Getting a term policy? All you need to know about the medical tests that will decide the premium

• When applying for a term life insurance policy, medical tests are often a standard requirement.
• The tests are an integral part of the underwriting process as they help insurance providers make informed decisions.
• The results of these medical tests may significantly affect the premiums the applicant is offered.
  

Gulshan Sharma, 43, (name changed) had a term policy of ₹1 crore, but recently wanted to enhance it by another ₹1 crore. When he approached the life insurance company, he had to do a video call with a doctor who asked him questions about his health and whether he was a smoker or consumed alcohol. He was quoted a premium figure but asked to undergo a medical test.

When applying for a term life insurance policy, medical tests are often a standard requirement. “Life insurance, particularly term plans, serve to address mortality risks, which significantly depend on an individual's health and fitness. Therefore, before underwriting any policy, it is common for insurers to assess an individual's overall health and potential risk factors,” says Rajesh Krishnan, Chief Operations Officer, Bajaj Allianz Life Insurance.

Importance of tests in the underwriting process

The tests are an integral part of the underwriting process. They help insurance providers make informed decisions about pricing.

Within life insurance, medical underwriting is required because it helps evaluate the risk involved while underwriting the customer. “Medical evaluation is generally done on the basis of the customer declaration which may be followed by either a tele-medical check-up or a full physical medical check-up,” says Rhishabh Garg, head, term insurance, Policybazaar.com, an insurance portal.

The results of these tests provide valuable insights that insurers use to determine how much an individual's premiums should be and what coverage they are eligible for.

Required tests

The specific types of medical tests required for a term life insurance application can vary from one insurer to another, but there are common tests that are typically requested.

These may include blood pressure measurements, blood tests to evaluate cholesterol levels and blood glucose, measurements of Body Mass Index (BMI) to assess obesity risk, urinalysis to reveal kidney or metabolic issues, and an electrocardiogram (ECG) to detect heart irregularities.

Additionally, insurers often review an applicant's medical history, including past surgeries, hospitalisations, or existing medical conditions. These factors contribute to the overall risk assessment and influence premium calculations.

Results of medical tests affect premiums

The results of these medical tests may significantly affect the premiums the applicant is offered. If an applicant's test results indicate good health, with no significant medical issues or risk factors, they are likely to qualify for standard or preferred premium rates.

These rates are typically lower, as they reflect a lower perceived risk to the insurer. However, if the tests reveal medical conditions, the premiums would go up, depending on underwriting norms of the insurer.

“Occasionally, insurance applications may be declined or incur additional premiums, contingent on factors like age, current health management, medication use, and disease severity,” says Krishnan.

If an individual is found to have diabetes, term insurance premiums can increase by 20-75% or more, depending on the severity of the condition. For heart issues, mild cases may result in a 20-50% premium increase, while severe conditions can lead to a 50-100% or higher rise in premiums.

How to reduce your term insurance premium

To reduce term insurance premiums, several strategies can be employed. Firstly, staying fit and maintaining a healthy lifestyle is crucial, as insurers often consider your health when determining rates.

Accurate disclosure of information related to your health and lifestyle habits is essential, as withholding information can lead to higher premiums or claims denial. Avoiding high-risk activities, such as extreme sports or tobacco use, can also help lower premiums.

Additionally, shopping around and comparing quotes from various insurance providers can assist in finding the most cost-effective coverage that aligns with your specific needs and budget.