Thursday, September 4, 2008

Life Insurance Underwriting

The first step in applying for a life insurance policy is when you complete a proposal form. When this proposal form is received by the Insurance Company it is then 'Underwritten'.

The insurance company need to establish if you can be accepted at normal rates, based on the answers given to all the medical questions on the proposal form. It is very important that you answer these questions truthfully as the company can refuse to pay out on a claim if it transpires that the client did not tell them about a pre-existing medical condition.

If a client suffers from something like Asthma, it will be necessary to complete an additional Questionnaire specifically on this ailment. This reduces the possibility of the insurance company requesting the information from your GP; and cuts down on time and the costs for the insurer.

Where further medical evidence is required, the insurance company may request a Private Medical Attendants Report (PMAR) from your own GP and may also request a Medical Examination (ME). The latter can be done with your own GP or with a GP appointed by the insurer, it depends on the company. Both of these reports, if required, are paid for by the insurance company.

All insurance companies have 'Underwriting Limits' up to which no/limited medical evidence is required. These are based on the age of the client and the level of cover that they a looking for. For example, a person under 35 years of age can propose for up to €900,000 life insurance without the requirement of a PMAR or ME, subject to what's referred to as a 'clean' proposal. This refers to where there are no adverse medical conditions raised on the proposal. These limits vary between companies.

Depending on the level of cover, age of client, existing medical conditions and the purpose for which the life insurance is required; the insurance company may also request a Personal Finance Questionnaire, Loan Offer Agreement, HIV Test, Fasting Blood Test or an ECG (heart test).

The insurance company reserve the right to 'load' the normal premium that would be required, for someone who is in bad health. They do this by calculating a percentage increase on the standard rate, based on the severity of the ailment. They can also postpone offering terms to a client until a future date or they can decline to offer any terms at all.

It is important to remember to submit the proposal/s to the insurance company/s as early as possible where the life insurance is required in connection with a mortgage or other credit transaction. It does take a reasonable amount of time for the insurer to gather all the medical evidence that may be required and it is very frustrating when your money is ready for collection but there is a delay on the life insurance requirement.

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