If you decide to buy a life insurance policy, no matter what type of life insurance you choose and from which insurance provider you buy it, one part remains the same. This part is the application.
Application is the first and the most important part of the life insurance policy. Application for life insurance includes a whole range of detailed questions that you have to answer truthfully. Mistakes made in the application can cause you serious implications. Not stating correct facts in an application can lead to your insurance getting cancelled.
Questions in the Life Insurance Application
Life insurance form tries to capture all the relevant information which has an effect on your health and life (i.e. longevity). These details will include, but may go beyond, the following factors:
1. Basic Details
These are the general questions that appear first in the application just to get you started.
Your basic information that could be asked include
a) Nameb) Agec) Addressd) Date of birth
2. Medical History – Self & Family
Your medical history can tell the insurance company a great deal about when you are likely to die.
The healthy you are the less the company will charge you. You can be asked the following information regarding your health
a) The disease you are suffering from
b) Surgeries undergone
c) Medications you take/have taken
You should disclose fully if you are suffering from any disease. The medical records you provide are also verified by the insurance provider later on.
3. Occupational Details
The work you do for a living is also asked while filling application for the life insurance policy.
Occupation is asked in the application to ascertain the risks involved in the work you do. The type of job you do can affect the price you pay as a premium.
If you have a safe desk job that involves little to no risk then it will not increase your premium. Jobs such as teaching, or normal office jobs are considered safe.
Whereas jobs involving huge risks will cause you to pay higher premiums since there are high chances that insurance has to pay your claims. Examples of these jobs are, working in a mine, chemical factory, etc.
These are the activities you do that interest you and gives you pleasure. You are asked about them as certain hobbies are considered risky by the insurance companies. These can increase your premiums or in extreme cases cancel your policy.
Hobbies like scuba diving, sky diving, racing, mountaineering, etc all carry risks and can increase your chances of death. So, you are asked if you take part in these in the application.
The way you lead your life has a direct bearing on the amount you would pay for life insurance. Following a lifestyle that is unhealthy and risky can have a profound effect on your insurance.
Though the lifestyle parameter is very broad, generally these things occur in your application
a) Smoking habit
Smoking has a lot of ill effects associated with it. It can cause diseases such as lung cancer, mouth cancer, breathing problems, etc. If you smoke, you are placed in a high-risk category by the insurer. High risk will lead to higher premiums.
Regular intake of alcohol is harmful to health and thus increases your chances of facing health issues such as liver problems, etc. This also puts you in the high-risk category. Heavy drinking can shoot up your premium
c) General health
If you don’t eat well, don’t exercise, and live a healthy lifestyle, chances are you can have high cholesterol or blood pressure, etc. Problems like obesity and blood-related conditions directly affect and deteriorate your health if not taken care of.
By making certain changes in your lifestyle, you not only have a chance to reduce premiums but also can improve your health and well-being as well.
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6. Family’s Medical History
The insurance provider is not only interested in your medical reports, but your family’s as well. This is because there are certain hereditary diseases, that is, they can be passed on to the coming generations. These diseases can curb your life expectancy.
This is why life insurers want to know any diseases that your parents or siblings suffer from which are life-threatening and can be passed on such as cancer, diabetes, etc.
Questions related to the above-stated topics are asked as they help the insurer to understand how much is the risk of you dying. These questions also have a significant impact on premium, and thus the overall cost of insurance.
Other Important Questions
However, there are certainly other questions that the application contains. These don’t have any effect on the risk but are essential to the working of your policy.
1. Who will be the beneficiary?
Beneficiaries receive the death benefit with the accrued bonus from the policy if you die within the policy’s term. You choose who will receive the amount in case of your untimely demise.
In the application, you are asked to fill in the basic details of the beneficiaries such as their name, age, etc. You are also required to fill the percentage share you want to assign to the selected beneficiaries.
A secondary beneficiary is also asked in case your primary beneficiary dies before you.
2. What will be the payment frequency?
The application also contains a question on the mode of payment you will choose to pay the policy premiums.
Options available are:
1. Single payment: Onetime payment in a lump sum
2. Regular payment2.1 Monthly2.2 Quarterly 2.3 Yearly
What is the Process After Application?
After you fill in all these details and submit your application, the next step is the verification of the details. After the application is complete, you need to submit the supporting documents and pay the standard premium estimated for you at the beginning.
Once your application is submitted for underwriting, you may need to go through a medical assessment if needed. After the underwriting one of the following may happen:
a) Your application for the proposed cover is accepted at the standard premium and a policy document is sent to you.
b) The insurer finds your proposal high and wants to offer a lower life cover amount. If you accept the policy will be issued for the lower life cover, any excess premium also returns.
c) The insurer finds you to have a higher risk, for example, you are diabetic. The insurer will ask for an additional premium which is nominally higher than normal. After depositing the extra amount the policy is issued to you.
Life insurance applications are seldom rejected, as the insurer will contact you for any confusion or information mismatch. So, make sure to reveal all the information to the best of your knowledge and available documents.
After these are successful then the insurer goes ahead with your policy.