Depression's Impact: Higher Life Insurance Premiums

Life insurance is designed to protect your loved ones in case something happens to you. However, purchasing a life insurance policy can become more challenging if you have a history of mental or physical health issues. Clinical depression is one such problem that can affect both your ability to obtain coverage and the costs of coverage. While some insurers will deny coverage altogether due to depression, others may charge higher premiums because of the mental health issue. The impact of depression on your ability to obtain insurance coverage varies based on factors such as the severity of your condition, the length of your struggle with depression, and the treatments you are undergoing or have received.

Life insurance companies' definition of depression

Life insurance companies do not use a uniform definition of depression. However, they are interested in any diagnoses that require medication or that might affect your daily life or ability to work. The National Alliance on Mental Illness (NAMI) defines the following as mental health conditions:

• Attention deficit hyperactivity disorder (ADHD)
• Borderline personality disorder
• Dissociative disorders
• Obsessive-compulsive disorder
• Post-traumatic stress disorder
• Schizoaffective disorder

Mental health conditions are considered a health risk by insurance companies because they can affect your physical well-being and ability to complete day-to-day tasks. Insurers will vary in how they weigh these risks and set premiums accordingly.

The impact of depression on your ability to obtain insurance coverage and the cost of that coverage will depend on several factors, including the severity of your depression, the length of time you have been suffering from it, and the treatments you are undergoing or have received in the past. For example, someone with a history of suicidal thoughts or major depressive disorder may find it more difficult to obtain coverage or get the best rates.

In most cases, people with a diagnosis of depression can still obtain life insurance, often at affordable rates. However, they may need to shop around among different insurers to find the right coverage. Some insurers may deny coverage altogether or charge higher premiums due to the increased risk associated with mental health issues.

The impact of depression on life insurance rates

Depression is a common mood disorder that can affect how you feel, think, and act. It is not uncommon, with 1 in 4 Canadians and 1 in 5 US adults receiving a diagnosis for depression. However, a history of depression can make it more difficult to obtain life insurance and can affect the cost of coverage.

Insurance companies want to limit the risk of having to pay out on a policy. Life insurance companies, in particular, want to insure people who are less likely to die while the policy is in effect. Therefore, a diagnosis of depression can make you appear to be a higher risk to insurers, leading to higher premiums.

The impact of depression on your ability to obtain insurance coverage and the cost of that coverage will vary based on several factors, including:

• The severity and frequency of your depression
• How long you have had depression
• Treatments you are currently undergoing or have received in the past
• Whether you have a history of suicidal thoughts or attempts
• Whether you have a history of substance abuse
• Whether you've been hospitalized for depression
• How you manage your symptoms

Applicants with a history of depression are evaluated on a case-by-case basis. The life insurance company will either approve or deny your application and, if approved, offer a specific rate class that dictates the cost of your policy.

Rate classes are typically divided into Preferred, Standard, and Table ratings. The Preferred rating includes the most affordable premiums and is usually assigned to people with no health conditions or only one well-controlled or minor condition. Standard ratings are given to those with mild-to-moderate conditions, and Table ratings are applied when a condition appears to significantly impact overall health, with higher percentages added to the standard rate.

Yes, it is possible to be denied life insurance if you have depression, especially if you have a documented history of suicidal thoughts or attempts, do not take prescribed medication, or have refused treatment. However, it is important to note that many people with depression can still obtain life insurance, albeit at a higher premium.

Tips for obtaining life insurance with depression

• Work with an independent life insurance broker who can help match you with an insurer that is more lenient with depression diagnoses.
• Shop around and compare quotes from different insurers, as underwriting guidelines vary between companies.
• Provide proof that your depression is well-managed, such as consistent treatment records and steady employment.
• Seek mental health help and follow your doctor's guidance on medication to improve your chances of a lower premium.

The application process for life insurance with depression

The application process for life insurance can be intimidating, especially if you have a history of depression. Here are some steps to guide you through the process:

Step 1: Understand the Underwriting Process

The underwriting process is a standard step in the life insurance application, where the insurer evaluates the risk of insuring you. They will consider your age, gender, family health history, lifestyle choices, and current health status, including any mental health conditions. Be prepared to answer questions about your mental health diagnosis, treatment history, and its impact on your daily life.

