Life insurance can save your family in the midst of a tragedy.
Insurance is a business based on risk. When a company issues a policy on an individual, it is betting that the individual will live long enough to pay premiums until the policy is profitable. It bases this risk assessment on exhaustive analysis of mortality and morbidity statistics. It's common practice for all applicants who want a term life insurance policy to undergo some kind of physical examination.
What Is Term Life Insurance?
Term and whole life insurance are the most common forms of life insurance sold. Whole life insurance covers the insured for his entire life, regardless of his health at the time of death. Term life insurance covers the insured for a set period of time: 10, 20 and 30 years are common periods. If the insured is still alive at the end of that period, the policy ends and the insurance company keeps all premiums paid. The insured has the option of buying a new policy, but at a rate adjusted to reflect his current age and state of health.
Why an Exam?
By subjecting each applicant to a medical exam, the insurance company can better predict her level of risk. This allows insurers to increase the premium payments for people who pose a high risk, or even deny them coverage altogether. On the plus side, people in unusually good health can qualify for exceptionally inexpensive term insurance.
What Can You Expect?
An insurance medical exam runs a spectrum based on potential risk. In some cases, you'll simply be asked some basic questions about your medical history, which the company verifies via your medical records. In other cases, you'll visit with a nurse who will take your vital statistics and some fluid samples. A full physical workup by a doctor is also a possibility. Most insurance companies base which kind of exam to conduct on the level of risk an individual poses. An athletic 22-year-old is less likely to get the full workup than an overweight 45-year-old.
What Happens Next?
Once you've completed your exam, the insurance company will analyze the results and compare them with various statistics. Once that is finished, one of three things will happen. The policy might be issued at the value you originally agreed upon. It might also be declined because the exam found an untenable health risk. A third option is called a "rating"; in this case, the company will insure you, but only at a higher cost than originally discussed. You will be informed of the new price and have the option of declining or accepting the adjusted offer.
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