InsuranceLecturer — Like all insurance, life coverage depends on actuaries to come up with the statistics on life expectancy. For any guaranteed minimum payout, the insurer must collect in a minimum amount of capital and then invest it to produce the payout.
This capital will be collected as premium installments over the lifetime of the insured. So, the actuaries collect every single piece of information about the lives of all the people in the US. Obviously, not all of it is relevant, but the essence of what they do is simple.
The census tell us approximately how big the population of the US and there are reasonably reliable birth and death records. Starting with this crude measure of life expectancy, actuaries monitor the health and lifestyles of individuals.
Some people have dangerous hobbies and contrive to die early in accidents. Others have the misfortune to be diagnosed with various diseases and, an average number of years later, they die.
This allows increasingly certain predictions to be made about every individual’s life expectancy. If the actuaries predict a long life, the premiums will be low. If there is only a short life expectancy, the insurer will either refuse the policy or charge a very high premium.
This places a very clear duty on everyone who applies for an insurance policy. Insurance companies cannot afford to verify every fact you disclose. There has to be some degree of trust.
However, the law protects insurance companies. If it should later appear you were less than honest in anything important you said about yourself, the insurer is entitled to cancel the policy without liability.
Depending on the circumstances, you may get some of your premiums back. Thus, both in what you say when answering the basic questionnaire to get life insurance quotes through this site and in anything you later say during a medical, you must be as honest as possible.
If there is anything you do not know or cannot remember, you must say so. This is the difference between getting a policy and keeping it. All the information you supply is fed into the statistical models produced by the actuaries who then assess the premium rate.
Obviously, some of the medical information could be extremely sensitive, so this assessment process is strictly confidential. You personal information is only seen by the assessment team. The rest of the time it is encrypted and not available to be viewed by anyone else.
If there is still doubt, you may be asked to supply further details or a more detailed medical examination may be requested. If this happens, the insurer will usually pay the cost of the doctor’s time and of any testing.
Once the assessment is complete, you will be notified of the decision on whether to offer you a policy and, if so , at what premium rate. In marginal cases, the premium may be increased or special terms may be written into the policy limiting liability depending on the cause of death.
As an aside, note that all this work is being done for life insurance purposes only. If the company discovers a problem with your health, it is not obliged to tell you.