The method insurance companies use to work out your level of risk is called underwriting.
We’ve mentioned that your risks change over time, as well as when you move through different life stages. But some people are seen to be more risky than others because of their health or their family’s medical history.
The method insurance companies use to work out your level of risk is called underwriting. It’s done when you apply for insurance and will usually require you to answer a bunch of health-related questions and undergo some medical tests.
Depending on your risk profile, the following things could happen:
If you’re healthy, you should get covered at the lowest possible premium, but in extreme cases, really high-risk people may be turned away completely because covering their risks would just be too expensive. An example of this is someone with a terminal disease, because they’ll definitely need to claim very soon. If there are some things that might make you an increased risk, like if you’re already suffering from a serious illness, then the insurer may make your premium higher (called ‘applying a loading to the premium’), or exclude certain things from your policy so that you can’t claim for something you already have.
It’s really important that you are honest during the underwriting period because, when you submit a claim, the insurer will definitely take a much closer look at your medical history. If it turns out that your condition was existing and you didn’t tell them about it or you lied about its severity during underwriting, your claim won’t get paid out anyway.
So, exclusions are the risks that an insurer will not cover. Some exclusions are based on your specific risks (e.g. if you already have a troublesome back, they might not cover disability due to future back issues), but other exclusions might apply to all people the insurer covers. For example, any claims resulting from someone committing suicide or which happened when they were committing a crime would very likely be excluded.
All exclusions will all be listed in your policy document, and it’s really important that you read that thoroughly so you don’t get any nasty surprises when you come to claim for something. You should also keep an eye out for long waiting periods, like only being able to claim in 6 months time, and strict rules, like you won’t classify as being disabled unless you lose both legs and an arm at the same time. Some insurers may also tell you that you don’t have to undergo any medical tests, but will then make your premium very high to compensate their “blind risk”.
Find out more about what’s in your policy documents here.
At Indie, we’ve managed to streamline the underwriting process to feature only the most necessary questions, which are asked as part of your online signup, and there are no hidden catches or long waiting periods; you’re immediately covered from the moment you sign up. Also, medical tests are only performed at random (so most people won’t have to worry about these) and this has absolutely no negative impact on how much your premium will be.
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