01 Jul How your life insurance application is assessed
Aside from getting home insurance, a life insurance policy should be something on the top of your priorities. And because of how vital it is in one’s life, it may also be the largest insurance policy you’ll have. Finding the right life insurance policy is no joke, so you’ll have to go through a detailed application process.
Your Duty of Disclosure
Applying for a life insurance policy requires you to disclose any and all information that has anything to do with your application. Failure to do so may result in having your level of cover reduced or even worse having your policy canceled.
What information do I need to disclose?
You would usually be asked to disclose the following information:
- Medical history
- Financial history
- Sports and pastimes you participate in
The amount of information you will be required to give may vary depending on the type of cover you’re applying for.
Providing your correct medical history to your insurer from the day you were born until your policy goes into effect is part of the process of applying for a life insurance policy. This means that you are required to disclose any information that could affect the outcome of your policy. For example telling your insurer about a cold that you had last week may not be relevant however telling them about being asthmatic since you were a child is appropriate. If you’re not sure what information is relevant, you should always disclose.
But if you’re not sure about the exact details of your medical history, your insurer could contact your doctor to view your medical files after you have granted them the permission to do so.
In some cases, you may be even required to go through a medical examination or be asked to do a blood test depending on your medical history. But this will be commonly be paid for by your insurer.
Remember, these are just some of the steps that might occur when applying for a life insurance policy. Viewing of medical records, blood tests and medical examinations are not always asked for by the insurer.
For lump sum benefits such as life, trauma, and TPD, you will only be required to provide some financial information such as your yearly income. But if you’re applying for a larger lump sum benefit (e.g. over $5 million) you may be required to disclose more information to explain the need for such a large amount of cover.
For income protection, you will need to provide a proof of income upon your policy application. In both circumstances, you’ll also need to disclose if you have suffered bankruptcy or insolvency in the past.
For life, trauma, and TPD, your insurer will require you to disclose your occupation to them. But for income protection, additional information about your occupation such as your qualifications, experience, the exact type of work you do, etc., will be needed.
Sports and Hobbies
The sports you enjoy or hobbies you participate in can have a significant effect on your premiums, so it is essential to disclose such information to your insurer. Although this may not affect life insurance and trauma, it can affect your total and permanent disability and income protection insurance. Mainstream sports such as basketball, soccer, tennis, swimming, and golf may not exactly cause a huge change in your premium but extreme sports such as skydiving, bungee jumping, rock climbing and other dangerous past times could have an impact.
Do I need to disclose any information to the insurer after the policy has gone into effect?
As long as you have observed your duty to disclose all necessary information, you do not have to disclose any more information about your financials, occupation, health or sports once your policy has gone into effect.
What decisions can be made by the insurer?
When your insurer has gathered all the necessary information, they will then make their assessment based on that. This is why providing correct information and being honest with your answers is crucial. Life insurers can make decisions such as:
- Insure you with standard rates
- Insure you with a percentage loading
- Insure you with a per mil loading
- Insure you but with exclusions (e.g. exclude cancer)
If you are unsatisfied with your insurer’s decision, it may be reviewed again in 12 month time. But if you are declined, you can also speak to your adviser about other alternatives.
You will receive a message once the decision is made and your insurer will inform you about the outcome. If your application is accepted, your insurer will then send you a policy schedule which outlines your cover including when the first premium is due.
The Axiom Risk team is well qualified, having worked in banking/financial planning industry for more than 25 years collectively.
Contact us today on (08) 7231 1412 for a confidential and personalised discussion about your individual circumstances and requirements or visit our Risk Insurance Adelaide Website.