Does Family History Affect Term Insurance Rates?
Family health history can affect your term insurance premium rates. If your immediate family member has a hereditary illness, like diabetes, you are more likely to contract it than those who don't have diabetes in their family history. In this case, you will have to pay a higher premium. Therefore, apart from your health, the insurer will also inquire about your family's health when you buy term insurance. These inquiries may include:
- Whether your family has a history of genetic diseases such as cancer, diabetes, or heart conditions
- Insurers will also enquire about the untimely death of your immediate family member.
These questions help predict your future health conditions. Insurance premiums are dependent on the policy that you choose and the diseases it covers. So, by taking your answers into account, your insurer will decide your insurance premium. This way, you and your insurer can pick a policy that will be better suited for you.
How Does Family History Affect Term Insurance Rates?
Suppose any of your immediate family members, most preferably your parents, have a terminal or chronic illness. In that case, insurance companies consider this a determiner and put that in terms and conditions of your insurance policy. By taking it into account, your insurer will sell you the insurance cover for increased rates.
Three factors about family medical history affect your term insurance rates. They are as follows:
- Heredity Illness: Certain diseases like cancer, heart conditions, diabetes, etc., can be passed on from one generation to another. Most likely from parents to children. If you have any hereditary illness in your family history, you will have to pay high premiums. It is because the insurer will categorize you as a high-risk customer.
- Longevity of The Family: Suppose either one parent or both parents die because of a terminal illness. In that case, there is a chance that the children will inherit that illness. It means low life expectancy and consequently higher premiums.
- Family Environment: The family environment you live in or the area where you and your family life can also affect your health. Poor living conditions can lead to infectious diseases and other health risks. If your insurer knows about such environments, they will charge a higher premium from you.
If the factors mentioned above are severe, then the following will be the consequences that you have to face:
- Your Insurer Can Deny You Insurance Cover: If family medical history indicates a low life expectancy, serious illnesses, etc., then insurance companies can deny insurance cover. It is because in such cases, there are higher chances of the insurance getting claimed soon. You will be categorized as a very high-risk customer as the insurer may not benefit by selling you a policy.
- Some Insurance Companies Will Offer You Insurance Cover for Higher Rates: Some insurers offer insurance to those with severe health issues like diabetes or cancer. In such situations, companies can inflate the policy cover rates than what you would otherwise pay for insurance cover.
- Insurers Can Offer You Policies that Won't Cover Some Critical Illnesses: Suppose your family medical history shows certain critical illnesses. In that case, an insurer can agree to provide you coverage but not for the disease that you may suffer from. In this way, you can ensure financial coverage for your family in case something happens to you. However, your family will not receive any coverage if you succumb to the critical illness your policy does not cover.
Insurers take all these measures to mitigate the risks involved if you are a high-risk customer.
Is It Wise to Hide Family Medical History from Insurers?
No, you should never hide facts about your family medical history from your insurer. Withholding facts can have serious repercussions when it comes to claims. You have to face the following consequences for hiding information from your insurance company:
- Rejection of Claims: Suppose after purchasing the life insurance policy, the insurer finds out that you lied about your health, family's medical history, or other lifestyle-related information. In that case, the insurance company holds full rights to reject claims.
- No Death Benefit: The insurance company always investigates the policyholder's untimely or unnatural death. If they find any undisclosed facts related to death, they can reject the death benefit to the nominee or legal heir.
- No Coverage for Certain Illnesses: Insurers conduct a medical examination before selling you a policy. The examination will reveal everything about your health. If they find out about pre-existing conditions about you or your family, then the insurance company can deny covering that illness.
What If You Do Not Know the Details of Your Family Medical History?
Not everyone knows about their family medical history. Orphans or adopted children may not be aware of their family history or have no other way of knowing it. Belonging to a nuclear family can also make you unaware of your family medical history. Insurance companies offer "I do not know" or "not sure" options for such exceptional cases.
It is advised to contact family members or try to gather as much information about your family. This will help you secure better coverage for yourself as your insurer will have a more comprehensive idea about your health.
If you fail to find information about your family's medical history, you have to choose one of the above options on your application form. Insurers seek to know your family's medical history, but it is not the deciding factor of selling you the policy. Insurers will ascertain your age and current health status before providing you well-curated insurance policy.
The Final Words!
It may look or sound appealing, but you must never lie about your health and/or your family's medical health, from your insurer. It is not only unwise, but you can invoke penalties. You can also be disqualified from purchasing an insurance policy again. Therefore, it is always advised to check your and your family's medical history so that you can get a better-curated policy catering to you and your family.
Ans. Yes, when you purchase term insurance from the recognized insurer or insurance company, you are eligible for tax deduction benefits. You can claim deductions under Income Tax Act, 1961, 80 CCC. You will have to claim the deductions while filing for your income tax returns. You are eligible for up to Rs 1 lac per annum.
Disclaimer: Tax benefit is subject to changes as per tax laws.
Ans. Policyholders are allowed to change their nominee in the event of the untimely death of the nominee. Any next to kin or the legal heir of the policyholder can act as the beneficiary. He/she will be eligible to file claims for insurance money by providing proper documentation.
Ans. You should always calculate your and your family's needs before purchasing term insurance cover. You should consider the following factors:
- Net annual income
- Number of family members
- Standard of living and lifestyle
- Existing loans and other financial commitments
- Estimated expense on children's education
- Health conditions of you and your family
Ans. No, insurance money is tax-free. After the policy's maturation, you can even reinvest that money to get more tax benefits.
Ans. No, the insurance premium will remain the same throughout your policy duration. Changes in tax regulations can sometimes affect the insurance premium. However, it most likely remains the same.
Ans. Yes, claimants can claim insurance money if the policyholder dies out of India for natural causes. However, suppose the cause of death is unnatural or due to some dangerous activities, such as adventure sports or illegal activities like smuggling, war, etc. In that case, the insurance company holds a right to reject the claim.