FACTORS INFLUENCING RISK IN LIFE INSURANCE
The age of life assured is one of the most important factors and it has potential effect to cause mortality of the assured. The risk is relatively high during childhood period and after becoming adult, the risk becomes stable. With increase in the age, the risk becomes higher and hence there is an increase in premium. Because of this, proof of age is a must while submitting the proposal for life insurance.
Build refers to physical condition of the life assured and it includes height, weight, and chest size. The build indirectly indicates the well being of the individual and if all the parameters are within the standard, the chance of risk is lower. On the other hand, obesity at older age or extreme thinness at younger age is definitely a risk and accordingly an additional premium is added. Different life insurance companies fix different standards for the physique of the assured and most of these standards do not vary widely among different firms.
The physical condition of the life assured too plays a vital role for the well being and they are given more importance by the insurance companies. The parameters include sight or vision, hearing, heart functions, lungs, tonsils, teeth, nervous system, kidneys, examination of breasts for possible breast cancer and uterine defects in case of females etc. The primary function of the medical examination of the individual is to detect any malfunctions in the vital organs of the body. The proposal contains particulars to elicit information about the health status of the individual and the information provided by the life assured is checked for its veracity by an expert physician and verified.
The personal history of an individual includes health record, past habit, previous job, and previous insurance taken by him / her. The health record is the most important document and has vital statistics of the life assured. It gives an idea about the longevity or mortality of the person. The information recorded in the health record include results of medical examination as well as that voluntarily provided by the individual and emphasis is given for the recent illness and injuries. Serious injuries / illness suffered by any individual will warrant denial of acceptance of the proposal.
The past habits of the life proposed including use of drugs or alcohol is thoroughly analyzed because there are more chances for the past sins to be acquired again.
Previous job held
The past hazardous occupation do have a significant effect on the life of the individual. The hazard may be physical one like exposure to polluted environment or microbial one like intimate contact with a person suffering from contagious diseases and there are possibilities for retaining the ill effects there from or sometimes revert to such occupation again.
The habit, health, occupation, and insurance details of other family members especially, parents, brothers, sisters are enquired which provide important information that has a bearing on the health of the life assured. Certain genetic diseases that are transmitted to the next generation and others like tuberculosis which affect other members of the family through close contact.
Occupation is another important factor that affects life of the assured. Nature of work if hazardous, will affect the individual and subsequently, the morale of the workers will go down. Bad personal habits like alcohol, drugs will tend to affect the health and in turn the longevity of the life assured. The worker when employed in a chemical factory will naturally suffer from work related illness and working in an ill ventilated environment will add to the woes of the individual. Occupation that excessively takes a toll on the capacity of the individual all will have an impact of the life assured.
The area where an individual lives is also important because a good environment promotes the health of the individual while the reverse is also true. The geographical location, political stability, environment or atmosphere, type of construction of house and travel are some of the factors that shall be evaluated while assessing the risk of the individual.
Personal habit is another factor has a bearing on the risk involved. Persons addicted to excessive alcohol, ill tempered nature, chain smoking are some of the intoxications that tend to shorten life of the individual. Not only the present habits but also the past ones should be ascertained to have an overall picture of the risk faced by the life assured.
Every society has its own accepted standards of living i.e. ethical and moral conduct and any deviation from the accepted norm is termed as a risk. Departures from the normally accepted relationships in life, infidelity are some of the standards not acceptable to the society. Indulgence in any these activities will affect the health of the assured. Hence insurance is normally denied to persons having immoral and unethical activities and so too in cases of bankrupt and notoriously dishonest persons.
Race and nationality
The longevity differs depending on the race and nationality. People considered of higher order or those belonging to the higher strata of the social class live longer than the weak and marginalized ones. The location of the nation on the globe too has an effect. For e.g. countries located near the equator are found to have people with lower life span than the rest and thus confirming the theory that a salubrious climate favors health and longevity.
Sex has a definite influence on the risk involved in an individual. Among the sex, females are considered to be more vulnerable both physically and morally. The hazards involved in child bearing add to their woes. Depending on the country where a female lives, she encounters varied sets of problems like education, social status (at par with their male counterparts), wealth creation, ability to take decision independently etc.
The background of the life assured like economic status, educational qualification, financial and professional consciousness have to be examined before clearing the proposal. The income of the individual is checked to see whether it bears any reasonable relationship to the amount of insurance that he proposes to carry.
Services in defence
Modern day advancements in science and technology has made the life of defence people less risky and more sophisticated but there are still some occupations like flying, gliding etc. which are considered hazardous. In such cases, some restrictive clauses are inserted for persons with heightened risk before accepting the proposal; for e.g. war clause is inserted to avoid the risk emanating from employment in services like air force, military and navy.
Plan or term of insurance
There are certain plans that add more responsibility and burden to the insurer and hence they are limited to first class lives, i.e. people belonging to higher economic strata. Certain plans will involve less risk and they are allotted for any one irrespective of the health condition.