Life Insurance: Pre-Existing Conditions And Coverage Explained

Life insurance is a valuable safety net that can provide financial security for your loved ones after you're gone. However, the process of obtaining life insurance isn't always straightforward, especially if you have a pre-existing medical condition. A pre-existing condition is any health issue that was diagnosed or treated prior to applying for an insurance policy, and it can impact your ability to get insured. While it may be more challenging and expensive to find coverage, individuals with pre-existing conditions can still obtain life insurance. The specific policy options, eligibility, and costs depend on the type of medical condition, its severity, and how well it's being managed.

How does a pre-existing condition impact life insurance premiums?

A pre-existing condition can have a significant impact on life insurance premiums. While it may not automatically disqualify you from obtaining life insurance, it can result in higher costs and reduced options. The extent of the impact depends on various factors, including the type of condition, your current health status, age, and lifestyle choices.

Insurers typically categorise applicants into rate classes based on their health status, such as standard, preferred, or super preferred. If you have a pre-existing condition, you may only qualify for substandard rates due to the increased risk associated with your health. The higher the risk, the higher the cost of the policy. In some cases, the insurer may even deny coverage if the risk is too high.

The specific impact on premiums will depend on the type of pre-existing condition you have. Common conditions like high blood pressure, high cholesterol, obesity, anxiety, heart disease, and gastrointestinal issues can affect your premiums. Proper management of these conditions through medical treatment, medication, and lifestyle changes can positively influence your risk assessment and potentially lead to lower premiums.

Additionally, the type of life insurance policy you choose can also impact the cost. Term life insurance, which offers coverage for a set period, is generally the cheapest form of coverage, even with a pre-existing condition. However, not everyone can pass the underwriting stage for this type of policy. Other options include no medical exam or simplified issue policies, which have fewer requirements but come with higher premiums. Guaranteed acceptance policies accept all applicants, regardless of their health, but they are usually the most expensive option and have limited death benefits.

It's important to be honest when applying for life insurance. Misrepresenting your health on your application can lead to disqualification or increased premiums if the insurer discovers any discrepancies. Shopping around, consulting independent insurance agents, and comparing quotes from multiple insurers can help you find the best coverage and rates if you have a pre-existing condition.

What are common pre-existing conditions that affect life insurance?

Pre-existing conditions can make it more difficult and expensive to get life insurance. However, even if you have a chronic or terminal health problem, you can likely find a policy that you qualify for. The specific policy types you qualify for will depend on your particular medical problems, how well your condition is managed, and the insurer.

• High blood pressure: High blood pressure is common in life insurance applicants, with about 75 million American adults having the condition. It can put you at risk for heart disease and stroke, so your blood pressure may play a role in the premiums you'll pay. However, if you're effectively managing your high blood pressure through medical care and medication, it could positively influence your risk assessment.
• High cholesterol: High cholesterol is another common condition in the United States, affecting one in three adults. It can cause coronary heart disease, stroke, and diabetes. Like high blood pressure, it is viewed more favourably by insurers when it is properly managed or medicated.
• Obesity: Obesity puts individuals at greater risk for heart disease, stroke, high blood pressure, type 2 diabetes, and certain cancers. While it may affect your rate, it is still possible to secure a policy if you're overweight.
• Anxiety: Anxiety is considered a risk by life insurance providers as it can lead to other health problems such as depression or substance abuse. However, anxiety disorders are highly treatable, and if they are being managed with the help of a physician, they may be viewed more favourably by insurers.
• Heart disease: Heart disease is the leading cause of death among men and women, causing nearly 610,000 deaths each year in the United States. Due to its prevalence, insurers may require additional testing, such as an EKG test, to examine heart health and identify the applicant's risk category.
• Gastroesophageal Reflux Disease (GERD): GERD, commonly associated with acid reflux, affects about 20% of Americans. If left untreated, it can cause serious health issues, including respiratory problems, ulcers, and, in rare cases, cancer. Treating acid reflux with over-the-counter medication can help improve your standing with insurers.
• Cancer: A history of cancer can be a red flag for insurers and may result in higher premiums or disqualification from certain types of insurance.
• Diabetes: Diabetes is a common pre-existing condition that can affect life insurance rates and coverage options.
• Previous injuries: Previous injuries may be considered pre-existing conditions, depending on their severity and any lasting effects.

What are the alternatives to traditional life insurance?

