One of the hard facts of life insurance is that not everyone who wants it will qualify.
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. Since life insurance companies want to issue you a policy — but only at a premium that makes sense, chances are good that you can still get a good, solid life insurance policy at a reasonable, affordable premium even if you have a few black marks in your medical history.
But most insurers go beyond your health when vetting you. Here’s what they look at:
Your application. Generally, the life insurance applied for must be reasonable given your income and net worth.
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 lumberjack, construction worker or police officer.
Your health questionnaire. 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 cancer, other than some skin cancers, within the last couple of years, you may have a hard time finding coverage, for example.
Your height and weight could also disqualify you if you are extremely obese — but insurance companies do routinely issue policies for people who are a few pounds… or tens of pounds… overweight if their health is otherwise good.
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% 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 larger 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 agent or the underwriter to clear up the discrepancy.
Your sex. 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.
A final word
Remember, the life insurance industry doesn’t expect your health to be perfect. 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 pool. 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.
