Life Insurance For The Differently Abled: Possibilities And Challenges

Life insurance is a challenging topic for most people, especially those with disabilities. People with disabilities may wonder if they will be declined coverage or have to pay more than others. While having a disability does not disqualify someone from getting life insurance, it can make the process more difficult. The nature and severity of the disability, overall health, and life expectancy are all factors that influence eligibility and rates.

The life insurance industry offers a range of options for people with disabilities, and denying coverage based solely on disability may violate the Americans with Disabilities Act. However, insurance companies do consider life expectancy, which can be affected by health conditions. The application process is the same for everyone, and the insurer reviews multiple factors beyond health to determine eligibility and rates.

The type of disability and its impact on the insured's risk are crucial considerations when applying for life insurance. Disabilities that affect life expectancy, such as severe or high-risk conditions, may result in higher premiums or limited coverage options. On the other hand, disabilities like loss of vision or hearing may have little effect on life expectancy and insurance rates.

To increase their chances of approval and obtain better terms, applicants with disabilities should consider working with experienced agents who understand their specific needs and can navigate the marketplace on their behalf. Shopping around and comparing coverage options and prices from different insurers is also essential, as each company has different criteria for determining eligibility and rates.

Can a disability be a reason for life insurance denial?

Yes, a disability can be a reason for life insurance denial. However, it is not a disqualifying factor and depends on several variables.

Firstly, the nature of the disability is important. Disabilities that affect life expectancy, such as cardiac issues, will likely result in denial by traditional life insurance providers. Disabilities with little effect on life expectancy, such as loss of vision or hearing, may allow qualification for a traditional term policy.

Secondly, the severity of the disability is a factor. If the disability is severe or compounded by other health issues, it may result in denial.

Thirdly, the disability's impact on the applicant's overall health is considered. If the applicant is in good health aside from their disability, insurance companies may be more willing to approve a policy.

Additionally, certain behaviours and habits can affect the approval of life insurance for disabled people. Smoking, drinking, recreational drug use, and risky hobbies can influence an applicant's insurability and premium cost.

It is important to note that underwriting processes vary among life insurance companies, so it is challenging to pinpoint specific disabilities that will automatically result in denial. Working with an experienced life insurance agent can help individuals with disabilities find the most suitable coverage options.

What are the best types of life insurance for disabled people?

Life insurance plays an important role in someone's financial protection. The insurance industry has expanded its life insurance options for disabled people and shown greater flexibility in writing policies than in the past.

Having a disability does not disqualify you from getting life insurance. However, insurance companies do factor in your life expectancy when evaluating your risk, and life expectancy can be affected by health conditions. The nature of your disability will also affect the available policy choices.

If you have a disability, you may easily qualify for a traditional type of life insurance like term life or final expense. Here are some of the best types of life insurance for disabled people:

Term life insurance

Term life insurance is a policy where you choose the length of the level term period, such as a 20-year term. Your rates do not change during the level term period. You’ll also choose your coverage amount, and if you die while the policy is in force, your beneficiaries will receive the payout. The policy expires if you outlive the length of your term without renewing the policy.

Permanent life insurance

Permanent life insurance typically guarantees lifelong protection and a death payout to your beneficiaries, no matter when you die. It also usually provides the opportunity to build cash value, which accumulates on a tax-deferred basis. The coverage length and cash value are why permanent life is much more expensive than term life.

Guaranteed-issue whole life insurance

Although this type of policy carries a higher price tag and a death benefit cap, a medical exam is not required, making it easily accessible. It can be useful to pay for final medical bills, funeral expenses, and other related costs.

Impaired risk life insurance

For those with high-risk disabilities affecting their life expectancy, an impaired risk life insurance policy is usually the better choice.

Simplified issue life insurance

These term and permanent life insurance policies work like traditional ones, but they don't require a medical exam. Simplified issue life insurance policies typically have some health-related questions in the application, and they can be more expensive and provide less coverage than traditional policies.

Guaranteed issue life insurance

Guaranteed issue policies don't require a medical exam, and they don't ask any health-related questions in the application. They're more expensive and provide less coverage, but guaranteed issue term or whole life insurance can be a way for disabled adults to get a policy if they're otherwise having trouble qualifying.

How does disability impact life insurance premiums?

Disabilities can impact life insurance premiums in several ways. Firstly, the nature of the disability itself plays a significant role. Disabilities that are considered to have little effect on life expectancy, such as loss of vision or hearing, may have less impact on premiums. On the other hand, disabilities that affect life expectancy or are deemed more severe may result in higher premiums and limited policy options. Additionally, the management of the disability and its potential impact on the lifespan of the insured individual are also taken into account.

