Nearly every major life insurance company in the United States requires some sort of medical examination or evaluation for all new applicants, especially when the requested death benefit is above a certain threshold. Many insurance applicants are uncomfortable with this aspect of the life insurance acquisition process and do not understand the need for such an examination.
Life insurance companies agree to take on a certain amount of financial risk when issuing a new life insurance policy. A great deal of consideration must be placed on the likelihood that the new customer may die before the insurance company has had sufficient time to recoup the initial expenses involved in issuing the policy. One of the most essential considerations is the new customer’s health status, and a battery of simple blood tests can reveal enough information for insurance actuaries to make a proper determination of risk.
Although every life insurance company may conduct business differently, there are several common actuarial concerns when evaluating the potential financial exposure of a new life insurance policy. Most life insurance companies require applicants to submit blood and urine samples so tests can be conducted to determine whether or not the person’s present health status fits within the confines of a pre-determined pricing model. The most common things insurance companies test for and examine are the presence of nicotine, illegal drugs, diabetes, HIV/AIDS, cholesterol levels, hepatitis, and protein levels. Some insurance companies test for or examine other things, depending on their own previous customer experience and business methodology.
The collection of blood and urine samples is typically done within a week or two after the submission of a life insurance application. An independent medical professional will usually visit the applicant at his home to conduct a paramedical exam, and also to collect the fluid samples. To avoid processing delays, it is always in the applicant’s best interest to schedule this appointment as soon as possible after submitting the life insurance paperwork.
When the laboratory test results are returned to the insurance carrier, the company will examine the results to determine which underwriting category is most appropriate for their new applicant. If the applicant’s medical exam and lab test results indicate an extremely healthy individual, that person is classified as a low risk which translates into a lower monthly premium. Conversely, if the results indicate a less healthy individual, a higher risk classification is assigned and the person will be required to pay an increased premium for the policy.
By conducting routine laboratory tests of new applicants’ blood and urine, life insurance companies achieve a more accurate evaluation of the potential financial risk exposure they will face with the issuance of a policy. This allows them to charge a price for the policy that fits more precisely into their financial model and is appropriate for an individual’s given situation and circumstances. Additionally, these laboratory tests can benefit the individual by revealing previously unknown medical concerns, or by validating the person’s assumption of good health.
Some people believe they can artificially alter the results of a blood and urine test by ingesting supplements or specialized drinks designed to hide certain issues like smoking or drug use. Many life insurance companies are aware of these tactics and have begun to test for the chemicals in these products. If such chemicals are detected, the applicant may be placed into a higher risk category, or even denied coverage altogether.
If an individual lies or omits significant information on a life insurance application that is eventually discovered or revealed through laboratory testing, the underwriting department will likely examine the entire application document with much more scrutiny than they would have otherwise. The potential for suspicion may work against the applicant and result in higher premiums or a denial of coverage.