Underwriting Life Insurance Versus Medical Evaluations
“My doctor never mentioned that
she was concerned about my health so why did my life insurance
company charge me more for my policy?”
 The
answer is that life insurance companies and medical
doctors evaluate medical conditions from different
perspectives. Therefore, it is quite common for an
insurance company to charge an increased rate for life
insurance based on your medical history when your personal
physician has never suggested the presence of a potential
impairment. In fact, your doctor may have even told
you that you “are doing well” or that he
is “happy with your current health”. Sound
confusing? You are right.
What
is Life Insurance Underwriting?
Life insurance underwriting is the process
by which insurance companies review an individual’s
health history, avocations and lifestyle factors to determine
their actual risk of mortality. The goal of life insurance
underwriting is to accurately assess an individual’s
risk level for the purposes of assigning the correct rate
for life insurance. Every life insurance company has its
own unique set of underwriting
guidelines for categorizing an individual’s health
class. Therefore, it is common for one insurance company
to offer a lower rate than another depending on how your
health history matches their respective health guidelines.
Likewise, life insurance underwriting and practical medicine
do not come to the same conclusions regarding an individual’s
overall health. Why?
Life
Insurance Underwriting Versus Your Physician’s Evaluation
The reason why life insurance companies
and doctors have competing views on medical impairments is
that each evaluates your health based on different objectives.
Life insurance companies look at an individual’s overall
life expectancy while doctors normally treat medical conditions
by managing symptoms. Furthermore, life insurance underwriting
involves making future decisions about an individual’s
risk level based a current “snapshot” of your
health while medical doctors have the luxury of continuous
evaluation and treatment based on ongoing health changes.
Life Insurance companies have only one chance to get it right
and will therefore be much more conservative when assessing
your risk level. Finally, while a specific impairment may
pose no immediate threat in your doctor’s opinion,
life insurance companies consider every kind of health condition
as being a potential increased risk.
A
Real Life Example: Borderline Diabetic or Just a High Sugar
Reading?
Let’s consider the hypothetical example
of Mr. Jones, a 60 year old business owner that has had slightly
elevated blood sugar levels (glucose) at his last two visits
to his doctor but has otherwise been in excellent health.
How will a life insurance company view the recent blood sugar
elevations? What will his attending physician say about the
higher than normal readings?
His attending physician will likely review
the degree of Mr. Jones’ sugar elevations and either
suggests that he change his diet while warning him of the
potential for type-2 diabetes or simply document his medical
file to watch for blood sugar results on his next lab test.
He may or may not mention to Mr. Jones the long term potential
for diabetes. He will likely schedule another fasting lab
test in 2-3 months and have Mr. Jones come in to evaluate
the results. If the elevations are significant, the physician
may diagnose type-2 diabetes and begin to consult with Mr.
Jones about ongoing treatment and control. If the elevations
are mild, he may continue to monitor the blood results without
disclosing to Mr. Jones the readings as a significant health
risk.
On the other hand, all life insurance companies
will scrutinize the elevated glucose readings very closely.
As part of the life insurance
application process, all insurance companies will
require a complete blood profile to
include a glucose test as well as an A1C reading, which is
a more defined test for the potential for diabetes. The insurance
company will also review Mr. Jones’ medical records
from his attending physician including all notes and the
actual lab tests completed at his office. Depending on the
results from the life insurance
exam and review of Mr. Jones’ medical file,
the insurance company may charge a rate commensurate with
borderline diabetes. In other words, the insurance
company may assume borderline diabetes even though Mr. Jones’ doctor
has not told him that he was a borderline diabetic.
Mr. Jones applies for life insurance and
is unexpectedly rated or postponed based
on his lab profile done for the insurance exam combined with
the medical information in his doctor’s report. The
insurance company’s decision is a shock to Mr. Jones,
but a reality when it comes to life insurance underwriting.
Good
News from MEG Financial
If you have applied for life insurance and
been charged more unexpectedly, MEG Financial can likely
help! One derogatory underwriting decision does not mean
that better rates are not available with a competing life
insurance company. The key is having an experienced independent
insurance agent as your advocate. At MEG, “we leave
no stone unturned” in making sure that we identify
the insurance company that will offer each customer the best
rate based on their specific health circumstances. Call
MEG Financial today at (877) 583-3955 or submit
this short form and we will shop the marketplace
to make sure that you have the most competitively priced
life insurance policy.
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