Life Insurance: How shedding pounds can lower your health coverage bills

How shedding pounds can lower your health and life coverage bills

Shedding some weight around the middle could add several pounds to your back pocket.

Life, health and sickness insurers are concerned with clients’ weight and set premiums to reflect the larger medical risks associated with obesity.

“Obesity poses a significant health risk, and is associated with an increased chance of heart attack, cancer and diabetes,” says Louise Cumming, managing director of brokerage The Life Dept, in Northwich, Cheshire.

Shocked: Lynn labeled Taylor obese when she applied for life insurance

Shocked: Lynn labeled Taylor obese when she applied for life insurance

The World Health Organization says that excess weight can also cause musculoskeletal disorders such as osteoporosis. In America, insurance companies routinely ask clients for BMI on application forms, and British insurers are also turning to BMI as a key indicator.

“Your BMI has become more of a factor in recent years as underwriting has become more complex,” says Roger Edwards of the specialist insurance company Bright Gray.

Women who routinely wear an 18-size dress have excellent loads, while for many men, insurance alarm bells can start ringing once their waist reaches 36 inches. In the worst case, coverage is denied outright.

“A BMI of 35 can see a 50 percent increase in premiums, while a BMI of 40 or more can double it,” Cuming says. The premiums last for the period of coverage, so it is essential to get the right deal in the beginning.

Cumming cites the example of a woman who wanted £100,000 for life cover and £25,000 for critical illness insurance, both for 16-year terms. The woman had no health problems and was a non-smoker. However, at 5 feet 2 inches and 13 stone, her BMI was calculated at 34.2. This was enough to raise the total cost of cover from £14.51 per month to £21.91 – an additional £1,421 over the term.

How do you calculate your BMI?

BMI is calculated by dividing your weight in kilograms by the square of your height in metres.

Simple arithmetic won’t work if you try to divide stones and pounds by feet and inches.

For example, for a person who is 2 meters (6 ft 6 in) tall and weighs 100 kg (15 lb), the calculation is 100 divided by two squared, or 100 divided by four, which results in a BMI of 25.

Calculate with Life insurance obesity tool.

According to the World Health Organization, a healthy body weight is a BMI between 18 and 25. A BMI of 25 to 30 is classified as overweight while over 30 is considered obese.

But BMI is not an exact science. There are many factors that will affect the numbers. These include ethnicity and lifestyle. For example, sports fans with heavy muscle tissue can end up with a high BMI despite their good general fitness.

‘The lady was shocked,’ says Cuming. She thought she was healthy and didn’t realize her weight would make such a huge difference.

Director of Nursing Care Lynn Taylor is also affected insurers place such emphasis on BMI. Lynn, from Earlston in the Scottish Borders, is 4ft 11in, which exaggerates the effect her weight has on her BMI, which is just over 30.

Lynn, 40, was shocked to be classified as obese when she applied for life and critical illness coverage. “There’s no way I’m fat,” she says. I can wear a size 14 and go to a Zumba fitness class every week. Insurance companies focus on BMI and don’t ask other lifestyle questions.

Lyn, who has two children, Stuart, 11, and Katie Grace, 4, was initially quoted over £60 a month for cover due to her BMI. But she was shopping and Friends Life would cover her on standard terms, subject to a medical exam. Ironically, one of the reasons for the focus on BMI is the lower average prices for those who are otherwise healthy.

“Ten years ago, 90 percent of the population was insured on standard rates,” says Edwards. Now with more competition, we ask more questions and just over 80 percent qualify for the standard terms.

Insurance companies are more sensitive to BMI for critical illness coverage, which pays a lump sum if you’re diagnosed with a specific condition, or income protection insurance that pays a regular monthly sum if you’re too sick to work. Here, those with a BMI as low as 32 or 33 may be required to go for a medical examination before they can be accepted for cover.

“Every insurer has a different situation,” says Matt Morris of LifeSearch, a specialist advisor. “We’ll always try to do some pre-underwriting with clients so we can direct them to the insurance company most likely to say yes, or provide cover on standard terms.”

Insurance companies are particularly interested in young people who are overweight. There is more tolerance for the “middle age prevalence”. For example, the insurance company Ageas will charge a 28-year-old with a BMI score of 34 an additional 50 percent for life insurance, while a 48-year-old with the same BMI will pay the standard rate for someone his own age.

“Insurers feel that a high BMI in the early years can be an indicator of genetic factors or lifestyle issues that will cause problems in later years,” Morris says.

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