Life Insurance For Disabled People: Is It Possible?

Life insurance is a crucial financial protection tool that guarantees a sum of money to be paid out to beneficiaries upon the policyholder's death. While having a disability does not disqualify one from obtaining life insurance, it is essential to understand how disabilities can impact the application process and available options. This is because insurance companies factor in life expectancy and overall health when evaluating an individual's risk and eligibility. Disabilities that affect life expectancy or have serious health ramifications may limit policy choices and result in higher premiums. However, it is important to note that living with a disability does not automatically disqualify an individual from obtaining life insurance.

Life insurance for disabled children

If you are considering purchasing life insurance for your disabled child, the first step is to contact a reputable advisor. The insurance industry can be driven by commissions, so it is important to find an advisor who will put your family's needs ahead of personal gain and who understands the guidelines for writing policies for a person with disabilities. Some advisors may suggest that a child with special needs may not be insurable due to pre-existing conditions or disabilities. However, despite such conditions, there may still be options to obtain insurance.

When applying for insurance, it is important to present the medical and psychological issues in a light most favorable for issuance of the policy. It is crucial to complete the details accurately and honestly, but there is usually no requirement to volunteer additional information. The insurance company may request further explanation about test results or details surrounding the capacity of the child to perform certain tasks.

Another important consideration is determining the amount of coverage to request, which depends on your reasons for purchasing a policy. If the proceeds are intended to cover only funeral and related expenses, there is probably no need for a substantial death benefit. However, if the proceeds will be used to support dependents or replace a caregiver's lost wages, a larger death benefit may be appropriate.

It is also important to consider who will own the policy. Since the child is often a minor or is receiving Medicaid or other government benefits, the child should not own the policy to avoid losing these critical benefits. An alternative could be to have another child own the policy or to have an appropriate type of trust as the owner and beneficiary.

The type of policy you choose will depend on your child's health and the level of coverage needed. Whole life insurance guarantees coverage for the lifetime of the insured and ensures continued coverage if health conditions deteriorate over time. On the other hand, term insurance may be less risky if your child's health is stable and not likely to deteriorate.

When purchasing life insurance for a disabled child, it is essential to work with an experienced professional who can guide you through the process and help you make an informed decision.

Whole life vs. term life insurance for disabled people

People with disabilities have the same choices for life insurance as anyone else. The two main types of life insurance are term life insurance and whole life insurance. Here are some of the key differences between the two:

Term Life Insurance

• This type of insurance covers you for a set period, typically between 10 and 30 years.
• It is often referred to as "pure life insurance" as it does not have a cash value component.
• It is generally the cheapest type of life insurance.
• It is simple and straightforward, making it easier to understand than whole life insurance.
• It is a good option for those who only need coverage for a specific period, such as while they have minor children or other financial obligations.
• It is also a good choice for those who want more affordable coverage or are only able to afford lower premiums.
• Term life insurance can be used to supplement a whole life insurance policy, providing additional coverage for a temporary period.
• The main drawback is that it only provides coverage for a limited number of years.
• It cannot be used as a wealth-building or tax-planning strategy.

Whole Life Insurance

• This type of insurance provides coverage for your entire life, as long as premiums are paid.
• It includes a cash value component, which allows you to withdraw or borrow funds during your lifetime.
• The cash value grows at a guaranteed rate on a tax-deferred basis.
• Premiums are typically much higher than term life insurance, and they remain level throughout the policy.
• Whole life insurance offers lifelong coverage, making it suitable for those who want permanent coverage or have lifelong dependents, such as a child with disabilities.
• It is a good option for those who want a policy that builds guaranteed cash value.
• The ability to withdraw or borrow against the policy makes it a flexible financial tool.
• The main drawback is the cost, which can be significantly higher than term life insurance.
• Whole life insurance is also more complex than term life insurance.
• If you take out a loan against the policy and don't repay it, your death benefit will be reduced.

Both types of insurance have their advantages and disadvantages for disabled people. Term life insurance may be a good option if you are unable to afford the higher premiums of whole life insurance. It can provide coverage for a specific period, such as until your children are financially independent. Whole life insurance, on the other hand, offers lifelong coverage and the ability to build cash value, which can be beneficial if you have lifelong dependents. It also provides more flexibility with the option to borrow or withdraw funds. However, it is important to consider your financial situation and needs when deciding which type of insurance is best for you.

Applying for life insurance as a disabled person

Having a disability doesn't mean you can't get life insurance. However, there are extra considerations to take into account. Understanding the nuances and seeking guidance from professionals can help secure a well-tailored life insurance plan, ensuring financial security for individuals with disabilities and their families.

Acceptance and the premium you pay are based on a number of factors that all play a role in your life expectancy, such as overall health and lifestyle, age, gender, medical history, and occupation. Disabilities can take many different forms and are only one piece of the puzzle.

If your disability does not affect your life expectancy and you are otherwise healthy, you can likely qualify for life insurance easily. However, some disabilities can have lasting effects on your health, which may limit your options and impact your premium payments.

