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Have you considered purchasing critical illness insurance but felt overwhelmed by the underwriting process?
Critical illness insurance underwriting is a complex process that involves a thorough evaluation of your medical history, current health status, and lifestyle. Understanding this process is crucial in managing your expectations so you know your chances of being approved for coverage.
In this post, we will guide you through the underwriting process for critical illness insurance, uncovering the top things underwriters look at when assessing your risk.
By the end, you will better understand how underwriting works for critical illness insurance, allowing you to make an informed decision about your coverage and ensuring that you are adequately protected in the face of unexpected health issues.
Key Takeaways
- An underwriter's job is to assess your risk for critical illness insurance and the premiums you should pay based on your risk.
- Before applying, a pre-screening checklist will inform you whether a pre-existing condition will preclude you from buying a policy.
- Besides medical underwriting, the insurer also assesses your lifestyle and finances to determine if you qualify for coverage.
What Is The Underwriting Process For Critical Illness Insurance?
Underwriting is the process by which life insurance companies evaluate the risk of insuring an individual and determine the appropriate premium to charge for the coverage.
During the underwriting process, the insurance company reviews many factors, including age, health history, lifestyle habits, occupation, and family history, to assess the overall risk level of the applicant.
Each piece of information is like a piece of the puzzle, and the underwriter’s job is to put the pieces together to get a clear picture of who you are.
The underwriter uses this information to determine the likelihood of an individual making a claim on the policy. People considered a higher risk, like those with pre-existing medical conditions, may need to pay higher premiums or be denied coverage altogether.
Overall, the underwriting process helps insurance companies manage their risk and ensure that they can provide coverage to those most likely to need it while also maintaining their financial stability.
Medical Underwriting For Critical Illness Insurance
As the most crucial part of underwriting, your medical history is often the deciding factor on whether you qualify for critical illness insurance plans. Here are the things you should be aware of with medical underwriting.
Pre-screening checklist
Most insurance companies have a pre-screening checklist showing a list of pre-existing conditions that would make you uninsurable. These include AIDS or testing positive for HIV, heart attack, invasive cancer, type 2 diabetes under age 40, alcohol or drug abuse within three years, and more. If you have one of the listed illnesses, you are not eligible for critical illness insurance.
Also on the checklist are other conditions that could result in a decline or rating. These include multiple family members with a covered condition diagnosis, depression or mental disorder, high cholesterol, high blood pressure, and being overweight.
Medical underwriting requirements
Do you have to provide blood and urine samples? How about getting a report from your family doctor? It depends on your age and how much coverage you’re buying. The table below shows the medical underwriting requirements based on age and coverage amount.
Age | Coverage amount | ||||
|---|---|---|---|---|---|
Up to $100,000 | $100,001-$250,000 | $250,001-$500,000 | $500,001-$1,000,000 | Over $1,000,000 | |
0-17 | Non-medical | Non-medical | Non-medical | Non-medical | Non-medical |
18-40 | Non-medical | Non-medical | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis |
41-50 | Non-medical | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis, APS | Non-medical, blood profile, urinalysis, APS |
51+ | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis | Non-medical, blood profile, urinalysis, APS | Non-medical, blood profile, urinalysis, APS | Non-medical, blood profile, urinalysis, APS |
In the table above, APS stands for attending physician report, the medical records your family doctor has on file. It may also be required if you recently had a checkup before applying.
If you recently underwent a medical exam for another insurance application, you may ask the insurance company to use those results instead of repeating the process.
The non-medical is a fully completed medical questionnaire asking for details about your health, medical history, and lifestyle. Suppose you answer ‘yes’ to any question. In that case, you will have to provide the date of the diagnosis, treatment taken and results, list of medications, and the name of the medical specialist consulted.
Family history
Since many of the conditions covered by a critical illness policy are hereditary, the medical history of your immediate family members is of utmost importance in the underwriting process.
The underwriter will consider the nature of the disease and its frequency among your parents and siblings. The age of onset and your personal medical history will also factor into the overall risk assessment.
Build
Obesity is a risk factor in critical illnesses like heart disease, diabetes, and stroke. On the other hand, being underweight may also lead to other health problems. You’ll have to disclose your height and weight for the underwriter to assess your build.
Cancer and tumours
While you may be approved for critical illness coverage if you have a history of a benign tumour, a malignant tumour will most likely result in decline. Even long after successful treatment, the risk of recurrence remains high, leading to a claim under the policy for life-threatening cancer.
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Lifestyle Underwriting
Your lifestyle plays a significant role in determining whether you qualify for critical illness insurance coverage. Here are a few things underwriters look for when assessing your lifestyle.
Smoking status
Tobacco and nicotine use is a leading risk factor for cardiovascular diseases and cancer. To be considered a non-smoker, you must not have used any nicotine or tobacco products in the past 12 months.
Recent immigrants
If you are new to Canada and haven’t lived here for a year yet, you may have to undergo a hepatitis B and C screening along with a medical exam to qualify for critical illness coverage.
Also, work permit holders who have applied for permanent residency status and are not in Canada under a government-sponsored program may be limited to a coverage amount of $100,000.
