How Your Life Insurance Application Is Assessed
Russell Cain Updated: 31 January 2020
A life insurance policy is one of the most important types of insurance you will ever apply for and outside of home insurance, it may be the most important insurance policy you have.
As a result, when you apply for a policy you will be required to go through a detailed application process wherein you provide the insurer with information about your overall health and specific lifestyle. The insurance company then, generally, uses this information to assess your risk of possibly lodging a future claim, which will determine your cover acceptance and premium rate.
Your Duty of Disclosure
When you are going through the application process, you have a legal duty to disclose any and all information which may be relevant to your application, especially information which you could reasonably be expected to know that may affect the insurer’s decision to provide you with cover.
A life insurance policy is essentially a legal contract you enter into with the life insurance company. Failure to answer application questions truthfully and accurately, to the best of your knowledge, can result in your contract being modified, a reduction in your sum insured and even your policy being cancelled or claim being denied.
What information do I need to disclose?
Depending on the insurer, you will generally need to provide some basic information, like your name, address and employer, as well as more specific personal information, such as your height, weight and lifestyle habits. In your application, you should disclose any and all facts which could influence the assessment of a proposal for insurance, including:
The level of information you will be required to provide may depend on the type of cover you are applying for.
1. Medical History
You are required to inform your insurer about your relevant medical history from the day you were born until your policy goes in force. This means that if you suffer from a relevant medical condition that only occurs after you have gone through the application process; you are required to notify your insurer.
Relevant medical history includes information which can affect the outcome of your policy. For e.g. telling your insurer you suffered from the flu may not be relevant whereas telling them you were born with a heart defect is relevant. When in doubt you should always disclose.
In some cases, if you are unable to remember exact details of your medical history, your insurer will request an “authority to view” form from you, giving them the authorization to contact your doctors and view your medical files.
Some insurers may also require you to undergo a medical examination or blood test depending on your medical history. This will generally be paid for by your insurer.
It is important to note that medical examinations, blood tests and the viewing of medical records will not always be requested by the insurer.
2. Financial History
For lump sum benefits (life, trauma and TPD), you will be required to provided only limited financial information which includes your yearly income. If you are applying for a larger lump sum benefit (generally over $5 million) you may be required to justify why you need such a large amount of cover.
For income protection, you will be required to provide proof of income at the time of your policy application.
In both cases, if you have suffered from bankruptcy or insolvency, this will need to be disclosed.
3. Occupation
You will generally be required to disclose your occupation to your life insurer for life, trauma and TPD.
For income protection, you may be required to disclose further details about your occupation including qualifications, experience, the exact type of work you do and so on.
4. Sports and Pastimes
Sports and Pastimes you participate in can have an affect on your premiums and it is important you disclose this to your insurer. While generally this may not impact on life insurance and trauma, it may impact on your Total and Permanent Disability and Income Protection insurance.
While generally mainstream sports such as football, cricket, basketball, tennis, swimming and golf will not affect your premiums, dangerous or extreme sports and pastimes such as sky diving, bungee jumping, motorsports, mountain climbing and scuba diving could have an impact.
We are experts at finding cover for people who participate in dangerous sports or pastimes. Speak to one of our specialists for more information.
Do you need to disclose any information to the insurer after the policy is in force?
As long as you have complied with your duty of disclosure, you do not have to disclose any further information about your health, financials, occupation or pastimes once your policy has gone in force.
What decisions can be made by the insurer?
Once your insurer has all the required information, they will make their assessment based on the information provided. This is why it is crucial that all information is accurate and you are honest with your answers.
Life insurers can make the following decisions:
Insure you with standard ratesInsure you with a percentage loadingInsure you with a per mil loading (a dollar figure per $1,000 of cover)Insure you but with exclusions (e.g. exclude cancer)Decline to insure you
Itâs important to know that if a decision has been made which is not satisfactory, it may be reviewable in 12 months time. If you are declined, you can speak to our specialists about your options.
When the decision is made, your insurer will inform you in writing of the outcome. If your application is accepted by the insurer, they will send you a Policy Schedule which outlines your cover including when the first premium is due.
If you change your occupation do you need to inform your insurer?
No, generally you are not obligated to inform your insurer if you change occupations, even if your new occupation is riskier than your previous occupation. This is due to the fact that most life companies offer Guaranteed Renewable contracts. However, it’s always best to consult your product disclosure statement (PDS) or broker to be certain.
