As a rule, Americans are independent thinkers. We do like being told what we can and cannot do.
During WW II many Americans did not wait to be drafted into the armed forces. They volunteered. My grandfather was a dough-boy during the first war to end all wars. He suffered from a German gas attack. Twenty-five years later he was in line to volunteer to go back to Europe and fight Germany again after Pearl Harbor.
Fortunately, the army told him that he had already done his service and there were enough younger men volunteering that they did not need him. The Great Depression was still going on. My father was only 11 at the time and needed his dad.
Even though much of the armed forces was made up with volunteers, the War Department understood that they were civilians and Americans. They would not blindly follow orders unless they were convinced that it was the best option. The War Department communicated with them through a movie entitled, “Why We Fight.”
The government understood that even though Americans will go so far, they will not blindly follow their leaders unless they are given a good reason.
Insurance is similar. People often know they need insurance but are ignorant over what the insurance company is going to do. Over the years one of the most common questions I get is, “Do I have to take a physical?”
In this post I want to try to help you understand what is going to happen between the time you decide to purchase an insurance policy and the time it is approved.
The first thing to remember is that insurance deals with economic loss. Health insurance does not guarantee that you will never get sick. Life insurance does not guarantee that you will never die. What they do, if they are set up correctly, is guarantee that you or your loved ones will have the money to pay for any economic loss that you suffer.
Additional medical bills that you were not expecting is a form of economic loss. So to is the loss of an income if a wage earner dies.
The second major principle of insurance is that it only covers “pure risk.” That means that there must be an element of chance. If you do not pay health insurance premiums until you have been diagnosed with a disease and then get health insurance expecting them to pay your medical bills, you have removed the element of chance.
If you go without life insurance until you are diagnosed with a terminal illness, again, you have removed the element of chance.
Insurance policies are contracts. In them are clauses to protect the insurance company from having to pay anything if you attempt insurance fraud and go without insurance until after you have a problem.
Although an underwriter is permitted to request a physical from a licensed physician it rarely happens. Over the last 25 years I have only seen a health insurance underwriter request that an applicant see a doctor for a physical before the insurance is issued twice. In both cases it was because the underwriter had reason to believe that the applicant had been less than truthful on their application about the status of their existing health.
As president Ronald Reagan said, “Trust but verify.” Under normal conditions, the underwriter is going to take you at your word. They will believe whatever you put in your application until they have reason not to trust you.
When you submit your application, most insurance companies are going to check with the Medical Information Bureau (MIB) to verify that you do not have an application pending with a different company or have not be declined or rated by someone else in the past.
They may also call you for a telephone interview. If your answers are consistent with what you said on your application and there is nothing negative from the MIB there is a good chance that your policy will be approved within 72 hours.
However, if the underwriter suspects that you are not being completely honest or are being treated for something, the underwriter has the right to request medical records from your doctor.
During my practice I have several clients tell me with pride, “I’ve never seen a doctor.” Depending on your culture, that may be something to be proud about. However, in the insurance world it is not.
If you have a disease that is not yet showing symptoms that would cause you to seek medical attention, the insurance company would prefer to pay less money to correct it in its early stages rather than wait until it is more advanced and costs more to treat.
With the new provisions of Obamacare several insurance companies have become stricter. Many insurance companies now require that an applicant has recently seen a licensed physician. If they have not, the underwriter will decline their application until after they have had a physical exam.
The bottom line is that the health insurance underwriter will want a clear picture of your current health. That does not mean that just because you have seen a doctor your application will be declined. It means that the underwriter’s job is to make certain that you are paying the correct premium for your current health.
Life insurance applications are interesting. Some applications for life insurance are very short. I have seen them fit on one page. Other applications can be very long. The longest application that I have seen was 64 pages.
I started my career in Life insurance sales. Back then the applications for Life insurance were fairly simple. I was able to finish the entire Life insurance application for a client in less than 15 minutes.
Over the past 25 years things have changed. State and federal politicians have added so many regulations that Life insurance companies have no choice but to add lengthy disclaimers and require initials or signatures to verify that they have informed you about your rights.
Curiously, over the past 25 years I have not had one client ask to read a required disclaimer before they signed. It appears that all the government customer protections have been ignored by the people they were intended to protect.
Not only can Life insurance applications be lengthy, the underwriting that happens after you submit an application can be complicated. The life insurance you get may or may not be fully underwritten. If it is, you can expect the following.
- Driving Record – The underwriter will request a copy of your driving record to see if you have been stopped for Driving Under The Influence or have a history of other dangerous driving habits.
- MIB – Like Health insurance, one of the first things that the underwriter will do, if your insurance company is a member of the MIB, is to see if you have any other applications pending or have been declined or rated by another insurance company.
- Physical Exam – Although the underwriter has the ability to require that a doctor gives you a complete physical exam, most exams are done by nurses. They often involve you giving a sample of blood and urine for lab analysis, submitting to an EKG to discover the health of your heart, having your height and weight verified and compared to the information you gave on your application and a verbal health history about you and your family’s past.
- Telephone Interview – This happens more often with Health insurance applications but Life insurance underwriter can still call you if they need further information.
- Medical Records – The underwriter is allowed to contact and request records from your doctor to see what diseases you may have been treated for and how well controlled your condition is.
Each insurance company has their own underwriting requirements. The ones listed above are just a sample of what you can expect. If you are concerned that something is added to or missing from this list, speak to the insurance professional who helped you with the application. He will be able to tell you if the phone call you got is legitimate or something you should be concerned about.
If you need the insurance, set aside the time necessary to complete the application and underwriting requirements. However, underwriting can be expensive. You will not have to pay anything for the underwriting expenses, however, the insurance company will. If you are not serious about your need for insurance, don’t waste your insurance professional’s time or the insurance company’s money.