium rates as accurate disclosure allows insurers to accurately assess risk, potentially resulting in more competitive rates.

3. You can also be entitled to enhanced coverage with additional riders, such as critical illness and disability riders, which can support your family in case of future medical emergencies.

4. Since you have nothing to hide, you get peace of mind as your family’s future is secured.

Summing up

Always discard any advice (from anyone) that suggests you not to disclose your medical history to an insurance company. You might think it will reduce your onboarding time, but your family will face serious consequences, including delay or denial of claim in your absence.

You might think that hiding material information related to your health can reduce premiums. Still, in reality, it ensures that the coverage accurately reflects the risk profile, potentially leading to more favourable premium rates and terms. You can also receive additional riders like those for critical illnesses and disability, further enhancing the policy and offering comprehensive protection against a wider range of life's uncertainties.

FAQs

Why is it important to disclose my medical history when applying for term insurance?

Disclosing your medical history is crucial because it ensures that your coverage accurately reflects your health risks, potentially leading to more favourable premium rates and reducing the likelihood of claim rejection.

What happens if I don't disclose my medical history to the insurance company?

Failing to disclose your medical history can lead to claim denials, policy cancellation, or increased premiums once the undisclosed information comes to light.

How do different medical conditions affect my term insurance premiums and coverage options?

Conditions such as hypertension, diabetes, and heart disease can lead to higher premiums. They may require additional medical monitoring or limited coverage options, depending on the severity and management of the condition.

Can adding riders to my term insurance plan benefit me if I have a pre-existing medical condition?

Adding riders like those for critical illness and disability provides extra security. It can cover additional risks, enhance your insurance coverage, and offer peace of mind in case of future medical emergencies.