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Underwriting Life Insurance and Long Term Care Insurance

September 20, 2017 | Insurance

I’m hesitating to apply, am I healthy enough?

Dawn Crouch, LUTCF®

Purchasing Life Insurance, Disability Insurance or Long Term Care Insurance involves underwriting to determine what rate you will receive.  Purchasing auto insurance is a calculation with known factors such as your driving history, your specific vehicle, miles driven, and coverage desired.  Applying for coverage on your life is more complicated as the decision will be made based on your health.


Position yourself for success

Exactly what will be required to approve your case will vary between companies and depends upon how much coverage you are purchasing.   The application process usually only consists of health history questions, a brief paramed exam or telephone interview and if needed a review of your medical records.  You may be tempted to say as little as possible about your medical history to your agent during the initial meeting but it is actually a smarter move to be forthcoming so they are better able to recommend a company that will be the most favorable to you.   (Underwriters are also more likely to see your case favorably if everything is disclosed up front and there are no surprises when your lab results or medical records are reviewed.)

Life Insurance rates are based on mortality

The underwriter will review your case and be looking closely at items that can help predict how long you are likely to live. While it is true that you need to be ‘healthy’ to be approved, the definition of what is considered healthy is the tricky part.   Generally, Life Insurance underwriting isn’t a pass/fail scenario.  Sadly, those who wish they were in better health often won’t even bother exploring the cost as they assume they won’t qualify or the rates will be exorbitant.    Most companies have a ‘standard’ rate, and then also offer one or more preferred rates for those who are healthier than average.   For applicants who don’t meet the criteria to be offered a standard (or preferred) rate there are usually 8 to 12 substandard rates available albeit at a higher premium cost.   Your history of cancer, stroke, heart attack (including family history), build, tobacco use, cholesterol, blood sugar, blood pressure, medications and dangerous hobbies are usually the biggest factors considered.   A 55 year old who is somewhat overweight and takes 2 prescriptions may still receive the standard rate.

Disability and Long Term Care Insurance rates are based on morbidity

These policies don’t pay if you die, but rather if you are unable to perform your occupation, or in the case of Long Term Care Insurance if you have a cognitive impairment or become unable to perform two of the six activities of daily living (eating, bathing, dressing, toileting, transferring and continence).   Your health is still the thing the underwriter will evaluate but the focus is shifted more towards looking for debilitating conditions, not just those that will affect your lifespan.   While some conditions such as diabetes can affect both morbidity and mortality, muscular/skeletal conditions such as osteoporosis, history of fractures or chronic back pain have a bigger effect on the morbidity calculation because they can indicate a higher risk of being unable to bathe or dress without assistance later on in life.  If you are a stage 1 or 2 cancer survivor or had a heart attack but with no other conditions or complications you’ll be able to qualify for Long Term Care Insurance much sooner than you will for Life Insurance.  If you are applying for more than one policy, your agent will help you decide which to apply for first and will guide you regarding the difference in underwriting processes and expected outcomes.