Alcohol, drugs, and criminal activity
Alcohol and drug abuse can lead to organ damage to the heart, lungs, kidneys, brain, and liver, with major consequences for critical illness insurance. Alcohol addiction can also cause more accidents, resulting in claims for covered illnesses like loss of limbs, paralysis, and severe burns.
Driving
Dangerous driving habits also increase the risk of loss of limbs, coma, blindness, and other conditions covered under critical illness insurance policies.
Sports and avocations
Participating in hazardous sports and hobbies may increase the risk of accidents, leading to a higher incidence of claims like paralysis and loss of limbs. Rather than a decline, the insurance company may add an exclusion or rating to the policy. The decision depends on your qualifications, frequency of activity, and other details specific to the sport.
Aviation
An aviation exclusion or rating may be necessary if you flew an aircraft as a licensed pilot or crew member within the last three years or will do so in the near future. Your age, experience, and annual flying time will dictate whether a rating or exclusion is warranted.
Occupations
Working at heights or underground, with carcinogens or other chemicals, with explosives, and with other hazardous occupations may require a rating or result in a decline.
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Financial Underwriting
Although not as vital to the assessment as disability insurance, financial underwriting is still an important part of the process. Here are some financial attributes the insurer will take into consideration.
Minimum and maximum
While the minimum coverage varies amongst insurance companies, most will only consider covering you for at least a $10,000 lump sum. On the other hand, the maximum benefit payment you can qualify for is $3,000,000 across all insurance providers.
How much coverage you can buy may also be limited by your income. If you are between 18 and 55 years old, you can get up to nine times your annual earned income plus the mortgage balance of your home. The multiple decreases to seven times your income from age 56 to 60 and five times from age 61 to 65. For example, a 40-year-old earning $100,000 and has a mortgage of $500,000 can buy $1,400,000 of coverage.
High-net-worth
High-net-worth individuals can obtain critical illness insurance if they have ties to Canada. This means having permanent resident status, purchasing property or business in Canada, and having a spouse and children living in Canada.
Retired
While retirees may have less need for critical illness insurance, the risk of critical illnesses increases with age. Therefore, retirees are typically limited to $250,000 of coverage.
Non-income earning spouse
A non-income-earning spouse may buy up to half the amount available for the income-earning partner plus the mortgage balance. Also, the income-earning spouse should have at least as much as the non-income earner unless they are uninsurable.
Post-secondary education students and recent graduates
Although students and recent graduates may not have any earned income, they can still get up to $250,000 of critical illness coverage.
Key person critical illness insurance
Key person critical illness insurance provides financial support to businesses in the event of a serious illness to a vital employee. A business can buy up to ten times the annual salary and bonus for a key person.
Buy-sell critical illness insurance
Buy-sell insurance lets business partners buy out a partner who has fallen critically ill. An owner can get up to 100% of the value of their shares in coverage, and all owners must be insured for their proportionate shares.
Business loan insurance
Businesses can use the benefit payment from a critical illness insurance policy to repay a loan. You must provide full loan details before the underwriter grants you coverage.
Frequently Asked Questions
Is there underwriting for critical illness insurance?
Yes. Underwriting is the next step after applying for critical illness insurance. It’s the process by which the insurer determines whether to accept your application and the rate to charge you.
How long is the underwriting process for critical illness insurance?
It depends. If you give complete details about your medical history and lifestyle on the application, the underwriter won’t need to ask for more information, reducing delays.
Also, the number of medical underwriting requirements will affect how long it will take to assess your risk. In general, expect the underwriter to make a decision in a few weeks to over a month.
What is the most difficult part of underwriting critical illness insurance?
Some say providing complete details about your medical history is the most challenging part due to the amount of information needed. Others may find the hardest part is waiting for the underwriter’s decision.
Can you be refused critical illness coverage?
Yes. If the insurance company feels the risk of insuring you is too high, it may reject your application for critical illness insurance coverage.
What is the single most important factor in underwriting critical illness insurance coverage?
While underwriters scrutinize many factors when assessing your risk, the single most important one is your medical history.
Want To Learn More About Critical Illness Insurance?
While the underwriting process may seem complex and intimidating, understanding the factors that insurers consider when evaluating your application can help you manage your expectations.
By working with an experienced insurance advisor, you can get the guidance and support you need to navigate the underwriting process confidently and ensure you can obtain the coverage you need to protect your financial future.
Don’t wait until it’s too late—take the time to learn more about critical illness insurance underwriting today and take the first step towards securing the peace of mind that comes with knowing you are prepared for whatever the future may bring. Contact us at info@briansoinsurance.com or 604-928-1628 for more information.
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Brian So, CFP, CLU, CHS, BSc
I am a life insurance advisor, and I love what I do. Over the past 11+ years, I have had the privilege of assisting people with their insurance needs. Life is unpredictable, so I make sure that you are protected from the unexpected with customized insurance coverage. Being independent means that I represent many highly-rated companies and can find the right company for each client. Let me help you find the perfect insurance policy today!
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
