Life Insurance: Pre-Existing Conditions, What You Need To Know

Life insurance is a crucial financial safety net for individuals and their loved ones. However, for those with pre-existing health conditions, the process of obtaining life insurance can be challenging and often comes with higher costs. Pre-existing conditions are defined as health issues or diagnosed illnesses present before applying for life insurance, and they can significantly impact the availability and pricing of coverage. While these conditions may make the search for life insurance more difficult, it is still possible to find suitable policies, especially if the conditions are well-managed through treatment and lifestyle choices.

No-exam life insurance

There are three types of no-exam life insurance underwriting:

• Accelerated underwriting: This process involves the life insurance company gathering information about the applicant electronically, with the help of algorithms, to assess their quote.
• Simplified issue life insurance: This is a streamlined approach where applicants answer some health and lifestyle questions without the need for a medical exam.
• Guaranteed issue life insurance: This type of policy does not require a medical exam or any health questions. It is intended for those in poor health who want minimal coverage, usually to cover funeral expenses.

Some of the best no-exam life insurance companies include Pacific Life, Protective, Symetra, Corebridge Financial, and Legal & General America/Banner Life.

Term life insurance

Even if you have a pre-existing condition, you can still qualify for term life insurance. However, the scope of your health condition and how you're treating it, along with other factors such as your age, gender, and overall health profile, will largely determine your coverage options and how much you'll pay for your policy.

How to Get Term Life Insurance with Pre-Existing Conditions

• Shop around and compare quotes from different insurers: Every insurance company will evaluate your eligibility and the cost of your policy differently. Comparing quotes from different insurers is the best way to ensure that you find the best option for you.
• Work with an independent agent or broker: They will have experience finding the best life insurance for people with various health considerations, including pre-existing conditions, and can help you find the right options for your unique needs.
• Use your medical treatment to your advantage: If you're actively managing your health conditions, life insurance companies will take that into consideration when they assign you a health classification, which could help you get lower insurance rates.
• Buy life insurance sooner rather than later: On average, life insurance rates increase by 4.5% to 9% each year that you delay applying, based on your age alone. Even with a pre-existing medical condition, you might still be able to lock in cheaper life insurance rates by applying for coverage earlier rather than waiting for your condition to change.
• Be honest about your health condition: Lying on your life insurance application can result in a higher premium, policy cancellation, or even a denied death benefit. Insurance professionals recommend being forthcoming with your insurer to avoid these concerns.

According to Policygenius, the following are some of the best term life insurance companies for people with common pre-existing health conditions:

• Legal & General America: Competitive rates and instant-decision options for qualifying applicants with conditions such as anxiety, asthma, depression, diabetes, and high blood pressure.
• Corebridge Financial: Competitive pricing and flexible term periods, especially for people with heart conditions and diabetes.
• Lincoln Financial: Good for people with various existing health conditions, including depression, stroke, and heart conditions, as well as marijuana users.
• Pacific Life: Affordable rates across age brackets and favourable underwriting for many health conditions.
• Prudential: Competitive coverage options for people with common medical conditions, including asthma, depression, and fibromyalgia.
• Symetra: High coverage amounts and term life policies for people with a history of health conditions like cancer.
• Transamerica: Affordable rates for almost every age and a no-medical-exam option for qualifying applicants, including smokers and people between 60 and 70.

Accept a higher premium

If you have a pre-existing condition, you may be offered a policy that includes what is known as a 'loaded' premium. This means that you will pay a higher price for your life insurance to include your pre-existing medical condition. In other words, you are asked to pay an increased price to cover the increased risk to the insurer.

The cost of the premium is likely to increase with the severity of the condition, but it is important to note that each insurer categorises medical conditions differently. For example, if you have high blood pressure, you may be offered a policy with a 'loaded' premium.

It is also worth noting that if you have a condition that is considered curable or manageable, it is against the law to charge you more for life insurance because of it, according to the Equality Act 2010.

Group life insurance

The typical group policy is for term life insurance, often renewable each year with a company's open enrollment process. This is in contrast to whole life insurance, which is permanent, has higher premiums and death benefits, and is the most popular type of life insurance.

There are many different formulas used to calculate group life insurance benefits. Some of the most common types are:

• Fixed multiple-of-earnings benefit plans: These plans tie the death benefit amount to a multiple of the insured person's wages, such as two times their annual salary.
• Variable multiple-of-earnings benefit plans: These plans' benefits are based on multiples of the insured person's earnings at certain thresholds.
• Flat-dollar-amount benefit plans: These plans pay the same amount to all employees and are a fixed dollar amount.
• Variable-dollar-amount benefit plans: Payouts can vary based on earnings and length of service.

The purpose of group life insurance is to provide financial support to the families of employees and peace of mind to employees and their families. It is also a way for businesses to attract and retain talent, showing employees that they are valued.

Guaranteed issue life insurance

Guaranteed life insurance policies typically offer lower coverage amounts than traditional life insurance due to their lower eligibility requirements. The application and approval process is quick and easy, and the policy provides lifelong coverage as long as premiums are paid. It also includes a cash value component that builds over time, which can be used as collateral for a life insurance loan.

One of the drawbacks of guaranteed issue life insurance is the lower coverage amount, typically capped at around $25,000. Additionally, these policies are more expensive than traditional life insurance due to the increased risk associated with applicants' severe health conditions. There is also a waiting period of about two to three years before the death benefit becomes available, during which beneficiaries may only receive a reduced benefit or a refund of premiums paid.

Frequently asked questions