When you apply for a life insurance policy, your insurance company will usually ask you to undergo a medical test to assess your overall health. But what if they didn’t? Are there policies wherein this test can be foregone? And is that a situation you would want to be in?
Let’s look into it.
It may seem advantageous to get insurance policies without the medical test pre-requisite (No- Med Policy) for the following reasons:
- It saves you from the cumbersome process of taking out time to travel to the medical center and getting the test done
- The time taken for policy approval is considerably shortened
- Probability of application rejection due to ill-health becomes nil
- A win-win situation for individuals suffering from pre-existing medical conditions, be it minor or major, who would have otherwise had to pay a high level of premium or had their application rejected
However, the insurance company is essentially doing away with the entire process of underwriting, wherein they assign a risk class to a potential policy holder based on medical and financial checkups.
Thus, it makes sense that they wouldn’t do so with for free.
The Cost Factor
Policies which discount medical tests tend to charge higher premiums since the amount of premium is usually based on the perceived risk that an individual’s health is exposed to.
This is traditionally determined with the help of the medical test analysiswhich is missing in such cases
You could actually be charged a lower rate of premium- called Preferred Rate if you are healthy, a benefit you do away with if you avoid getting tested. Here’s how Life Insurance rates are classified, Preferred Rate
- Standard Rate
- Smoker Rate
- Sub Standard Rate
Thus, if you get tested and are declared to be extremely healthy, you could be offered a special rate called preferred rate and you pay lesser premium compared to the standard rate.
The Possibility of Rejection
When you buy a non-medical policy, you undertake a Declaration of Good Health. This is a self-declaration stating the current state of your health as a policyholder.
This declaration puts the onus of complete disclosure on you. In case it is found to be inaccurate, a claim made on a non-medical policy can be rejected on the grounds of nondisclosure of material facts.
Thus, if you deliberately hide material facts relating to your health i.e. those which could affect an insurer’s decision to insure you, your claim could get rejected.
However, since Oct 2015, claims made on policies older than 3 years old cannot be rejected by insurers under any circumstances.
Even if you were yourself oblivious to certain health complications or if they had not appeared when you got the policy, the onus falls on you, since no medical examination was conducted initially.
While insurance policies are usually supposed to cover your Human Life Value, an amount calculated based on the process of medical and financial underwriting, policies which do not include these processes, may limit cover.
This means that you are at the risk of being underinsured, which can have disastrous financial consequences down the line when you or your family need financial support. Use this calculator to know how much Insurance cover you need.
Is it worthwhile to invest in such a policy?
Since the price of policies which exempt medical tests is higher, it makes sense to evaluate the costs and benefits associated with such policies before you decide to buy them.
You should go for them only if they truly satisfy your needs and fit your budget.