Mental Illness: Life Insurance Policies And Their Problems

Mental illness is becoming more accepted in society, but many people with mental health issues still feel embarrassed to admit their diagnosis or talk about it. This can make it difficult to apply for services like life insurance, which often requires disclosing personal medical information. While a mental illness diagnosis does not automatically disqualify someone from getting life insurance, it can affect the cost of coverage and the options available.

What is considered a mental health condition?

Mental health conditions are defined by the Centers for Disease Control (CDC) as "conditions that affect a person's thinking, feeling, mood, or behavior". Mental disorders, a type of mental health condition, are characterised by clinically significant disturbances in cognition, emotional regulation, or behaviour. These disturbances are usually associated with distress or impairment in important areas of functioning.

Mental health conditions can take many forms, including but not limited to depression, anxiety, bipolar disorder, or schizophrenia. They can also include phobias, substance use disorders, and eating disorders. Mental health conditions can be mild, only interfering with daily life in limited ways, or severe, requiring hospitalisation.

Mental health conditions are often treatable, and many people with mental health conditions can continue to function in their daily lives. However, mental health conditions can also be serious and chronic, requiring ongoing medical care and treatment. Some mental health conditions can be related to or mimic a medical condition, such as depressive symptoms related to a thyroid condition. Therefore, a mental health diagnosis typically involves a full health evaluation, including a physical exam and possibly blood work and/or neurological tests.

Mental health conditions are common, with one in five adults in the United States experiencing mental illness each year, according to the National Alliance on Mental Health (NAMI). Despite this prevalence, stigma and discrimination surrounding mental illness persist, and many people do not seek the treatment they need.

When it comes to life insurance, mental health conditions can impact eligibility and premiums. Life insurance companies typically consider mental health conditions as part of their underwriting process, reviewing recent medical history and specific details of the condition. They may also request specific information, such as the name and severity of the condition, medications and treatment plans, the impact on everyday life, and any history of self-harm.

While a mental health condition does not automatically disqualify a person from life insurance eligibility, it can increase the risk for insurance companies and potentially affect the ability to purchase life insurance. Certain mental health conditions with a higher likelihood of suicide, such as severe anxiety, depression, schizophrenia, and substance abuse, may result in higher premiums or lower coverage limits. However, successful treatment and management of mental health conditions can improve the chances of obtaining life insurance.

How does mental health impact life insurance?

Mental health can impact life insurance in several ways. Firstly, it can affect the eligibility for coverage. While most insurers are aware that mental illness is not uncommon and typically welcome people with mental health conditions, there are cases where a life insurance company may deny coverage due to an ongoing mental health condition. This decision is usually made by reviewing an applicant's recent medical history and specific details of their condition.

Secondly, mental health can influence the cost of life insurance. The impact of mental health on premiums depends on the type of illness, its severity, and the treatment methods used. Certain mental health conditions, such as severe anxiety or depression, schizophrenia, and substance abuse, may result in higher premiums due to their association with an increased risk of suicide.

Thirdly, mental health can affect the type of life insurance policy available to an individual. For instance, individuals with mental health conditions may opt for term life insurance, which offers coverage for a set period, usually between 10 and 30 years, or permanent life insurance, which lasts an individual's entire life as long as premiums are paid. Additionally, guaranteed issue life insurance, which does not require a medical exam or health questionnaire, may be an option for those with mental health conditions who have been turned down for coverage.

When applying for life insurance, individuals with mental health conditions can expect to undergo a medical exam and complete a questionnaire about their medical history, including their mental health. Insurers may ask questions about the diagnosis, severity, treatment plan, and impact of the mental health condition on daily life and employment. It is important to disclose mental health information accurately, as failing to do so could result in application rejection or policy cancellation.

Overall, while mental health can impact life insurance eligibility, cost, and policy type, many insurance companies recognize that mental health conditions can be managed successfully and are willing to provide coverage options for individuals seeking financial protection.

Can I be denied life insurance due to mental health?

It is possible for an insurance company to deny you coverage if they deem you to be too high a risk based on statistics regarding others with similar pre-existing conditions. However, this is not always the case, and it is worth shopping around and speaking to a financial professional to find the right insurer for you.

According to the National Alliance on Mental Illness (NAMI), a mental health condition is one that "affects a person's thinking, feeling, behaviour or mood". Common mental health issues include:

• Obsessive-Compulsive Disorder (OCD)
• Attention Deficit Hyperactivity Disorder (ADHD)
• Post-Traumatic Stress Disorder (PTSD)
• Borderline Personality Disorder (BPD)
• Dissociative Disorders
• Schizoaffective Disorder

When shopping for life insurance, your overall health can impact your chances of approval and the price you pay. Depending on the type of insurance policy, you may have to fill out a health questionnaire or participate in a medical exam. Insurers can also request your medical records for evaluation.

You should never lie about your mental health diagnosis on an insurance application. Life insurance underwriters use databases like the Medical Information Bureau (MIB) to confirm your medical history. If you are found to be lying, the underwriter will conduct an investigation, which could lengthen the application process, and you could be charged with insurance fraud.

If you are denied life insurance due to your mental health, there are other options. Simplified issue life insurance doesn't require a medical exam, but does involve answering a few questions about your medical history. Guaranteed issue life insurance doesn't require a medical exam or any questions about your health, but these policies are designed for those who are the riskiest to insure, so they come with lower benefit amounts and higher premiums. Group life insurance, which is often offered by employers, rarely requires any medical screening and is usually inexpensive and easy to obtain.

What happens if I lie about my mental health diagnosis?

Lying about your mental health diagnosis on a life insurance application is not advisable. Life insurance underwriters use databases like the Medical Information Bureau (MIB) to confirm the medical history information you supplied. If it is found that you lied on the application, the underwriter will need to conduct an investigation to gather more information about the discrepancies found, which could lengthen the application process. In some cases, you could be charged with insurance fraud, which could make it difficult to get approved for life insurance in the future.

Most life policies, including term life insurance, have a two-year suicide clause. This clause is in place to prevent people from purchasing life insurance with the intent to commit suicide and have their family's income protected. In addition, your insurance policy will come with a contestability period, which typically lasts for two years after you purchase the coverage. This clause allows the company to investigate any death claim during that time for misrepresentation. If it finds you lied on the application, your beneficiary may not get the full death benefit you selected. They might receive a reduced amount based on what your premiums would have qualified you for with accurate representation, or they may only get the premiums paid into the policy up to your death.

Will a mental illness increase my life insurance costs?

Mental illness can affect the cost of life insurance, but it depends on the type of illness and how it is treated. If you have a mental illness, you can get life insurance, but you might have to pay higher premiums.

When you apply for life insurance, you will have to provide your medical history, undergo a medical exam, and answer additional questions about your mental health history. Life insurance companies will want to see a complete picture of your diagnosis, treatment history, and the rest of your medical history to accurately set your premiums.

The more severe your diagnosis, inconsistent treatment records, health issues linked to your mental health, and recent or multiple hospitalizations, the more likely your life insurance costs will increase.

Certain mental health conditions that have a higher likelihood of suicide, such as severe anxiety or depression, schizophrenia, and substance abuse, may result in higher premiums than other mental illnesses, lower coverage limits, or even application denial.

If you are seeing a mental health professional, are following a treatment plan, have not been hospitalized recently, and have a consistent employment history, you may increase your chances of being approved for life insurance at a better rate.

If you are denied a standard life insurance policy due to mental illness, you may want to consider a simplified issue or guaranteed issue life insurance policy, which does not require a medical exam or medical questions. Group life insurance through your employer is another option, as it often does not require medical underwriting.

Frequently asked questions