When an insurance company assesses the relative risks associated with insuring a specific individual in order to set a fair and reasonable premium it is said that they are underwriting the applicant. Underwriting determines the insurability of any given applicant and, if the applicant is insurable, the corresponding policy premium.
Since life insurance plans cannot be cancelledor changed by the insurance companyonce the policy is in force, a policyholder's insurability normally comes into question only once; especially if the plan is being calculated with a level premium system.
A number of factors are considered, including any physical factors (such as Smoking, Obesity, and dangerous hobbies), which will determine the type of risk an individual presents to the insurance company. A premium is then generated by the insurer based on the hazards found during the underwriting process.
Whilst a number of Hong Kong life insurance plans are available without a medical exam of the policyholder, meaning that the applicant does not have to submit to a medical examination prior to receiving coverage under the policy, a number of insurers will require a medical exam as standard in the application process.
Insurers who do not normally require a medical exam may request additional information in the form of a doctor’s report in the event of any unusual responses being provided by the policyholder in the application.
The results of a medical exam can impact the coverage being provided by the insurance company in the following ways:
In a worst case scenario the insurance company may decline to offer cover to the applicant due to a serious or terminal condition, usually one which would result in death in the short term. This is something which tends to be avoided by most life insurance companies in Hong Kong.
The insurance company may offer life insurance coverage to the applicant following a physical examination but only in return for an increased premium, also known as a loading. The amount of the loading will reflect the increased risk identified by the medical exam.
The insurance company may offer coverage to the application but may exclude certain causes of death. For example, the policy may exclude death caused by windsurfing or skydiving.
Exclusions, other than the standard Suicide Exclusion Provision, are not commonly practiced by life insurance companies in Hong Kong.
The insurance company may decline to provide coverage to the applicant, but may offer to provide coverage at some point in the future. This may be applied in the event that the individual has a serious (but temporary) injury, or if they are suffering from a major (but curable) medical condition.
Having a medically underwritten life insurance policy, that is to say a life insurance policy which was obtained after submitting to a physical examination, can mean that the policyholder will pay a higher overall premium in the event that the examining physician diagnoses any significant medical conditions, and such an identification could even mean the removal of the possibility of coverage altogether.
However, in the event that a Hong Kong life insurance policy is obtained after a medical examination has been performed; the policyholder cannot be held responsible for anything which the doctor failed to identify provided that the policyholder has not breached utmost good faith by wilfully hiding a condition.
As such, and on the assumption that applicants will be truthful with the insurance companies, it is often better to go for a medically underwritten policy that a non-medically underwritten plan despite the chance that the premium may be inflated.
If you would like to learn more about medical examinations on life insurance applications, and how these exams may potentially impact your Hong Kong life insurance premium, please Contact Us to speak to one of our expert advisors today.
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