【Life Insurance】How does the insured's medical history affect an application? Where is the line between acceptance and rejection?

Many people have the misconception that, because life insurance has few exclusions, they can successfully take out a policy at any time. In fact, having few exclusions does not mean that the underwriting process is lenient. In particular, as we age and minor health issues start to emerge, these may become grounds for an application to be declined or for an extra premium to be charged! So, what factors will an insurance company consider during underwriting? What illnesses might result in an applicant being declined? Today, 10Life will explain with examples.

Applicants must disclose information truthfully; incomplete or inaccurate information may affect claims

In addition to purchasing life insurance through brokers or agents, many insurance companies now also offer online applications, making it more convenient for consumers to obtain cover. Both online and offline applications require applicants to declare their information truthfully. Under the principle of utmost good faith, applicants must provide the insurance company with accurate and truthful information. Otherwise, the insurance company may ultimately refuse to pay a claim.

During the application process, insurance companies will usually ask about the applicant’s occupation, height, weight, smoking habits and medical history. If the applicant has unfortunately suffered from a specified illness, or is unable to complete the application directly online, they may need to contact a customer service representative or insurance intermediary to continue the process. Common medical-history questions during underwriting include the following illnesses:

• Diabetes
• Cancer
• Heart disease
• Stroke
• Liver disease
• Kidney disease

Having suffered from a specified illness does not automatically mean an application will be declined

Insurance companies will generally consider a number of factors before deciding whether to provide cover. Take diabetes as an example. If an applicant has diabetes, they will need to answer further follow-up questions, such as the type of diabetes, age at onset, level of blood-glucose control and whether any complications have developed. If necessary, the insurance company may require the applicant to undergo a medical examination, urine test and blood test for glycated haemoglobin (HbA1c), among others, before deciding whether to charge a non-standard premium or decline cover.

It is worth noting that an insurance company will not necessarily decline cover because of a serious illness. In fact, some conditions commonly regarded as “minor illnesses”, such as fatty liver and acid reflux, may also become grounds for an application to be declined (see Table 1). Therefore, buying life insurance while you are in good health is the best approach.

Table 1: Factors insurance companies may consider when underwriting life insurance for different illnesses

Term life insurance provides pure protection and offers good value for money

As highlighted in our previous article, compared with whole-of-life insurance, term life insurance does not include a savings component. It has lower premiums and higher cover, providing consumers with greater leverage on the death benefit (i.e. death benefit ÷ premiums paid). 10Life analysed more than ten term life insurance products currently available on the market and rated each one based on its payout multiple and policy terms. Before making a purchase, you can use the 10Life “Product Decoder” to compare different products and analyse their similarities and differences.

Table 2: Comparison of payout multiples for term life insurance (10-year payment period)
 

Assuming a 35-year-old non-smoking man, with a death benefit of HK$1,000,000 and a 10-year payment period

Further reading

1. 〈Term life insurance is not all the same: how should you choose the coverage period?〉
2. 〈Hong Kong’s insurance premiums per capita are among the highest in the world, but is the cover still insufficient? Why is term life insurance so often overlooked?〉
3. 〈Why does life insurance have so few exclusions? Comparing the coverage and exclusion principles of life insurance and general insurance〉
4. 〈【Claim payable or not?】Breaking down life insurance disputes: key details revealed〉

Note: The above information is provided by 10Life, updated on 9 November 2021, for reference only and does not constitute sales advice.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.