There are three main ways a new life insurance policy is priced: Underwritten policies are those where you answer questions on your personal and family medical history and undergo a medical exam arranged by the insurance company; a simplified issue life insurance policy application asks you some medical questions but does not require a medical exam; and a guaranteed issue life insurance policy requires no questions and no medical exam. If you're healthy, or even if you have a few medical problems, you're likely to get the best insurance value from an underwritten policy, which is priced specifically for you. Simplified issue and guaranteed issue life insurance policies set a price that assumes risk that you may not have.

Whether you're buying term or whole life insurance, you'll likely be asked to undergo a medical exam. These are typically performed by licensed paramedicals who are often independent contractors hired by the insurance company. They will schedule a visit to your home for the exam and bring all the necessary supplies. The life insurance company foots the bill for the exam.

Health questions

When you submit your completed application for your life insurance policy, your agent or life insurer will call a paramedical service to let them know you require an exam. The service will then contact you to arrange a convenient time and place. You must have the exam or your application won't be processed.

The life insurer may still request an attending physician's statement (APS) from your doctor, but you cannot have the life insurance medical exam done by your own physician.

In a basic exam, the paramedical will take your medical history (even though you've already supplied it on your application), height and weight, blood pressure, pulse, and blood and urine samples. Beyond that, tests will vary based on you.

For example, MetLife will order an in-home EKG for applicants age 50 and older who are applying for face amounts of at least $1 million. For applicants age 70 and older who are applying for $2 million policies and higher, MetLife forgoes the paramedical exam and requires an exam by an M.D. chosen by MetLife (not your own doctor). The doctor will ask the same medical questions as a paramedical and get your height, weight, blood pressure and pulse, plus do a brief medical exam such as listening to your heart.

Jacki Goldstein, Vice President of Life Underwriting at MetLife, emphasizes that this is not a comprehensive medical exam and does not include sensitive issues, such as a breast exam for women. Goldstein also stresses that the M.D. life insurance exam is not a substitute for good routine medical care.

When age and face amounts get higher, a treadmill test may be required. For example, MetLife requires treadmill tests for applicants who are at least 50 and applying for over $10 million in insurance or applicants 76 and older applying for $5 million or more.

If you're applying for a low face value policy, you may not even be asked to do a paramedical exam. For example, if you're age 40 and applying for $50,000 of life insurance, MetLife requires no specific tests or measurements. And for some cases, MetLife asks for a "simple paramed" exam, encompassing the basic measurements and blood and urine work but without the paramedical question list. Guidelines for tests will vary among life insurers.

What are they looking for?

The life insurance company wants to know if you have any health condition that could shorten your life — which in turn affects the insurer's risk and your policy premium. When samples of blood and urine are collected, the insurer tests for HIV, cholesterol and related lipids, liver or kidney disorder, diabetes, hepatitis, prostate specific antigen (PSA) and immune disorders. The urine sample might go through routine analysis, plus screening for certain medications, cocaine and other drugs.

Results go to the life insurer's home office for an underwriter to review. You can usually send a written request if you want a copy of the results, and some insurers will automatically send you a copy of your lab work. If there's anything of concern about the lab results, you would need to consult your own doctor. Goldstein says, "It's not uncommon to have abnormalities that don't mean anything."

A life insurance underwriter then reviews your application and the results of your medical exam. They decide your life insurance rating, which sets your premium. If there are lingering questions about your health, they may request additional information or medical tests. In the very rare event you are unknowingly quite ill — chronically or terminally — your application would be declined and you would have to look for a high-risk carrier or one that offers guaranteed issue life insurance.

Don't let your premiums go up in smoke

Smokers pay higher premiums for life insurance because of their higher mortality rate. If any nicotine shows up in your results, you'll be considered a smoker. The test also detects nicotine from a transdermal patch.

After the results

If your test results correlate with the classification used for your original life insurance quote, you'll have no problem getting that rate. If a medical problem is discovered, you might be offered a life insurance policy with a higher premium.

There are two types of risk ratings: "flat" ratings, sometimes called temporary flat extras, and "table" ratings. Underwriters assess health conditions based sophisticated table to determine how to rate certain health conditions.

For instance, an underwriter might apply a flat rating for a short period of time for a person who has just had surgery. On the other hand, a person with high-blood pressure could receive a table rating, which increases premiums by a set amount for the duration of the policy, depending on your medical condition and age. If you disagree with a rating you receive, contact your agent. Agents can find out if the rating can be revised based on supplemental medical tests to prove you qualify for a better rating.

Even if you end up declining the life insurance policy, your test results become part of your record in MIB Group's database (formerly the Medical Information Bureau), a clearinghouse of medical information that insurers share which stores information for seven years after you apply for a life, health, disability income, long term care or critical illness insurance policy. MIB is jointly owned by about 470 insurance companies. So, if you go shopping around for other life insurance, remember that your medical information is accessible to other insurers in the near future. Note that MIB's database does not contain actual medical records but rather codes that represent medical conditions and tests, hazardous hobbies and even your bad driving record.If you want to check your MIB file, or dispute information in it, you can obtain one free report annually at www.mib.com

No way, you say?

Life insurance medical exams are really quite routine. But if you want to avoid a medical exam at all costs, you could buy a simplified issue life insurance policy, which requires only that you answer a few medical questions, or a guaranteed issue life insurance policy, which requires neither an exam nor questions.

Keep in mind, though, that if you're in general good health, or even with a history of some health issues, you'll likely get a much better rate by buying the underwritten policy that requires a medical exam.