Buying life insurance? Don’t skip the medical test

A detailed health check-up will not only make the claims procedure easy, but also bring down the premium for you

No medical test required', says the advertisement by the insurance company, and it seems just what you wanted to buy. But will it be the right thing to do? Today, many insurers are offering policies that don't insist on putting you through the entire gamut of tests before covering your life. However, be warned that these plans are not as customer-friendly as you might think. Here are the points you should keep in mind before picking up such insurance plans. 

Declaration is key 
The exemption from medical tests does not mean you can sweep your health problems under the carpet. You will still be required to make a declaration about your health condition in the application form and the premium rates will be fixed on the basis of your disclosure. If you hide a health condition, it can have severe repercussions on your insurance cover. The strictness of the claim procedure is inversely proportional to the leniency of the underwriting. 
    Usually, a claim is rejected when the company has reason to believe that key facts were suppressed at the time of purchasing the policy. It's not easy to hoodwink insurance companies, especially when the amount at stake runs into lakhs of rupees. In the case of early death (within two years of taking the policy), insurance companies examine the cause in minute detail. The claims department of insurers has a panel of medical experts, who can determine whether a particular illness existed prior to taking the policy. 
    That's not all. "There are agencies that can dig out information by talking to neighbours, colleagues, acquaintances, even family members, of the deceased," says Sanjeev Pujari, appointed actuary of SBI Life. If the company finds evidence of fraud or suppression of facts, the claim is rejected. Roughly 2-3% of claims end up in the trash can on this count every year. 
    Admittedly, not all claims that are rejected due to suppression of facts are fraudulent. In some cases, a lay person may not even be aware of his health condition. For instance, borderline diabetics may not know about their illness till a medical test is conducted. However, an insurance company can reject the claim saying that the mild illness (which was suppressed) had ballooned and caused death. So, even an unintentional mistake can blow away an individual's life insurance cover. 
    But if a buyer goes through a medical test, the responsibility of determining his health condition shifts to the insurance company. When Mumbai-based Paurav Mehta's father died of a heart attack, the insurer denied the claim, saying that he had not disclosed his heart illness at the time of buying the policy. But a court ruled that since the company had subjected the policyholder to medical tests and then fixed the premium, the claim cannot be denied. 
Pay less after medical test 
Stringent medical tests also mean lower premium rates for the buyer. An insurance company fixes the premium based on risk perception. If a medical check-up of two individuals shows that one has normal sugar level, while the other is a borderline case, the normal person will be charged a lower premium for the same cover. 
    However, if the two people apply for a policy that does not require medical tests, both will be charged the same premium. This is because the insurance company will factor in the possibility of the risk for both and will, therefore, hike the premium rates. If you are in good health, there is little reason to pay for somebody else's medical problems. You just have to show your insurance company that you are a low-risk candidate and the best way to do that is to undergo a detailed medical examination. Still, few buyers realise that insurance policies issued without any medical tests charge a higher premium than plans that require health check-ups. They are attracted by the convenience of a no-test policy compared with one that may require them to go to a hospital. "If the premium for a healthy person is 8,000, someone with a health problem would be charged 12,000. But if it does not conduct medical tests, it may charge everyone 10,000 uniformly. So, the healthy person will be charged a higher premium for no fault of his," says Gopal Kumar, principal consultant, Allons Insurance Research & Consultants. 
Cost-cutting by insurers 
If medical tests reduce the risk for insurance companies, why do they push products that don't require screening of customers? "A medical examination can cost up to 3,000-5,000. If they absorb this, their cost of acquiring a customer goes up," says Akshay Mehrotra, chief marketing officer ofPolicybazaar.com. Insurers admit that they save on costs, but deny that this is the purpose of offering such products. "We do it from the customer's point of view, so that they do not have to take the trouble of going to the diagnostic centre," says Subrahmanyam B, vice-president and head, health vertical, commercial lines and risk engineering, Bharti AXA General Insurance. "Non-medical lifeinsurance business is beneficial for the proposer as well as the insurance company. It saves on cost and cuts down the timeline," adds Kamalji Sahay, managing director and CEO, Star Union Dai-ichi LifeInsurance. 
Cover may be inadequate 
The policies that don't require medical tests are usually low-value plans. Even if you are young (below 30 years) and in very good health, no company will offer a cover of more than 5 lakh without a medical test. For buyers in the age bracket of 30-40 years, the threshold is even lower at 2 lakh. In most cases, such low-value plans may not be able to serve a person's life insurance needs. "If someone wants a higher cover, he should look for a pure protection plan, which will require him to undergo medical tests," says Aneesh Khanna, senior vice-president and head of marketing and product management, IDBI Federal Life Insurance. One reason why such policies find so many takers is because they can be issued much faster. A buyer who has to show proof of Section 80C investments to the accounts department of his company the next day may not have that much time. "The basic concern is not the insurance cover or the policy features but the speed with which it can be issued to the buyer so that he can claim tax deduction before the 31 March deadline," says Khanna. 
    Life insurance is a key component of your financial portfolio because it helps safeguard all other investments. It is not something that should be bought in a hurry. "If a person is healthy and can spare the time, he should opt for policies that require a medical test. It will work out cheaper and better for him," says Khanna. Even if you have to spend a few hours—even a day off from work—to get yourself medically tested, it will be well worth the effort. The good news is that severalinsurance companies have now started arranging for medical tests at home. So you don't even have to take the trouble of visiting the doctor's clinic. 
    Besides, there is an unintended benefit that comes your way. A detailed medical examination will tell you how fit you really are. If there is a health problem, you will be able to take corrective steps to nip it in the bud. So go ahead and take that medical test when you buy an insurance policy. 
    —with Babar Zaidi 
Tips for a health check-up 
Planning to undergo a medical test for a life insurance cover? Follow the schedule given below for best results. Mind you, we are not suggesting that you hide facts about your lifestyle or any medical condition. This is only meant to keep you away from habits and foods that could lead to abnormally high readings in some tests. Our objective is to make you give your body a chance to rest before you are subjected to a health check up. 
1 week before the test 
Stick to a healthy balanced diet. Minimise intake of salt. Avoid excessively fatty or spicy foods. 
3 days before the test 
Do not consume alcohol 72 hours before the test. It can cause liver enzyme levels to rise. 
1 day before the test 
Don't consume any caffeine product. It increases the blood pressure. Avoid nasal decongestants and pain killers unless absolutely necessary. Don't do strenuous exercises like jogging, gym training or swimming. 
12 hours before the test 
Get a good night's sleep. It will ensure normal blood pressure. Do not eat or drink anything, except water, 8-10 hours before the test. 
1-2 hours before the test 
Don't use any form of tobacco or engage in strenuous activity. Just sit back and relax.