Obesity and its effects on your assessment for life insurance and income protection cover in Australia.
With more than 14 million people in the country who are overweight, Australia is now one of the fattest nations in the developed world (MODI, 2013).
A body mass index (BMI) score between 18.5 to 24.9 is generally considered to be the ideal proportion of body weight to height. Australia is currently ranked at 11th in the world, with an average BMI of 27.8 for men and 27.3 for women (Bond, 2013). More than 60% of adults and one in four children in Australia are considered to be obese or overweight (Corderoy, 2010).
It has become one of the leading causes of premature death and illness, with obesity even overtaking smoking. Figures from Western Australia in 2006 showed that 8.7% of all disease were contributed by poor health due to excessive weight, while smoking accounted for 6.5% of all causes of premature death and illness (Corderoy, 2010).
With the increased risk of mortality that overweight people can carry, it is little wonder that insurers will look for associated health risks when underwriting people with a high BMI.
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A greater awareness of the health issues associated with obesity has placed a spotlight on the dangers of being at an unhealthy weight. Medical conditions that can stem from being overweight include joint and bone problems, to increased risks of diabetes, sleep apnea, heart attack, cardiovascular disease or chronic kidney disease (MODI, 2013).
If you have a BMI of 30 or over, the chances of health problems as a result of excessive weight will increase significantly. With over five million people that are obese in Australia, with a BMI of 30 and over, obesity has become one of the biggest threat to public health in Australia, costing as much $19 billion in NSW alone, according to NSW Health (Corderoy, 2010).
Benefits of life insurance for overweight individuals
Life insurance can provide many benefits to you and your family, regardless of your weight. Certain events in life often happen unexpectedly, especially with an illness or injury, and even death. Life insurance plans such as life cover and income protection can provide you with the peace of mind, knowing that no matter what happens to you, your loved ones will be financially taken care of.
There are two main life insurance products that you may want to consider, life and income protection insurance.
Life cover provides a lump sum payment to your financial dependents should you pass away unexpectedly or have been diagnosed with terminal illness with 12 months to live. Life cover can provide support for your family’s financial obligations in times of needs, particularly to cover their daily living expenses and any specific commitments for the future, such as your children’s education expenses and mortgage repayments.
Any Australians can apply for life cover; however, there are specific conditions, such as smoking, any pre-existing medical conditions and high BMI that may affect your application and possibly your premium rates.
Income protection for overweight individuals
Income protection insurance can provide a replacement income of up to 75% of your monthly wage if you are unable to work because of a serious illness or injury. You can use the benefit payment to cover your everyday living expenses and any short-term or long-term debts, such as rent or mortgage repayment and bills.
Either your work full-time, part-time, or on a self-employed basis, you can reap the benefits of having income protection cover in place. Similar to life cover, the rates you pay for premiums will be influenced by whether or not you smoke, have pre-existing medical conditions, the level of risk you are exposed to in your occupation and your weight.
Considerations for life cover and income protection if you are overweight
Just like any type of personal insurance, many providers will consider your current health condition as a key factor in deciding the conditions of your insurance application. If you are applying for life cover and/or income protection insurance, getting sufficient cover for the right price can be difficult if you are obese and often, some insurance providers may consider placing exclusions on your policy for certain conditions.
Life cover and body mass index
Underwriters may account for the additional risk that someone with a high BMI may carry by applying a premium loading on the policy. Typically, insurance providers consider individuals that are overweight to pose much higher risk due to associated health risks, and the increased likelihood of a claim. It is worth noting here that each insurer will assess applicants differently. Comparing different options may mean the difference between premium loadings and exclusions that are applicable.
That being said, if price is an issue, it does not mean that you should abandon the thought of getting cover altogether. Having a protective cover in place, such as life cover and/or income protection, is still important to safeguard the financial future of yourself and your family, should anything happen to you.
How will I be assessed by an underwriter if I am overweight?
Life insurance providers and their team of underwriters typically use BMI as a guide to assess and determine whether an applicant is overweight or not. Your BMI is calculated based on the following formula:
Your score will then determine whether you have an ideal weight, underweight or overweight, from the following classification:
- <15: Very severely underweight
- 15-16: Severely underweight
- 16-18: Underweight
- 18.5-25: Normal (healthy weight)
- 25-30: Overweight
- 30-35: Obese Class I (moderately obese)
- 35-40: Obese Class II (severely obese)
- 40+: Obese Class III (very severely obese)
Since no two cases are ever the same, every applicant is assessed individually and thoroughly reviewed. Additional questionnaires, blood tests and medical check-up may be required by your insurer to further assess your overall health and any other relevant conditions that may lead to an increase in mortality.
If there is no indication of a medical issue as verified by a medical practitioner, even if your BMI is on the higher scale, your insurance provider may be able to offer you standard rates of premiums. However, if your medical examination results show that you pose additional health risks in the future, your insurer may choose to place a loading, an exclusion, or reject your application altogether.
Source: Rolfe, 2013
I have a high BMI but I am healthy. How will I be assessed?
It is important to understand that BMI is not the only factor that is considered by an insurer to determine whether one poses a greater risk. Insurance provider will also consider existence of related conditions such as high blood pressure, diabetes and high cholesterol in their assessment. Sports players with a high BMI (muscle mass) are not likely to present much risk to the insurer. People with a high BMI that feel they are in good condition can get a report from a certified practitioner to have their application assessed.
What you can do to reduce your life cover and income protection premiums if you are obese
Remember that if you have BMI of 30 or over, you are considered to be obese and as a result, heavy loadings may apply on your life insurance and/or income protection. According to Stephen Mitchell, Canstar Head of Wealth Management, life insurance premiums can cost from 50% to 100% more for people who are overweight. Some applicants may have their cover refused by the insurance providers if they are obese (Keane, 2011).
However, if you decide to lose some weight, keep it off and lead a healthier lifestyle, not only will your health improve, but so will your premiums. Similar to a smoker’s effort to quit and stay clean from tobacco for at least 12 months, all you need to do is to notify your insurer of your weight loss and you can benefit from the new standard rates (Keane, 2011).