People believe that decisions regarding how much life insurance cover they buy is their prerogative and mostly, the sum assured depends on how much they are willing to pay as premium or how much they would be willing to save by taking a life insurance policy. But people normally remain oblivious of the fact that with each passing year life insurance becomes costlier and might even go out of reach.
It is, therefore, necessary for every young person to decide on buying life insurance policies well on time, when he is eligible for maximum life insurance cover on his life.
The life insurance underwriters pay very serious attention to one’s family history while evaluating risk on his or her life before issuing a policy of the proposed sum assured and term. These technicalities make savings through life insurance very different from saving or investing in other financial products.
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For example, history of death of any close family member due to cardiovascular disease or malignancy in early age, as reflected in family history column of the proposal, is noted as a risk with very high probability in respect of the proposer even though he may not be smoking or drinking liquor occasionally. Death of mother or sister due to ovarian cancer will not be influencing the decision of the underwrite if the proposer is male. But if both parents died of cancer and at an age within the term of insurance proposed for by the son or daughter, insurance is usually granted with rated up premium, if not declined.
Usually death around the age of 50 is considered as a highly dangerous signal. Diabetes at early age or blood pressure and heart problems at age around 40, coupled with death of parents and siblings at age below 60 also call for further health investigation and, in most of the cases if the term of the policy is substantially beyond age 60 of the proposer, higher premium is charged or proposal is declined or policy is offered with shortened term which in fact may not serve the purpose of the proposer.
Over a period of time medical underwriting has become liberal in India as average longevity has crossed the average earning period of people and health hazard stands considerably reduced. Insurance underwriters are gradually accepting the dwindling role of family history in impacting longevity of the insured lives. Similarly, if healthy lifestyle and diet is followed by someone, then he or she would get some credit points when risk on the life is evaluated vis-à-vis family history. Yet, youngsters seeking high insurance cover must be aware about their family’s health history which they must disclose faithfully.
Declining insurance cover is a rare event but several proposals are declined every year on health or family history related grounds. The industry maintains a declined case directory which is referred to in all high-risk cases so that a person whose proposal is declined by one company does not manage to buy policy from another by suppressing material facts. Let us accept that life insurance is a serious business for both, the seller as well as the buyer.
The writer is former MD & CEO, SUD Life, an Indo-Japanese JV