Medical treatments, medications, surgeries, and hospitalizations are also crucial factors. Insurance companies will assess these aspects through interviews, questionnaires, and a review of the applicant's medical history. Steady employment is generally viewed favourably, as it indicates good health and a regular income to make insurance payments.

Certain behaviours, such as smoking, drinking, and recreational drug use, can negatively impact an applicant's insurability and premium costs, as can risky hobbies. Furthermore, the type of life insurance policy chosen, such as term or permanent life insurance, will also influence the premium amount.

It is worth noting that disability insurance rates can vary based on factors like age, gender, occupation, and policy riders. Seeking the assistance of an experienced life insurance agent who understands the unique needs of individuals with disabilities can be beneficial in obtaining suitable coverage.

Do you have to disclose your disability when applying for life insurance?

Yes, you must disclose your disability when applying for life insurance. If you don't disclose your condition and your insurer finds out, they might terminate your policy or refuse to pay out the death benefit to your beneficiaries. This non-disclosure can be considered life insurance fraud.

However, having a disability does not disqualify you from getting life insurance. In fact, denying someone a life insurance policy solely because they have a disability may violate the Americans with Disabilities Act. The nature of your disability will affect the available policy choices.

For example, if your disability is due to a physical impairment like blindness or deafness, you may be able to qualify for a traditional term policy, especially if your significant other has life insurance. In this case, most life insurance providers will allow you to purchase a policy that offers at least half of the coverage your spouse has.

If your disability affects your life expectancy, it can impact a life insurance policy in certain ways. If your disability is severe or if you have other compounding health problems, most traditional life insurance providers will likely deny your application.

What are some additional considerations for parents of disabled children?

Parents of children with disabilities face unique challenges when it comes to life insurance. Here are some additional considerations for them:

Understanding the Impact of Disability on Life Insurance

Recognize that the nature of your child's disability will influence their life insurance options. Disabilities that impact life expectancy or are deemed high-risk will result in higher premiums and fewer choices. Be prepared for this reality and don't hide your child's disability when applying for coverage.

Choosing the Right Type of Policy

Term life insurance offers coverage for a specific number of years, while permanent life insurance is a lifelong policy. For children with deteriorating health, a whole life policy that guarantees coverage regardless of health deterioration may be preferable. However, if your child's health is stable, term insurance might be a less risky option.

Exploring Specialised Programs and Policies

Some insurance companies offer specific programs for certain disabilities. For example, MassMutual's SpecialCare program caters to individuals with Down syndrome, cerebral palsy, and autism. These programs often provide specialised training to agents, enabling them to better serve clients with disabilities.

Working with the Right Professionals

Engage a reputable advisor who understands the intricacies of writing policies for individuals with disabilities. Be cautious of advisors who claim that your child with special needs is uninsurable due to pre-existing conditions. There may still be options, such as requesting a rating, a graded life benefit, or a policy based on your child's functional level.

Determining the Amount of Coverage

Consider the reasons for purchasing life insurance for your child. If it's solely to cover funeral and related expenses, a substantial death benefit may not be necessary. However, if you intend to use the proceeds to support dependents or replace lost wages, a larger death benefit is more appropriate.

Ownership of the Policy

Since your child is likely a minor or receiving government benefits, it's generally not advisable for them to own the policy. The cash value of the policy could impact their eligibility for programs with asset limits, such as Medicaid and SSI. Consider owning the policy yourself or having another child or an appropriate trust as the owner and beneficiary.

Comparing Quotes and Shopping Around

Don't settle for the first offer. Compare quotes from multiple carriers and shop around for the best rates. Each insurance company has different criteria for determining eligibility and rates, so explore various coverage options. Remember, honesty is crucial when requesting quotes to ensure accurate premiums.

Considering Alternative Options

If traditional life insurance seems out of reach, explore alternative options like final expense or burial insurance. These policies often provide guaranteed coverage up to a certain amount without medical underwriting and are available regardless of health status.

Utilizing Employer-Based Life Insurance

If you're employed, check if your company offers life insurance programs. Sometimes, employers may even pay for this coverage. You may also have the option to buy additional life coverage through the same insurer. While the payouts are usually smaller, it's a viable option if you can't get coverage elsewhere or want supplemental insurance.

Frequently asked questions