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. You can find the podcast episode at the end of this article.
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 change of circumstances relating to 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. This is true for term life insurance policies as well as whole-of-life insurance and other life insurance policies that long-term; are not renewable and are often fixed in price from the outset for the life of the policy.
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, and 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.
Do I need to tell a life insurance company about cancer?
No, if your life insurance policy is in place and you answered all questions on your life insurance application form at the time that you applied, accurately and honestly then there is no need to tell your life insurance company about a change to your health. If, however, you have not started your life insurance policy, you will usually be required to tell the insurance company about cancer as most life insurance application questions include questions about cancer and investigations that you may be having.
Should I tell my life insurance provider if I am diagnosed with a terminal illness?
Yes, but not because the diagnosis of a terminal illness will affect your life insurance but because many life insurance policies include cover for terminal illnesses. This means that you could be eligible to make an early death claim if your terminal illness diagnosis meets the terms of the terminal illness cover within your life insurance. This could be very beneficial in relieving financial pressures at a difficult time.
Should I share a family member's health change with the life insurer?
It is not necessary to inform the life insurance provider if your family member's health changes. Anyone who suffers a serious health event may feel alerted to check that their life insurance policy is valid and will cover them in case the worst happens. As long as they have disclosed their health factually at the time that they applied for the life insurance, there is no reason why the life insurance will not pay out the lump sum or income that the policy insured if they were to die. It is also common for your life insurance application to have asked you about the health of immediate family members - again, you only have to disclose details of what was true at the time that you made your application. Your cover will not be invalidated if a family member goes on to suffer a health problem that you were previously asked about.
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 the 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.
Do life insurance companies share information?
The short answer is that they don't do this without reason or request and importantly, your medical information is protected and you would have to consent to release information to each organisation individually. However, when you apply for life insurance, you will be asked whether you have ever been declined for life insurance or if you were offered special terms (restricted cover or increased premiums can be examples of special terms). You must answer this question honestly to ensure that your cover, when it starts, is valid and will pay out in the event of a claim. This prevents applicants who are declined by one insurer from simply going to another insurer and omitting the information that has caused one declined application. If you answer 'yes' to this question, the insurance company will ask you for more information to verify the circumstances of the decline or the special circumstances.
When do I need to tell my life insurance company about a change to my health?
Only at the time that you apply for your life insurance cover and before your life insurance policy is started - you do not have to share any change to your health after your life insurance policy has commenced However, sometimes you may have to disclose your health information if you apply to either increase your cover or add additional benefits to your cover such as critical illness cover.
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 ensure 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.