Medical underwriting: Are you paying more for less?

“Medical underwriting for low-value life policies usually involves a simple blood test whereas policies sold to older customers, or for high policy cover amounts, might require more detailed tests and a comprehensive health check by your doctor or one appointed by the insurer,” says Thembisa Mapukata, General Manager: Tied Sales Distribution at Old Mutual Mass and Foundation Cluster.

“We describe underwriting as the process of collecting health and lifestyle information about a potential customer. This information is used to create an individual risk profile; the risk profile then determines the premium charged for the selected amount of cover,” Mapukata explains.

Depending on the sum insured and type of policy you take, your insurer will either require simplified underwriting (only questions, no medicals) or full underwriting (questions and medicals).

Simplified underwriting involves nothing more than answering a series of health and lifestyle questions with no medical tests. Full underwriting, meanwhile, involves a full medical examination and a questionnaire that must be answered honestly and accurately by a doctor.

The three myths of underwriting

There are three reasons why you might be concerned about going for full underwriting:

• The first is that you might find out something negative about your health. This concern is easily addressed because it is important to know about serious medical conditions as early as possible, giving you time to seek the necessary medical treatment to help you to live a long and healthy life.

• The second concern is that the full underwriting process might reveal a condition that prevents you from taking out the life insurance policy. While this is a possibility, it is important to note that a medical condition flagged during underwriting does not automatically prevent you from getting life cover. The insurer might still offer you cover that excludes certain conditions or charge you a higher premium to adjust for the higher risk linked to your condition.

“You must remember that hiding a medical condition from your insurer or lying about it when you fill in the questionnaire, will almost certainly result in your future claim being rejected,” warns Mapukata.

• The third concern is that your privacy will be compromised if you go the full underwriting route. After all, nobody wants a total stranger to know about his or her health issues. This concern is perhaps the easiest of the three to dismiss because all medical underwriting procedures and requirements are conducted with the utmost respect for your privacy.

But there’s good news

The good news though is that once you have done full underwriting, your premium will be accurately priced according to your individual risk profile. But if you don’t do underwriting, you could end up paying so much more, even for a medical condition that you do not have (and therefore don’t need cover for) because the insurer will make all sorts of assumptions on your risk profile.

One of the best ways to make a tough decision is to list the pros and cons. So, the pros of full underwriting include finding out about potential health conditions at an early stage; being charged the premium that accurately reflects your risk profile; obtaining the maximum cover for your policy and providing much-needed financial security for your family.

And the cons? Worst case, some conditions might be excluded from your policy or your monthly premium will higher; but these options are far better than having your claim denied.

If you complete this simple ‘pros versus cons’ exercise, then you will not hesitate to go the full underwriting route.

“Deciding to undergo the full underwriting process could turn out to be one of the best decisions you make; you not only get more value from your cover, but also ensure that you protect your family’s financial future and leave a legacy,” concludes Mapukata.

*This article does not constitute financial advice. Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and life insurer.