Mental Illness: Life Insurance Options And Obstacles

Mental illness is a common issue, with around one in five adults in the US experiencing mental health conditions each year. Despite this, many people with mental health conditions can find it challenging to obtain life insurance. However, it is important to know that having a mental health condition does not automatically disqualify you from getting life insurance. Several factors come into play when determining eligibility and rates. These include the type of mental illness, its severity, treatment methods, and its impact on daily life and work ability. While some insurers may deny coverage or charge higher premiums due to mental health issues, others offer competitive rates and flexible options for individuals with mental health conditions. It is crucial to be transparent during the application process and seek expert advice when navigating life insurance options with a mental health history.

Types of life insurance for those with mental illness

If you have a mental health condition, you may still be able to get life insurance. However, the type of condition, its severity, your treatment protocol, and other factors will determine what you qualify for and at what cost. Here are some types of life insurance that may be suitable for those with mental health conditions:

Term Life Insurance

Term life insurance offers coverage for a set period, usually between 10 and 30 years. This type of coverage is generally cheaper than other types of life insurance, particularly if you are younger and relatively healthy. Term life insurance may be a good option for those with mental health conditions who are looking for affordable coverage for a specific period.

Permanent Life Insurance

Permanent life insurance, such as whole life insurance or universal life insurance, lasts your entire life as long as you pay the premiums. It is usually more expensive than term life insurance and offers a cash value component. This type of coverage may be suitable for those with mental health conditions who want lifelong protection and are willing to pay higher premiums.

Guaranteed Issue Life Insurance

Guaranteed issue life insurance is a good option for those who have been turned down for coverage due to their mental health condition. It does not require any health questionnaires or medical exams, and approval is guaranteed if you meet the age requirements (typically 50 to 80). However, the death benefits are usually capped at around $25,000, and there may be a waiting period of two years before your beneficiaries can receive the full benefit.

Group Life Insurance

Group life insurance is offered by employers and provides coverage to a company's employees under one plan. It is often inexpensive and easy to obtain, and mental health issues typically do not disqualify you from participating. However, the policy is only active as long as you remain employed with the company. Group life insurance can be a good option for those with mental health conditions who want affordable coverage through their workplace.

When considering life insurance with a mental health condition, it is important to shop around and compare different companies' policies and underwriting guidelines. Working with a licensed insurance agent or broker can also help you find a suitable policy that meets your needs.

Factors that affect life insurance premiums

Several factors can influence the life insurance premiums for individuals with mental illness. Here are some key considerations:

• Type of Mental Illness: Different mental health conditions may be viewed differently by insurance providers. For example, conditions such as severe anxiety, depression, schizophrenia, or those with an increased risk of suicide, may result in higher premiums or even application denial. Other conditions, such as mild depression or less severe disorders, may have a lesser impact on premiums.
• Severity and Treatment: The severity of an individual's mental health diagnosis and their treatment plan can affect premiums. Underwriters will consider whether the condition is mild, moderate, or severe and if the person is following a prescribed treatment plan. Successful treatment and management of the condition can increase the chances of obtaining coverage and may lead to lower premiums.
• Medical History: Insurance companies will often review an applicant's medical records, including hospitalization history, medication use, and any history of self-harm. Multiple hospitalizations, a higher number of medications, or a history of self-harm may result in higher premiums or impact eligibility.
• Ability to Function: Insurers will assess how the mental illness affects an individual's daily life and their ability to work and live independently. If the condition significantly impairs their functioning, it may be considered a higher risk, leading to higher premiums or coverage limitations.
• Age and Overall Health: As with any life insurance application, age and overall physical health are important factors. Older individuals or those with other health issues in addition to mental illness may face higher premiums or have more limited options.
• Type of Insurance: The type of life insurance policy can also impact premiums. Term life insurance, which covers a set period, is generally cheaper than permanent life insurance. Guaranteed issue life insurance, which does not require medical exams or questionnaires, tends to be more expensive and has lower death benefits.
• Underwriting Guidelines: Each insurance company has its own underwriting guidelines, and some may be more accommodating to individuals with mental health conditions than others. Shopping around and comparing quotes from different providers can help find the most suitable coverage.

The application process for life insurance

Step 1: Determine Your Coverage Needs

First, you need to decide on the type of life insurance you want (term or permanent) and the amount of coverage you need. Term life insurance covers a specific period, usually 10 to 30 years, while permanent life insurance covers your entire life. Consider factors such as your age, income, debts, and anticipated funeral expenses when determining the coverage amount.

