Underwriting in critical illness plans is more stringent

Published in Mint on, Jul 02 2013, Written by Kapil Mehta

I am looking for a health insurance policy for my father aged 52. He is a tobacco user (consumes 6-7 sachets of gutkha in a day). If we take a health policy without disclosing this fact and later in case he suffers from any problem caused due to this habit, what are the chances of claims getting rejected? If we disclose this fact to the company, then will our proposal get accepted? Also, will there be extra loading? Will they cover the diseases related to the habit or only the unrelated diseases? After what waiting period the related diseases and unrelated disease will start getting covered? Should we go for critical illness policies? Will they be easily available or are there strings attached to them, too?
—Pooja Rajpal

The information you disclose depends upon the specific health insurance product you select and its proposal form. I looked at 10 forms before responding to your question. Four of these did not require any information on smoking habits. Three forms did not ask specifically about smoking but inquired if the person to be insured had any addiction and the remaining three forms had a specific question on smoking.
Consuming 6-7 gutkha sachets a day is extremely high and many underwriters would classify it as an addiction. So if you select products that require disclosure of specific smoking, gutkha consumption or addiction the application is likely to be declined. Health insurers generally prefer to either accept or reject an application and seldom introduce extra loading. Do not hide the gutkha habit in a proposal form that requires specific disclosure. Such suppression of facts will result in claims getting declined, perhaps even if they are not related to gutkha consumption.
I would suggest that you select a product that does not require disclosure of gutkha consumption or addiction. I estimate that 40% of health insurance products fall into this category. These products tend to be more expensive because the insurer prices for anti-selection where smokers and gutkha consumers buy the policy. Such proposal forms legitimately allow you not to disclose the gutkha consumption habit.
Purchasing a critical illness plan is not a solution for heavy smokers or gutkha consumers. There is a strong correlation between smoking and cancer. Since cancer is a specific benefit in a critical illness plan, the underwriting in these insurance policies is more stringent than regular health insurance products. Alcohol consumption is treated more leniently by insurers. Limited or social drinking generally poses no issues.
As a practitioner of insurance, I see considerable adverse impact on health and longevity caused by smoking. I would like families to encourage (or even threaten) their members to quit smoking. That is smarter than sifting through plans to determine the best deal for smokers.

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