Life Insurance: Pre-Existing Conditions And Coverage Options

Life insurance is a valuable financial tool that can help protect your loved ones in the event of your death. However, for those with pre-existing health conditions, the process of obtaining life insurance can be more challenging and expensive. A pre-existing condition is typically defined as a medical issue that has been diagnosed or treated prior to applying for life insurance. While it is still possible to obtain life insurance with a pre-existing condition, it is important to understand how it may impact your eligibility and premiums. This paragraph aims to provide an introduction to the topic, highlighting the key considerations for individuals with pre-existing conditions who are seeking life insurance.

How does a pre-existing condition affect life insurance rates?

Pre-existing conditions can make it more difficult and expensive to get life insurance. The specific policy types you qualify for will depend on your particular medical problems, how well your condition is managed, and the insurer.

Insurance carriers use a tiered system to determine the risk of covering you. Policyholders are generally broken into four classifications: Super Preferred (or Preferred Plus), Preferred, Standard (or Regular), and Substandard. Those with more pre-existing conditions are typically placed in the lower-tier classifications, resulting in a higher premium or even coverage denial.

To determine your risk level, insurance carriers will assess each case based on the following criteria:

• Severity of medical condition: Pre-existing medical conditions that significantly raise your mortality risk will almost always result in a higher life insurance premium.
• Whether the issue is current: A medical condition that creates serious, ongoing health problems may place you in a higher risk category.
• Date of diagnosis: If you’ve been living with your diagnosis for a long time, it could indicate to your insurer that your condition will worsen during your policy.
• How you’ve managed the condition: Pre-existing medical conditions that show signs of improvement and respond well to treatment may result in a lower risk classification. Taking fewer prescription drugs over time or if your prescription dosages have remained stable may be a positive sign to your insurer.
• Your lifestyle: Habits like smoking can put you in a higher risk class, which means your cost of life insurance will likely increase.

To further understand and determine your life insurance risk, the insurer may ask your doctor for an attending physician statement (APS). The APS will detail any legally-allowed specifics the insurer requests, which may help the company decide whether to approve or deny your application and what rate you will pay.

• Apply for coverage earlier in life: The older you get, the more expensive life insurance typically becomes. This is because your insurance carrier assumes that with an older policyholder, there will be a higher chance the insurer will need to pay out the death benefit indicated in a plan.
• Share improvements with your insurer: If you are approved for a life insurance policy with a pre-existing condition, it may be a good idea to communicate any improvements in your health to your insurer. Sometimes insurance carriers make adjustments to your premium if they see that a health condition has been eliminated or significantly improved.
• Find the right agent: It’s important that you look for an independent life insurance agent who works with an impaired risk specialist — a broker who’ll know which insurance companies are more likely to provide a good rate for your particular condition.
• Get quotes from a handful of insurers: Insurance companies can be unique in how they review specific health conditions. Compare life insurance quotes to make sure you're getting the best possible coverage at the best possible price.

What types of life insurance can I get with a pre-existing condition?

If you have a pre-existing condition, you may still be able to get life insurance, but it may be more difficult and expensive. The specific types of life insurance you can get will depend on your particular medical problems, how well your condition is managed, and the insurer.

Term Life Insurance

Term life insurance policies typically have more affordable premiums and large death benefits, but coverage only lasts for a set period, usually between 10 and 30 years. This type of policy may be a good option if you want the most coverage for your budget. However, your chances of approval will depend on the severity of your condition, and your premium will likely be higher than if you didn't have a pre-existing condition.

Guaranteed Issue Life Insurance

A guaranteed issue life insurance policy never denies applicants, and there are usually no medical exams or health questions required. These policies tend to be more expensive, and the coverage amounts are lower than other types of life insurance. However, they offer lifetime coverage, and the rates typically remain the same for the life of the policy.

Group Life Insurance

Group life insurance is a type of term life insurance policy that you can often get through your employer as part of your benefits package. Employers usually offer limited coverage, typically not more than $50,000 in death benefits, for tax reasons. Premiums can be favourable and easy to manage, but the coverage is only valid while you are employed with that company.

Whole Life Insurance

People with pre-existing conditions may still qualify for whole life insurance, which provides coverage for life and includes a cash value growth component that allows you to build wealth. However, premiums for this type of insurance can be much higher.

It's important to note that insurance companies use different approaches to qualifying customers and underwriting policies. Therefore, it's recommended to shop around, compare quotes, and consider working with an independent broker who can help you find the best option for your specific needs.

Tips for buying life insurance with a pre-existing condition

Be mindful of when you apply

An insurer will likely turn you down if you apply shortly after a cancer diagnosis or a heart attack. However, you can always reapply, especially if your medical records demonstrate that your treatment has been effective. Some companies will have a specific timeline for when you can apply, such as two years after a final treatment for breast cancer.

