Life insurance (or Life Assurance) is a contract between
an insurance policyholder and an insurer or assurer,
where the insurer promises to pay a chosen beneficiary
a sum of money (the benefit) in exchange for a premium,
upon the insured event (such as death/disability/debility)
of an insured person (often the policyholder). Depending on
the contract, other insured events such as life-threatening or
chronic illness can also trigger payment.
A chronic condition is a human health
condition or disease that is persistent or otherwise
long-lasting in its effects. Common chronic diseases include
arthritis, asthma, stroke, cancer, epilepsy, diabetes and viral
diseases such as hepatitis C and HIV/AIDS.
Chronic diseases generally cannot be prevented by vaccines
or cured by medication, nor do they just disappear. Health
damaging behaviors – particularly tobacco use, lack of physical
activity, and poor eating habits – are major contributors to the
leading chronic diseases. Chronic diseases tend to become
more common with age.
How does it work?
When taking out life cover, the insurance company would
normally ask health and lifestyle related questions and require a
medical examination. A medical examination is often required
to be undertaken by potential policyholders before they can
receive a life insurance policy so that the insurance company
can determine the medical or health status of the prospective
policyholder and how much the applicant should be charged
(premium) for the policy.
People with chronic diseases often have difficulties buying
life insurance policies. They are often either declared to be
uninsurable due to ill health or they are forced to pay very high
premiums (premium loading). Life insurance companies need
to price their products higher for people with chronic diseases,
but there are life insurance policies that have been created just
for them that will not be very expensive.
Most life insurance covers include Terminal Illness
Benefit which pays out the full insurance cover amount if the
policyholder is diagnosed with a terminal illness.
But, if the life insurance cover does not include this special
(ancillary) benefit option and the policyholder is declared with a
chronic medical condition after the insurance cover has been inforce
for a while, the insurer is most likely not honor any claim
in that regard.
Therefore, it is advisable that consumers understand the
terms and conditions of their life insurance cover and ensure
that it includes a Chronic/Terminal Illness benefit option
if it’s believed to be appropriate and in the same manner,
a policyholder must inform the insurer in cases whereby
the policyholder suffers a severe illness after the policy has
commenced.
