What to Expect When Applying for Life Insurance in Australia
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Buying life insurance for the first time or after a significant life event, for example, getting married or buying a house, can be confusing, especially when you have a pre-existing medical condition.
There are generally about 6 steps you need to follow when applying for life insurance, including the underwriting process, which is when a life insurance company evaluates the risk of providing you with coverage.
In this article, we’ll guide you on what you can expect when applying for life insurance, how the underwriting process works and the value of a pre-assessment when you have a pre-existing condition.
6 Steps to applying for life insurance
In general, the life insurance application process looks something like this:
1Request a quote online or over the phone
You can generally request life insurance quotes either through a broker, comparison website or directly from the insurance company. However, not all Australian life insurers sell directly to new customers.
2Review and compare quotes
Take your time when considering life insurance quotes, this is a big decision. An insurance broker can help you compare policy options and will answer any concerns you might have. To start, you might want to use a comparison website like ComparingExpert and compare policy pricing and features from leading life insurance companies’ side by side online.
3Request a quote online or over the phone
Choose a policy and life insurance company you feel confident will suit your requirements and your budget.
4Fill in the application form
The life insurance application form provides the insurance company with the information they need to approve your coverage. Generally, a life insurance application will require personal information about your age, gender, health, and job.
5The underwriting process begins
The insurance company’s underwriter(s) will review your application and assess your risk to determine your acceptance status and premium. Each company has different underwriting guidelines with each policy type typically having specific underwriting criteria. For example, for income protection insurance underwriters will usually require more information regarding your occupation and salary compared to applying for a death benefit.
6Your acceptance status is revealed
Once an insurer has all the information required to make an assessment, they will advise you in writing of the outcome.
If they do not accept your application due to concerns over an increased risk, they will generally offer you alternative terms of insurance so that you can still obtain some cover. The alternative terms offered may take the form of:
- A loading which is an increased premium to cover the risk.
- An exclusion of risks relating to a specific medical condition or activity.
- A reduction in the level of cover.
In cases where the insurer has serious concerns, they may decline cover. However, they may offer a reassessment at a specific future date. There may also be some cases where they cannot offer any protection at all.
Usually, if you have a pre-existing medical condition, participate in a dangerous occupation or pastime, or are requesting a large amount of cover the underwriter might ask that you take a medical exam to confirm your eligibility for coverage and finalise your insurance rate. Rules vary from company to company.
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General information required on a life insurance application form
Generally, a life insurance application form will request details regarding your health, the type and level of cover you want and information about the people you want to receive the lump sum benefit, i.e. your beneficiaries.
When assessing your application for life insurance, companies generally consider the following, your:
- Age and gender: The older you are, the higher your premiums will generally be because of your increased risk of disability, illness and death.
- Medical history: If you have a pre-existing medical condition, an insurer will generally require you to provide accurate and honest information regarding the instance.
- Current health: When assessing your application, insurers usually take your current physical health into consideration.
- Body mass index (BMI): Underwriters typically use your height and weight as an indication of your physical health.
- Smoking status: Smokers generally pay higher premiums than non-smokers because of their increased risk of developing an illness.
- Family history: If there are hereditary diseases in your family, like cancer or heart disease, your insurer will generally take this into account because you might be predisposed to developing the same condition.
- Financial history: When applying for income protection or TPD insurance the insurer will typically assess your salary over a specific period to determine if you qualify and the amount of cover they can provide you with.
- Occupation: Having a dangerous job, for example, a police officer will usually mean you're exposed to increased risks, which might lead to a loading or exclusion on your policy.
- Sports and pastimes: If you partake in dangerous activities, like skydiving, underwriters need to take such information into account when assessing your risk for future injuries.
Other information that might be requested to assess your application
Insurers try to keep their assessment limited to the information provided in the application form, but in some cases additional medical or financial information may be requested.
This could be because of the information you provided in the application that requires further investigation, or the amount of life insurance you are applying for.
Typically, the need for additional medical information will involve an insurance company:
- Writing to one of your doctors for further information (as authorised by you on the application form).
- Asking you to undergo a medical examination or blood test. Generally, the insurer will cover the cost of any such additional testing.
- Requesting you to complete some additional questions concerning a specific medical condition they’re concerned about.
Start the life insurance application process
The value of a pre-assessment
A life insurance pre-assessment request is designed to give you an indication of how a life insurance company might assess your application and pre-existing medical condition while you remain anonymous. Such an assessment should provide you with a good idea on the premium you'll be expected to pay and the terms under which cover might be provided, for example, if there will be any special exclusions.
The results of such an assessment should never be a reason for you to not fully disclose all relevant information to a life insurance company. You must meet all your disclosure duties when formally applying for life insurance or risk your future claim possibly being denied.
Who might benefit from a pre-assessment?
Generally, people who have a pre-existing medical condition, participate in a dangerous sport or have a high-risk occupation or unusual financial situation, might first want to complete a pre-assessment provided to a few leading life insurance companies to help them determine which one they'd like to apply to.
If you have a complicated medical history, the underwriter might request more information or ask that you undergo a medical exam. Depending on your medical history, a medical exam could consist of drawing blood, urine tests, checking your blood pressure and recording your weight or requiring more in-depth, for example, a stress ECG is you have heart problems.
All health and financial information provided by you is strictly confidential and is only used by an insurer to assess your life insurance application. Once the assessment process has been finalised, and the insurer has issued your policy, your information is kept securely on file should you make a claim.
Your responsibility when applying for insurance
As part of your application, you are asked to sign a declaration stating that the information you provide is complete and correct. If for some reason an insurer has cause to query the accuracy of the information provided at a future date, (such as in the case of a claim) and non-disclosure is revealed, it could result in your cover being invalid.
It is therefore essential that you ensure the accuracy of the information provided at the time of application. Once your policy is issued, any change that occurs will not affect your cover, and as long as you continue to pay your premiums, you will continue to be insured until the policy expires.
Frequently asked questions and answers
Which is better, applying directly or through a broker?
There is no best way to apply for life insurance. It should depend on your personal circumstances, your knowledge of the industry and how much time and money you’re willing to spend when searching for a policy.
- Insurance broker: A broker will usually help you during the application process and provide quotes from a variety of companies, so you can find the most suitable policy at a price you can afford.
- Buying directly: Quick and easy application process directly from the life insurance provider. However, you’ll need to shop around and conduct your own research and will be limited to only purchasing their products.
What’s the difference between an underwriter and insurer?
The company that provides (issues) the insurance is usually known as the insurer or insurance company. An insurance underwriter is typically the person(s) appointed by the insurer to evaluate your application and reviews your medical records if provided, and then decides on which terms and at what price you'll be eligible for a life insurance policy or not.
Is the life insurance underwriting process the same for all insurers?
No, each life insurance company generally follows their own underwriting guidelines and have their own criteria by which they’ll assess your application.
What happens if my test results uncover an unknown health problem?
Results of medical examinations and other tests are disclosed to life insurance companies directly under the authority provided by you. If a previously unknown medical situation presents itself, they are only authorised to inform you of how it affects your insurance application.
In such circumstances, they would send a copy of the medical evidence to your family doctor upon your request. They may then recommend that you consult your doctor to discuss the findings of your tests in more detail.
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