The process of applying for life insurance is no different for someone with a disability. As part of the application, you’ll provide your personal details and medical history. It’s important to be accurate and truthful, as claims may be denied if information is concealed. Then, you’ll usually be required to take a life insurance medical exam that is similar to a standard yearly checkup. It can include measuring your height, weight, blood pressure, and heart rate, and a blood or urine sample may be required.

• Work with a qualified professional to find the right coverage — It might seem tempting to fill out a form online to see if you qualify, but life insurance is too important and too nuanced to rely on an impersonal questionnaire. Seeking guidance from a qualified financial professional can significantly ease the process of securing life insurance for individuals with disabilities. They can offer advice and guidance about which products and coverage amounts would work best based on your circumstances. They also have extensive knowledge of life insurance add-ons, called riders, that may help with your specific situation.
• Improve your overall health — Lifestyle changes like quitting smoking, better managing conditions like diabetes, adhering to prescribed medical treatments, and eating healthier can have a deep impact on your health, and subsequently on your insurability. Taking steps to adopt a healthier lifestyle can lower your insurance rates and increase the options available to you, whether you have a disability or not.

In the unfortunate event of being denied coverage, there are steps you can take. Seek an explanation for the denial, which should help you better understand if there are things you can change or improve in order to reapply and get coverage in the future. Also, you may still be able to qualify for other insurance products or with other providers. Another option is no-exam life insurance, which can provide some of the protection you need if you have disqualifying health issues.

Getting life insurance without a medical exam

Life insurance is usually a lengthy process that involves a medical exam. However, some insurance companies offer life insurance without a medical exam, which can be beneficial for those who want to expedite the process. This type of insurance is typically referred to as "no medical exam life insurance" or "no medical life insurance".

There are a few different forms of life insurance without a medical exam, including term life insurance and whole life insurance. Term life insurance provides coverage for a specific period, often involving lower premiums that remain constant throughout the policy's duration. On the other hand, whole life insurance offers coverage for the entire life of the policyholder, usually at a higher cost. It also tends to accumulate cash value in a separate savings account.

Aflac, for example, offers term and whole life insurance without a medical exam, depending on the applicant's state, age, and chosen plan. Simplified issue life insurance and guaranteed issue life insurance are other common types of policies that do not require a medical exam. Simplified issue policies are ideal for younger, healthier individuals who want to skip the medical exam but are willing to answer health questions and share medical records. Guaranteed issue policies, meanwhile, are suitable for those with health issues that have led to previous rejections from insurers. While these policies typically come with higher premiums and limited coverage, they do not require any health-related information.

It is important to note that opting for life insurance without a medical exam may result in higher costs due to the increased risk for the insurance company. Therefore, it is recommended to shop around and compare quotes from different insurers to find the best option for your specific needs.

Riders on life insurance policies

Riders are add-ons to a life insurance policy that provide additional coverage or benefits. They are usually purchased at the same time as the insurance policy and cannot be added later. Riders can be added to both term and permanent life insurance policies, but the availability of specific riders depends on the insurer and the chosen policy.

Accelerated Death Benefit Rider

This rider allows the policyholder to access the death benefit funds if they develop a qualifying illness, usually limited to chronic or terminal illnesses. This can help them manage the high costs of medical care. There may be limits on how much of the death benefit can be paid out, and what qualifies as a covered illness. This rider is sometimes included in the base policy.

Accidental Death Rider

The accidental death rider increases the payout to beneficiaries if the policyholder dies due to a covered accident, such as a car accident or a fall. This rider typically doubles the death benefit in the event of an accidental death. However, the death must occur within a specified time period after the accident for the rider to take effect.

Child Term Rider

The child term rider provides a death benefit if a child of the policyholder dies, covering medical bills, funeral expenses, and burial costs up to a predetermined limit. It covers biological children, stepchildren, and legally adopted children, as well as any children adopted after the rider is in place.

Guaranteed Insurability Rider

This rider allows the policyholder to purchase additional insurance coverage without undergoing further medical examinations. It is beneficial when there are significant changes in life circumstances, such as the birth of a child, marriage, or an increase in income. The rider may also provide for the renewal of the base policy at the end of its term without a medical check-up.

Long-Term Care Rider

The long-term care rider allows the policyholder to access the death benefit to pay for long-term care costs if they require nursing home care or home care. It provides monthly payments to cover these expenses. Long-term care riders typically come with two types: reimbursement riders and indemnity riders.

Return-of-Premium Rider

The return-of-premium rider refunds some or all of the premium payments if the policyholder outlives the term of the policy. This rider can be added to a new or existing term life policy but comes at a high price, potentially tripling the cost of the premium.

Waiver of Premium Rider

The waiver of premium rider waives the life insurance premiums if the policyholder becomes totally disabled and unable to work. Covered disabilities may include permanent illness or severe injury. The rider may require proof of disability from the Social Security Administration and a physician. There is usually a waiting period before the rider takes effect, and the policyholder may need to provide proof of disability every few years.

Other less common life insurance riders include chronic illness riders, cost-of-living riders, critical illness riders, disability income riders, family income benefit riders, paid-up additions, spousal insurance riders, and term insurance riders.

Frequently asked questions