In our podcast episode 220, we discussed life insurance and in particular how a life insurance company will underwrite or assess your life insurance application. While we recommend that you listen to the podcast yourself in full, we conclude (spoiler alert!) that you should always be honest when completing the application and if you are ever unsure about how to answer a question, say you don't know and the onus will be on the insurance company to find a way to ascertain the correct information which may mean that the insurance company writes to your GP.
Writing to your doctor for your medical history has multiple benefits, it will ensure that the information is accurate, it will increase the chances of the policy paying out, the life insurer will cover the cost and most importantly, you'll be fully covered while they carry out the work.
There is a small chance that something may show up on your medical records that will result in an increase to your insurance premium, but wouldn't you rather pay slightly more for a policy that will guarantee to pay out, than slightly less for one that won't?
Do I need to tell my life insurance provider about my current health?
Having listened to the podcast, one of our listeners asked a very good question:
Q: I took my life insurance out 12 years ago when my son was born and was a fit 30 year old. In the subsequent years I've had some health complications. Do I need to tell my insurer about issues that have occurred during my policy? I know my monthly cost is set in stone, but could the life insurance company claim non disclosure at a later date?
The simple answer is no, you don't need to inform your life insurance provider of any health issues that have arisen since you took the policy out. The application is underwritten at the time you took out the policy and based on your health at that time. The price that you are quoted takes into account the possibility that your health may deteriorate or change over time.
An insurer will have a team of actuaries whose job it is to assess the risks of things changing and they do this by looking at a wide range of statistics that provide them with the likelihood of a claim. Statistics such as life expectancies, the incidence of disease, morbidity rates are all used alongside many other statistics when life insurance companies price their products. Clearly, insurance companies price products to allow for claims and profit while undertaking full responsibility to pay out for all qualifying claims.
If you think about it, if a life insurer insisted you contact them every time you had a health condition diagnosed or investigated and subsequently increased the premiums or declined the cover, very few people would be able to afford life insurance and fewer still would be able to successfully claim on it.
Will my life insurance company pay out if I die?
Insurance companies come in for a lot of negative press when it comes to paying life insurance claims but the fact remains that around 93% of claims are successfully paid out. In fact, the main reason for a claim being rejected is non-disclosure of a pre-existing medical condition or even symptoms that you have seen your doctor about. Your responsibility is to disclose all the facts that you know at the time you complete your life insurance application according to what is asked of you which brings us back to the original point of our podcast; if you are unsure, ask for the insurer to write to your doctor. It is useful to bear in mind that you only have to answer what is asked in your life insurance application so there's no need to worry about things that you haven't been asked about.
How long does it take for a life insurance company to pay out a claim?
Having worked in the life insurance industry for over 20 years I have personally witnessed countless improvements to the claims process. Many insurers have invested heavily in specially trained staff and have even created specialist departments to handle the claims process. Some insurers have even updated their policy terms and conditions, introducing partial 'early payments' which can be paid within 24 hours of a claim being submitted, ensuring a bereaved family gets the financial support when they need it most. Full settlement of a death claim will usually be processed within two or three weeks.
Buying life insurance - 5 top tips
- Be honest on your application form - if you don't know or you're not sure about any relevant information, ask the insurer to write to your GP
- Shop around - speak to an independent expert who can get you the best possible price and provide free impartial advice
- Buy now - If you haven't already got life insurance (and you know that you need it) don't put it off. The price will be based on your age and health at the time of the application, so will only get more expensive as you get older.
- Put the policy into trust - A trust will ensures that your dependents will not have to pay inheritance tax and it will speed up the payment too.
- Consider taking joint cover or combining other insurances such as critical illness or income protection - You'll be better protected and you can save some money by combining the cover
So long as you were honest at the time of your life insurance application, you do not need to contact your insurer to update them with any medical information that has arisen since. That said, there is a possibility that if your health or lifestyle has improved since you originally applied, you may be able to get the policy cheaper now. As the life insurance quotes are based on your age and health at the time of the application, if your health is better, it may actually be cheaper to take out a new policy. In our article best and cheapest life insurance in the UK we help you to find the best life insurance policy for you, which type of life insurance is best and how to accurately compare the cost.