Srikanth was 30 years old, and his wife Srimati was 28 years old. They were married for 3 years and just had a baby. In a terrible twist of fate, Srikanth suffered a sudden heart attack and died immediately. There were hospital bills for the baby to pay, immediate expenses for the ceremony, and the wife and newborn baby's future to worry about.
Upon going through his documents, his brother Sridhar found a life insurance cover for Rs.25 lakhs. He immediately filed a claim with the insurance company. Sadly, Srikanth had taken an insurance policy that did not need a medical test. The claim was rejected on the grounds that his medical history was not disclosed at the time of taking the policy. It was a bitter and harsh lesson for the family, which could have been saved from at least some degree of financial troubles if only Srikanth had disclosed his medical history at the time of buying the policy.
Usually, an insurance company will require the insured to disclose health information and undergo physical health tests before issuing a term life insurance policy. A few insurance policies are issued without a medical test; however, they usually don't provide sufficient risk coverage and have other disadvantages, which we will look at in detail later.
Why Medical Tests?
Insurance premiums are determined based on the risk perception of the insured by the insurance company. There are several factors that influence the risk level, such as age, lifestyle habits such as smoking and drinking, family health history, occupation, and the past and current health status of the individual.
The premium amount is usually inversely proportional to the risk perception of the individual's health by the insurance company. For example, smoking increases the chance of contracting several critical illnesses and is considered a big health risk. The premium charged to smokers is higher than that charged to non-smokers. Similarly, if there is a family history of diabetes and hypertension, the risk is considered higher, as both of these conditions can potentially cause several more health problems.
Thus, a complete disclosure in the insurance company's questionnaire and the individual's health test results are vital in determining the insurance company's risk level, which impacts the premium amount.
How are the Tests Conducted?
Most insurance companies have a tie-up or authorize specific medical test centers where the examination is conducted. Basics like height, weight, BMI (body mass index), blood and urine tests, ECG, and hypertension measurement are taken. Depending on the age and the details in the questionnaire filled out, other tests are conducted.
The insurance company usually pays for the tests. This is because they would like to have reasonable faith in the individual's test results and health assessment. After receiving the test results, the insurance company will evaluate the risk and determine the premium amount. It can take a minimum of 2-3 days for the tests and the premium determination to be done.
Skip the Medical Tests?
Most reputed companies will not provide life cover without a medical test. So, if someone offers life insurance without a medical test, tempting as the offer may be, it is not a recommended one.
Sometimes people may try to influence you to not disclose information that can be detrimental to the risk perception, e.g., family history of illnesses or drinking habits. However, it is not recommended to withhold true and material facts from the insurance company. If the cause of death is due to a pre-existing disease that was not disclosed, they may reject the claim when it is made, and the family will face financial burdens.
Buy a Plan without Medical Tests?
While it may sound like a convenient thing to do, it is not advisable to buy life insurance without undergoing a medical test. The primary reasons for this are:
- Claim rejection: Even though medical tests are not mandated, disclosure of all health conditions is mandatory. A failure to disclose the pre-existing medical conditions accurately can result in claim rejection, especially if the cause of death was due to one of these conditions.
- Higher premium: Since the insurance company provides the insurance plan without seeing evidence of medical test results, the premium charged will be higher. In other words, when one is in reasonably good health, there is a much greater incentive to get tested to lower the insurance premium payable on the policy.
- Low-risk coverage: Term life Insurance policies issued without a medical test will usually cover only smaller amounts between Rs.5 lakhs to Rs.25 lakhs, which may not be sufficient to cover the financial requirements of the family.
Customization of Plans
These days, several customizable insurance plans are available. They are tailored to suit the needs of your family and work around your health history. Add-on riders such as critical illness now cover several illnesses like cancer, kidney failure, etc.
The plan best suited for you can only be determined if a complete and accurate picture of your health and your family's financial needs are chalked out. This is one more reason a health test is beneficial before taking term life insurance.
If you have good health, it is highly beneficial to get the medical test done, as the premium payable will be low. In case you have a history of health problems, it is still imperative that you get the medical tests done, as the risk of the claim getting rejected is high. While you may be paying a higher premium, you have an assurance that the insurance plan is in good faith, for the sum assured, and highly likely to be honoured in the event of the insured's unfortunate death.
In summary, get a medical test done and disclose all health history accurately for the best insurance on your life, one that will be paid and truly save your family from financial worries.