Step 2: Disclose Your Full Medical History

It is crucial to be honest and disclose your mental health history, including any diagnoses and medications used to treat your condition. Failure to do so could impact your claim if the insurer discovers any undisclosed information. This honesty will also help set the right expectations for your coverage and premiums.

Step 3: Maintain Consistent Treatment

Insurers look for patterns of consistency in your treatment. Regular therapy, stable medication use, and steady employment all demonstrate stability and can improve your chances of obtaining coverage. Provide documentation from your healthcare provider that showcases your condition management.

Step 4: Choose the Right Policy

Different policies cater to varying levels of mental health conditions. Fully underwritten policies are comprehensive and ideal for well-managed mental health conditions. Final expense policies are easier to qualify for and don't require a medical exam, making them suitable for moderate conditions. Guaranteed issue policies don't require medical exams or health questions but come with higher premiums and lower coverage amounts.

Step 5: Shop Around and Compare

Different insurers have varied guidelines and rates for those with mental health conditions. It is beneficial to compare quotes from multiple insurers to find the most affordable and suitable coverage for your needs. Working with an independent broker or agent can help you navigate this process.

Step 6: Prepare for the Medical Exam

If required, you may have to undergo a medical exam as part of the application process. This typically involves basic preparation, such as fasting overnight and avoiding caffeine before the exam, which is usually scheduled for the morning.

Remember, depression should not prevent you from applying for life insurance. While it may impact your premiums or eligibility for certain policies, there are options available, and being proactive about your mental health treatment and disclosure will improve your chances of obtaining the coverage you need.

The possibility of being denied life insurance due to depression

While it is possible to get life insurance when you have depression, there are some cases where you may be denied coverage. This is because insurers consider your risk level when determining whether to sell you a policy. If they determine that you pose too high a risk, they may turn you down. However, this is not true of all insurers, and it is worth shopping around and speaking to an independent broker to find the right policy for you.

Reasons for denial

There are several reasons why you may be denied life insurance due to depression:

• You have a documented history of suicidal thoughts or attempts.
• You don't take prescribed medication or refuse treatment.
• You have a history of substance abuse.
• Your depression is severe and/or impacts your overall health and daily life.
• You are unable to work or are on disability due to your depression.
• You have been hospitalized due to your depression in the last year.

What to do if you are denied

If you are denied traditional life insurance, there are still options available to you:

• Group life insurance: This is offered by employers and accepts all applicants, regardless of pre-existing conditions.
• Guaranteed issue life insurance: These policies have age restrictions but don't require any medical information. Coverage amounts are limited, and premiums are high.
• Simplified issue life insurance: This type of insurance only requires answers to a few medical questions. Premiums are high, and coverage is limited.
• Accidental death insurance: This policy pays benefits to your beneficiaries if your death is an accident. It is easy to apply for and quick to get.

Alternative life insurance options for those with depression

While most people with depression can qualify for a standard life insurance policy, there are alternative options for those who cannot. Here are some alternatives to consider:

Guaranteed issue life insurance

This type of policy provides coverage regardless of your medical history, and you cannot be denied. However, the coverage amount is usually capped at a relatively low amount, and the premiums tend to be higher.

Graded death benefit policy

This type of policy pays only a percentage of the death benefit initially, gradually increasing over time. For example, your beneficiaries may receive 25% of the death benefit if you pass away in the first year of the policy, 50% in the second year, and so on. After a certain number of years, the full death benefit is paid out.

Simplified issue life insurance

Simplified issue life insurance is designed to cover end-of-life expenses and can provide coverage of up to $50,000. It often comes with high premiums and age limits, and requires a medical questionnaire for approval.

Group life insurance

Group life insurance is typically offered by employers as part of a benefits package. It is usually inexpensive or free, and obtaining coverage does not require a medical screening. However, the coverage amount is limited, and you will lose the policy if you leave your job.

No-medical-exam life insurance

Some insurance companies offer no-medical-exam life insurance, where you complete a health questionnaire instead of undergoing a medical exam. This option may be available to those with mild depression that is well-controlled with treatment.

When considering life insurance options, it is important to shop around and compare quotes from different insurers, as rates and coverage options can vary significantly. Working with an independent broker or agent can also help you find the best policy for your needs. Additionally, maintaining consistent treatment for your depression and following your doctor's recommendations can improve your chances of obtaining coverage at more affordable rates.

Frequently asked questions