Take advantage of improvements in your health

If you are accepted but are being charged a high rate, you can ask for a life insurance re-rating (and a lower premium) once your condition is under control and your prognosis is positive.

Find the right agent

Look for an independent life insurance agent who works with an impaired risk specialist – a broker who will know which insurance companies are more likely to provide a good rate for your particular condition. Make sure your agent is submitting informal inquiries rather than formal applications that will be recorded by the MIB Group.

Get quotes from a handful of insurers

Insurance companies can be unique in how they review specific health conditions. Compare life insurance quotes to make sure you're getting the best possible coverage at the best possible price.

Don't conceal your condition

The worst strategy is to conceal your condition from your insurer. Life insurance companies use many methods to identify fraud. Misrepresenting your health on your application could cause the insurer to reject a life insurance claim, jeopardizing the benefit for your beneficiaries. If the insurer discovers fraudulent information, it typically records the incident in the MIB Group insurance database, which is shared with other insurers. This might hurt your chances of buying coverage from another company.

What to do if you've been denied life insurance coverage

Being denied life insurance coverage can be disappointing, especially if you have a family relying on your income. However, a rejection isn't the end of the road. Here are some steps you can take:

Ask for more information

Contact the insurance company to find out why your application was denied. Insurance companies consider both medical and non-medical risks when assessing your application, and the reason for denial could range from a serious medical condition to non-medical reasons like bankruptcy, a criminal record, or a dangerous hobby. Make sure the information they have is correct and up to date, and if not, consider appealing the decision.

Check with your workplace

Your employer may offer a group term life insurance plan that you can sign up for. These plans usually don't require a medical exam, so your health conditions won't be taken into consideration. However, the death benefit will be limited, and the policy is only valid while you're employed.

Reach out to a life insurance agent

An independent life insurance agent can be a lifeline when you're having trouble getting insured. They know the ins and outs of the underwriting process and can work around any red flags in your application. They can also search across a wider market for policies that are worth it and work for you.

Allow for a waiting period

Sometimes, your best option is to wait and give yourself time to correct any health issues that led to your denial. Use the denial as motivation to improve your health and build healthy habits. Making lifestyle changes and improving your financial health may help you qualify for life insurance in the future.

Apply again for a different policy

If you're reaching an age where your usual insurer doesn't offer the kind of life insurance you applied for, consider applying for a shorter term. If your problem is a serious health condition, there are also no-medical-exam life insurance plans you can consider, such as simplified issue life insurance or guaranteed issue life insurance. However, these plans have limited payouts and higher premiums.

What to do if you don't get approved for life insurance

Being denied life insurance can be a disheartening experience, but it's important to remember that a denial isn't the end of the road. There are several steps you can take to improve your chances of getting approved for coverage. Here are some options to explore:

Ask for more information

Contact the insurance company to find out the specific reasons behind your denial. This will help you understand if there were any inaccuracies or outdated information in your application. You have the right to appeal and provide updated medical or non-medical information to support your case.

Check with your workplace

Your employer may offer a group term life insurance plan that you can enrol in. These plans usually don't require a medical exam and are provided at no cost to employees. While the coverage amount may be lower than what you initially wanted, it can serve as a temporary solution until you find a more suitable policy.

Reach out to a life insurance agent

An independent life insurance agent can be a valuable resource when facing difficulties in obtaining insurance. They understand the underwriting process and can help identify red flags in your application. Agents can also search for policies across a wider market and advise you on the next steps to improve your chances of approval.

Allow for a waiting period

If your denial was due to health issues, use the time to focus on improving your health. Make healthy lifestyle changes, such as eating nutritious meals, exercising regularly, and managing stress. This can increase your chances of approval when you reapply.

Apply for a different policy

Consider applying for a different type of life insurance policy, such as simplified issue life insurance or guaranteed issue life insurance. These policies don't require a medical exam, but they may have higher premiums and lower payout amounts. Alternatively, you can explore no medical exam policies like mortgage life insurance, which covers your mortgage balance in the event of your death.

Consider lifestyle changes

If your denial was due to controllable lifestyle factors, such as risky hobbies or heavy alcohol consumption, making positive changes can improve your chances of approval when you reapply.

Try other life insurance options

If traditional life insurance isn't an option, explore alternatives such as final expense insurance, accidental death insurance, or life insurance through your employer. Final expense insurance is a type of permanent life insurance available to individuals between 50 and 80. Accidental death insurance provides a death benefit if you die due to an accident, but not if you pass away from an illness. Group life insurance through your employer is usually offered at a low cost or even for free, and you can often purchase additional coverage on top of the basic plan.

Frequently asked questions