While life insurance is a low-risk way to provide for your family after your death, there are other options for a financial safety net. Here are some alternatives to traditional life insurance:

• Accidental Death and Dismemberment Insurance: This type of insurance policy pays out only if the insured person dies or is seriously injured due to an accident. It is usually less expensive than a traditional life insurance policy and does not consider the insured person's medical history. However, it does not cover death from natural causes or illness.
• Investing in stocks, bonds, or other commodities: This option provides a potentially higher return on your investment but carries more risk than a term life insurance policy. The proceeds from this type of investment may also be subject to estate taxes and probate.
• Annuities: These function like savings accounts that pay income during your life and into retirement. Annuities can be set up to pay your loved ones upon your death, similar to life insurance. However, they may charge expensive fees compared to other investments, and their value is lower if you pass away prematurely.
• Mortgage Insurance: This type of insurance plan is designed solely to pay off your mortgage in the event of your death or if you default on your payments. Mortgage insurance is usually more expensive than traditional life insurance, and the benefit decreases over time, while the premium remains the same.
• Savings Accounts: A traditional savings account is a risk-free way to put aside money for your death or other financial needs. The interest rates are typically lower than those on investments, and the funds may have to go through probate upon your death. It will also take longer to save up a substantial amount compared to buying life insurance.
• Primary Care Membership: When a primary care physician or medical practice offers services for a monthly fee, similar to a gym membership. Also called concierge medical services, people get the services they would under a traditional policy, including blood tests, pediatric care, and doctor's visits, without having to pay a co-pay. However, major injury treatment, hospitalization, surgery, and specialist care are often not included.
• Medical Cost-Sharing Plans: A group of people pools their resources and shares medical costs as they arise, with a monthly fee similar to insurance premiums. The groups often negotiate discounted prices with primary care physicians and hospitals to keep costs lower. This option offers similar levels of reimbursement to traditional health insurance but with lower monthly fees.
• Health Savings Accounts (HSA): Payments made into this type of account, often set up by employers, have tax benefits if the money is used for medical expenses. However, contributions to an HSA account are limited by the Internal Revenue Service.
• Medical Discount Cards: These cards offer significant discounts, sometimes up to 80% or more, on hospital services, physician services, and prescriptions. They usually come with a one-time membership fee or a small monthly fee and are combined with high-deductible catastrophic illness and injury insurance coverage.
• High Deductible Policies: These are generally purchased by younger, healthier adults who do not expect to incur many expenses. A low premium and high-deductible policy cover unexpected major illnesses or injuries, providing targeted financial protection.

What are the factors that impact approval for life insurance with pre-existing conditions?

While a pre-existing condition does not automatically disqualify you from getting life insurance, several factors can impact your approval chances and the premium you will have to pay.

Type of Condition

The type of pre-existing condition you have significantly impacts your approval chances. Insurers evaluate the risk associated with the condition and the likelihood of it causing recurring issues. For instance, cancer, heart disease, and other severe chronic illnesses are considered higher-risk conditions.

Current Health Status

Even with a pre-existing condition, insurers will evaluate how well you are currently managing it. If your condition is under control and you are otherwise healthy, you may have a better chance of getting approved and qualifying for more favorable premiums. Regularly visiting your medical provider and taking any prescribed medication can help demonstrate vigilant management of your condition.

Age

Premiums tend to increase, and approval chances decrease with age, given the same pre-existing condition. Younger people generally have a longer life expectancy, reducing the insurer's risk.

Lifestyle

Certain lifestyle habits can also influence your approval chances. For example, smokers with pre-existing conditions may have lower approval odds. On the other hand, leading a healthy lifestyle, such as regular exercise and a balanced diet, can potentially increase your chances of approval.

Time from Diagnosis

The time that has passed since your diagnosis can also be a factor. A longer time from diagnosis may increase the chance of complications or other issues, leading the insurer to scrutinize your application more closely.

What are some tips to increase the chances of getting life insurance with pre-existing conditions?

Tips for getting life insurance with pre-existing conditions

While having a pre-existing condition may influence your premium rates or even exclude you from coverage by some providers, it is still possible to secure life insurance. Here are some tips to increase your chances of getting life insurance with a pre-existing condition:

• Be mindful of when you apply: An insurer will likely turn you down if you apply shortly after a serious diagnosis or health event, but you can always reapply once your health has improved or stabilised. In some cases, companies will have a specific timeline for when you can apply, such as two years after a final treatment for breast cancer.
• Take advantage of improvements in your health: If you are accepted but are being charged a high rate, you can ask for a life insurance re-rating (and a lower premium) once your condition is under control and your prognosis is positive.
• Find the right agent: Look for an independent life insurance agent who works with an impaired risk specialist — a broker who’ll know which insurance companies are more likely to provide a good rate for your particular condition. Ensure your agent is submitting informal inquiries rather than formal applications that will be recorded in an industry database.
• Get quotes from multiple insurers: Insurance companies can vary in how they review specific health conditions. Comparing quotes will help you find the best coverage and price for your needs.
• Be honest about your condition: Failing to disclose a pre-existing condition can result in denied claims or a significant reduction in benefits. Additionally, misrepresenting your health on your application may be considered fraud and recorded in industry databases, hurting your chances with other insurers.
• Consider a pre-assessment: A pre-assessment can help you understand what policies may be available to you. It involves providing information about your pre-existing conditions, general details (e.g. age, height, weight), lifestyle, health status, and family history. While not compulsory, it can give you a better idea of your options.
• Shop around and compare policies: Coverage varies depending on the provider, so it's important to research and compare different policies to find the most suitable cover for your needs.

Frequently asked questions