Step 2: Choose an Insurance Company and Apply

Once you know your coverage needs, you can start shopping for an insurance company. You can apply for life insurance directly with an insurance company or through a broker or agent. The application will ask for basic information such as your name, address, occupation, and employer, as well as lifestyle habits, health history, financial information, and risky hobbies or activities. Be prepared to answer questions about any mental health conditions and treatments. It is crucial to be honest and accurate when filling out the application.

Step 3: Medical Exam and Phone Interview

Most life insurance companies require a medical exam as part of the application process. A paramedical or licensed healthcare professional will conduct the exam, which may include recording your medical history, taking your vital signs, and collecting blood and urine samples. Additionally, you may be required to participate in a phone interview to provide further details about your health and lifestyle.

Step 4: Underwriting Review and Approval

After submitting your application, the insurance company's underwriting department will review your information. They may request additional medical records or clarification on certain points. This process can take several weeks, depending on the complexity of your situation and the completeness of your application.

Step 5: Receive a Decision

Finally, the insurance company will either approve or deny your request for coverage. If approved, you will receive the terms of your policy, including the premium amount and coverage limits. If denied, you have the option to reapply with another insurance company or explore alternative options, such as guaranteed issue life insurance.

The impact of mental health on life insurance

Mental health issues can have a significant impact on the availability and cost of life insurance. While most insurers are aware that mental illness is not uncommon and welcome people with mental health conditions, the impact of mental health on life insurance depends on the type of illness and how it is treated.

The Application Process

When applying for life insurance, individuals with mental health conditions may be required to fill out detailed applications, participate in phone interviews, and undergo medical exams, including blood and urine tests. They may also be asked specific questions about their mental health, such as the date of diagnosis, current treatment methods, medication history, and any hospitalizations related to their mental health.

Factors Considered by Insurers

Insurers consider various factors when evaluating the risk associated with insuring individuals with mental health conditions. These factors include the severity of the condition, the consistency of treatment, the impact on daily life and employment, and the presence of other health issues linked to mental health. Conditions with a higher risk of suicide, such as severe depression, bipolar disorder, or schizophrenia, may increase the cost of the policy or result in application denial.

Types of Life Insurance

Individuals with mental health conditions may have different options for life insurance, including term life insurance, whole life insurance, simplified issue life insurance, guaranteed issue life insurance, and group life insurance through their employer. The availability and cost of these options may vary depending on the individual's specific circumstances and the insurer's underwriting guidelines.

Cost Implications

Mental health conditions can affect the cost of life insurance, with more severe diagnoses, inconsistent treatment records, and recent hospitalizations potentially leading to higher premiums. However, individuals with well-managed mental health conditions who follow their treatment plans may be able to obtain life insurance at competitive rates.

Disclosure of Mental Health Information

It is crucial to be honest and disclose mental health information during the application process. Failing to disclose or lying about a mental health diagnosis may result in denial of coverage, cancellation of the policy, or legal consequences for insurance fraud.

Options if denied life insurance due to mental health

If you have been denied life insurance due to your mental health, there are several options to consider:

• Shop around and consult experts: Every insurance company has its own policies and algorithms for determining who they will sell policies to. This means that even if one or two companies have turned you down, others may not. It can be beneficial to consult a licensed life insurance agent or broker who can answer your questions and help you find an insurer that will work for your needs.
• Consider guaranteed issue life insurance: This type of coverage does not require a medical exam or health questionnaire. Approval is guaranteed as long as you meet the age requirements (usually 50-80 years old). However, the death benefits are typically capped at around $25,000, and there is often a two-year waiting period before your beneficiaries can receive the full death benefit.
• Explore group life insurance options: Group life insurance is offered by employers and is generally inexpensive and easy to obtain, without any medical underwriting requirements. While coverage is only active for as long as you remain employed with the company, it can be a good option if you are unable to find coverage elsewhere.
• Look into final expense insurance: If you are a senior, final expense insurance (also known as funeral or burial insurance) may be an option. Many carriers do not require health questions or a medical exam for this type of coverage, and the amount of coverage needed is usually smaller.
• Be honest on your application: Failing to disclose a pre-existing mental health condition could result in your application being rejected or your policy being cancelled. It is also important to note that lying on a life insurance application is considered insurance fraud and could make it difficult to get approved for insurance in the future.
• Appeal the decision: If you feel that you have been denied coverage unfairly, you have the right to appeal the insurance company's decision. Many people are able to receive the care they need after filing an appeal, and there are federal and state laws in place to protect individuals in these situations.

Frequently asked questions