Hospitals, doctors and medical check-ups are never a pleasant experience. Most of us spend a large chunk of our time to avoid visits to any kind of medical premises. Add to that, a lot of individuals have a strong fear of needles and other medical equipment. Advertisers and policy makers keep capitalize on this irrational fear in their hit and catchy advertisements of “get an insurance without medical tests”.
Needless to say, a lot of people find this a very convenient way to buy a term insurance policy. In fact instead of comparing any other features and options, they make a decision based on this simple marketing tactic! Unfortunately though, ads and marketing gimmicks don’t necessarily guarantee a robust insurance plan which will cover all your needs.
A term insurance plan is a pure insurance product available under all major insurance companies. A term insurance policy is a risk coverage product with no investment component to it. Under a term insurance the insurance company is responsible only for paying out a death benefit to the nominee of the insured. There are no maturity or survival benefits payable under this plan. A term insurance plan covers the life of the insured for a specified duration known as the “term” of the policy. Thus, term plans have a lower premium and pack in a lot of features of their big brother product life insurance. Term plans also come with additional rider options such as critical illnesses and permanent disability. In such cases the insurance company waives off the future premiums while continuing to cover the life of the insured for the rest of the policy term.
An insurance premium and sum assured is determined on the basis of the insurance company’s risk perception of an individual. An insurance company will get a clear idea about the individual’s health, expected life span and any other risks arising due to his/her lifestyle only after conducting a full medical test. A medical test helps the insurance company to customize the term plan to suit the needs of the individual while mitigating the risk of the insurance company.
Following are some of the reasons why a medical test for term Insurance is extremely important:
We pay premium to the insurance company to cover our risk. The insurance company charges premium on the basis of various factors such as the life expectancy ratio, gender, any occupational hazards, pre-existing health conditions and the sum assured.
A premium has to be paid at regular intervals defined in the term plan. The insurance company allows for flexibility in choosing the premium payment intervals. They could be annual or semi-annual or quarterly or monthly. An individual can opt for any of the above mentioned premium options which is convenient to him/her.
The premium paid towards term insurance plans is deductible under Section 80C of the Income Tax Act, 1961. An amount of up to a maximum of Rupees 1 lakh is eligible for tax benefits.
The premium charged by an insurance company is determined on the basis of the risk it sees in insuring an individual. When the said individual gets a medical check-up done, the results help the insurance company get a clear picture on the insured. This in turn allows them to customize the term insurance plan to suit the individual’s needs.
If you compare the insurance plans with no medical tests with the plans that have a medical test, you will notice that in a medical test free plan the premium amounts are much higher. While the term plan with a medical test charges you a lower premium. The reason behind this is that when a medical test is done the risk for the insurance company is mitigated. Thus, they can guarantee the same sum assured at a lower price.
Also as someone who is in great shape and taking good care of your health, don’t you think it should pay off somewhere! Well a term plan with a medical test will ensure your wallet doesn’t feel the burn of higher premiums while you burn calories in the gym.
Higher Risk Coverage
Term insurance plans cover the risk of the insured’s life for a fixed duration of time. They guarantee the sum assured to the individual in the event of his death. Generally term plans offer a risk coverage up to the age of 65.
Risk coverage is the most essential part of the term insurance plans. The higher the risk coverage, more the peace of mind to the individual. It ensures that in the unfortunate event of the death of the insured, their family is well taken care of.
Death is a traumatizing event, especially if it occurs untimely. In such cases the family is grieving and trying their level best to cope up with an irreplaceable loss of their loved one. It takes a lot of time for the family to heal and move forward in such a scenario. They undergo a lot of mental stress during such times. If they also have to worry about the financial mess they have landed in, it may make things worse for them.
Risk coverage plays a major role in alleviating the financial fears and worries of the family. They can continue to have a stable lifestyle without having to fret about the money. When opting for a term insurance plan, one must calculate their monthly expenses and needs, and factor in the effect of inflation. This will help you narrow in on the amount of risk you want as cover.
All major insurance companies require their policy holders to get a medical test done for obtaining a higher risk coverage. If you want a higher sum assured, then a medical test is necessary. In case you opt for a plan with no medical tests then they will cover only a limited amount of the actual risk. Thus, in the event of the insured’s death, their family will be left stranded with little or no money.
Claim Settlement Ratio
A claim settlement ratio is defined as the number of settled claims by the insurance company divided by the number of received claims by the company. This number generally acts as an indicator of the credibility of the insurance company. It makes the insured feel safe that their loved ones will be given the death benefit in the event of his/her death.
But no insurance company can ever have a perfect 100% claim settlement ratio. Because a lot of times they have legal and valid grounds to reject a claim filed by the beneficiary. Under such circumstances the claim settlement ratio will be affected adversely. Hence, while comparing insurance companies one should keep in mind that a higher claim settlement ratio is good enough.
There are various reasons why an insurance company can reject a claim. They may be covering a risk under which the claim is made. In case of a term insurance plan, suicide is not covered. Another reason could be the non-disclosure of physical ailments by the insured. If the insured had not disclosed that he has a chronic disease like asthma or diabetes at the time of entering into a contract with the insurance company. The company has the right to deny the death benefit pay out to the nominee.
If an individual has had a medical test done as part of the term plan, then the chances of claim settlement are higher. On a broad basis, if no other clauses of the policy have been violated and all the premium payments are up to date, then the insurance company is liable to make a 100% death benefit payment. It can be statistically proven that insurance companies settle more claims in term plans with medical tests than those with no medical tests.
Free Medical Tests
Here’s the kicker! All the big insurance companies are willing to pay for your medical check-up when you are buying a term insurance plan. The insurance company gives the individual a wide array of hospitals near their location where they can go for the pre-insurance medical tests. The individual can choose the hospital, schedule an appointment and undergo the tests.
Another option that insurance companies give is reimbursement of medical check-up expenses. So, the individual can go to any hospital they prefer and get the necessary tests done, submit the reports and the billing documents to the insurance company and get a reimbursement in their bank account.
The tests conducted under the pre-insurance bracket are standard tests. They need a full body check-up, urine tests, test for HIV, normal blood tests for hemoglobin counts, cholesterol and blood sugar. The insured also has to get an ECG done to rule out heart disease. All of these tests help the insurance company in determining the insurability and risk coverage of the individual.
The added advantage being you get a health check-up done for free!
It is easy to be lured by the “no medical test” term insurance plans. But remember the term insurance plan is not about you, it’s about the people you love and want to safeguard even when you die. Thus, take a little time and get that medical check-up done before you buy an insurance plan!