Do life insurance companies require me to divulge information about my medical condition and personal finances?

UPDATED: Mar 13, 2012

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Asked March 13, 2012

1 Answer

Life insurance is meant to protect your personal value. As your net worth increases, so should the number and value of your life insurance policies. But keep in mind that your net worth, where life insurance is concerned, is based on your financial situation and your health as much as on the amount of money you earn each year. Your personal information is needed to help the insurer tailor a policy specific to your needs, as well as to help determine what the premiums for your personal policy will be.

Your credit score is the way that lenders and other financial institutions gauge your financial stability. Insurance companies, believe it or not, are thought of as financial institutions, and they check your credit score to help them determine how much of a financial risk you will be to insure. Higher credit scores, above 650, receive the lowest premiums, while average and low credit scores translate into having to pay higher rates because of the risk associated with you financially.

Life insurance is a gamble on how long you will live, and because of that, personal information about your medical history are vital to determining how long you can be expected to live. For example, someone with diabetes is more risky to insure than someone without any medical problems. If that person lied about having diabetes, or simply chose not to notify the insurance company, then their premiums would not reflect the amount of risk, and that throws the entire insurance system off balance. Even worse, in the situation described above, the insurance company could file fraud charges against you, even if failing to mention the medical condition were an actual oversight instead of an intentional one.

Everything about you is important in determining the risks of insuring you. Your marital status, age, the zip code you live in, and what you do for a living are all calculated into the formula. Every broken bone you have ever had and any illness serious enough to garner medical attention fit together to make a complete picture of how healthy you are today and how long you can be expected to live. Without the use of personal information, all insurance policies would be equal and probably a lot more expensive. After all, without medical and financial information to identify lower risks, the assumption would be that everyone was a high risk and the premiums we all paid would have to be higher.

Answered March 13, 2012 by Anonymous

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