Why you should buy life insurance when you are healthy
[social_share]Life insurance policies have been compared to umbrella salesmen who are always willing to sell umbrellas until it starts raining. Although it’s possible to get life insurance if the buyer is unhealthy, it’s usually a better idea to arrange for coverage before that happens.
For the policy holder, life insurance is a way of ensuring his or her dependents still have a source of financial support if the policy holder were to die or be disabled. This need doesn’t change, no matter the policy holder’s health. However, the perception of the need does change, often quite dramatically, if a health condition is diagnosed.
For the insurance company, the operation of life insurance is merely a grouping exercise. If the company has a sufficiently large group that is segmented properly, then the actuaries know a certain proportion of the group will claim in any given year. But the segmentation is important. If a policy holder does not have an illness, then that person will be assigned to a group with a lower likelihood of claiming, and who will also have lower premiums.
However, if a life insurance applicant has been diagnosed with a chronic or serious health condition, that person will instead be assigned to a group with a higher likelihood of claiming. This group will pay higher premiums, sometimes substantially so, and while the policy holder’s family will be protected, it will not be an attractive rate.
One thing a healthy person should consider when seeking life insurance is the term of the loan. Generally speaking, the longer the term, the longer the applicant will be covered at the more advantageous premiums. The problem with this approach is that the premium for long-term life insurance can be considerably higher than the premium for shorter-term insurance. The long-term policy isn’t more expensive, in fact it’s usually cheaper over the policy’s lifetime. But the life insurance premium reflects the risks at all stages of the term – and those risks rise over this period.
Life insurance providers often insist on a medical examination prior to issuing the coverage. Policies that do so tend to be cheaper than those that don’t, which is another reason to purchase coverage while the applicant is healthy.
