Setting nonmedical underwriting limits

Please could some explan the process a life insure goes through to set its non medical underwriting limits on term life? Thank you. Ben

In general, they are trying to balance the tradeoff between additional claims that would have been avoided by having a medical exam and the cost of the medical exam. In that process, they’ll consider antiselection, where applicants who are concerned about their health will, with the agent’s help, stay under the nonmedical limit. And, as a small but not totally irrelevant issue, they consider that nonmedical is a more “client-friendly” process.

[tan]Autocorrect keeps changing “nonmedical” to “nonmusical” I hope I caught them all.[/tan]

There is also a cost savings on applicants who are in fine health but go nonmusical. And some extra claims on nonmedical on applicants who think they are in fine health but are not.

Paramedical may also be an option.

In deciding about the extra claims cost, the company will certainly consider what health questions they ask on the nonmedical app, since certain answers may trigger medical exams even if the person is below the normal nonmusical limit.


“Nonmusical” - that made me giggle!!! :grin:


Yeah, what Steve said. You expect to see some slippage, but if the additional claim cost incurred is less than the cost savings then you’re still ahead.

A few overly enthusiastic executives like to pretend that this isn’t the case, but it’s trivial to come up with examples proving them wrong.

How much anti selection can you live with? How good are you at accurately tracking your exposure? If the person who just found out they had 6 months to live went out and bought 25 policies for $100,000 each (instead of 1 policy for $2,500,000) would you catch it in time?

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given my family history and lack of training, I do shop for policies that cater to the nonmusical.

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The last time I bought life insurance I had to send in an audition tape singing a song of my choice.

I went with Take Out Some Insurance On Me