Depression History: Life Insurance Rates And You

A history of depression can affect life insurance rates in several ways. Firstly, individuals with a history of depression may be charged higher premiums due to the increased risk associated with mental health disorders. The severity, frequency, treatment, and specific details of the condition can all impact the insurance rates. Additionally, insurance companies may evaluate applicants with a history of depression on a case-by-case basis, considering factors such as the type of depression, date of diagnosis, history of suicidal thoughts or attempts, substance abuse, and medications used. Life insurance companies also consider an individual's overall health, including physical and mental health status, when determining eligibility and policy rates. It is important to note that having a history of depression does not automatically disqualify an individual from obtaining life insurance, and there are alternative options available, such as simplified issue or guaranteed issue life insurance policies.

The impact of depression severity on life insurance rates

The severity of depression can have a significant impact on life insurance rates. When applying for life insurance, individuals with a history of depression are evaluated on a case-by-case basis, and the insurance company will determine whether to approve or deny the application, as well as the specific rate class, which dictates the cost of the policy. The rate class is based on the perceived risk of premature death, with higher-risk individuals paying higher premiums.

For individuals with mild depression, defined as those taking up to one type of medication and with no history of hospitalizations, life insurance rates may not be affected at all. They may even qualify for "preferred" or "preferred plus" rates, which are the most affordable premiums offered to individuals with well-controlled or mild health conditions.

For moderate depression, defined as those taking more than one medication and consulting a psychiatrist, rates may be higher. This indicates that the condition is more severe and has a greater impact on overall health, resulting in a "standard plus" or "standard" rate class.

Severe depression, which includes individuals with suicidal ideation or a history of suicide attempts, will likely result in even higher rates or denial of coverage. Life insurance companies view severe depression as a serious condition linked to suicide, and all life insurance policies include a suicide clause stating that the insurance company will not pay the death benefit if the insured dies by suicide within the first two years of the policy.

It is important to note that the impact of depression on life insurance rates also depends on other factors such as age, gender, overall health, and lifestyle habits. Additionally, the consistency of treatment and improvement in symptoms can positively impact the rates offered. Working with an independent broker or agent who has experience with mental health conditions can help individuals find the best coverage options and rates.

The effect of treatment history on life insurance premiums

When it comes to life insurance, a history of mental illness can affect the rates you pay, and this includes a history of depression. However, it is important to note that not all cases are the same, and there are many variables at play. For instance, the type of depression, the severity, and the treatment methods will all be considered by insurers.

If you have been diagnosed with depression, it is likely that you will be evaluated on a case-by-case basis by insurance companies. They will want to know the specifics of your diagnosis, including the type of depression, the date, severity, any history of substance abuse or suicidal thoughts/attempts, medication, and hospitalisations.

The good news is that you can still get life insurance if you have a history of depression, and in some cases, your rates may not even be affected. Mild cases of depression that have not required medication are unlikely to impact your life insurance rates. However, more severe cases of depression that have required multiple medications and hospitalisations will likely result in higher premiums.

If you are taking medication for your depression, it is advisable to wait for a few months after your initial diagnosis and treatment before applying for life insurance. This will give insurers a chance to see how you are responding to treatment. The wait time can be as little as three months if your condition is mild and you are responding well to treatment.

In general, insurance companies are looking for a pattern of consistency. They view steady employment and a consistent treatment plan favourably. They will also be more willing to offer better rates if you are on fewer medications or have a medication plan without frequent changes.

It is important to be honest when applying for life insurance and disclose any mental health diagnoses. Lying or omitting information can be considered fraud and can result in serious consequences, such as higher premiums or even policy cancellation.

If you have a history of depression and are seeking life insurance, it is recommended that you work with an independent life insurance broker. A broker can help match you with an insurer that will be more lenient with your diagnosis and offer you the best rates possible.

Suicide attempts and their influence on insurance eligibility

A history of suicide attempts can significantly impact an individual's eligibility for insurance and the rates they are offered. While it is possible to obtain life insurance after a suicide attempt, it is important to understand the various factors that will affect the type of insurance policy available and the associated costs.

Most standard life insurance policies in the UK will honour a claim for suicide after the policy has been in place for 12 months. However, a history of suicide attempts will typically result in non-standard rates, with insurers increasing monthly premiums to offset the perceived added risk. If the suicide attempt was recent, some standard insurers may postpone the application, requiring individuals to seek specialist insurers who can offer coverage with a full-term exclusion on suicide.

The number of suicide attempts, the timing of the attempts, and the presence of any underlying mental health conditions are crucial factors that insurers will consider. They will also want to understand any specific triggers, such as traumatic events or mental health issues. This information helps insurers assess the risk and determine the appropriate course of action.

Critical Illness Cover may be available after a suicide attempt, depending on the time elapsed since the event. Similar to life insurance, the disclosure of triggers and underlying mental health conditions is essential for this type of insurance. Recent suicide attempts will generally lead insurers to postpone applications for Critical Illness Cover, necessitating the involvement of specialist insurers.

Income Protection after a suicide attempt may also be attainable, especially if the event occurred several years ago. Again, the number of attempts, underlying mental health conditions, and specific triggers are factors that insurers will consider. If the suicide attempt was an isolated incident without ongoing mental health issues, Income Protection could eventually be available at standard rates after a sufficient period.

Accident, Sickness, and Unemployment Cover is another option for individuals with a history of suicide attempts. This short-term income protection policy does not take into account the applicant's medical history, so previous suicide attempts will not affect eligibility. However, any claims made will exclude pre-existing medical conditions.

Travel insurance is another area where a history of suicide attempts can impact eligibility and rates. In this case, it is recommended to consult a specialist travel insurance broker who can find the right policy for the individual's needs.

While a history of suicide attempts can present challenges in obtaining insurance, it is not an insurmountable obstacle. Specialist policies and brokers who understand these situations can assist individuals in finding the most suitable coverage options. It is important to be transparent about one's mental health history and to seek support in navigating the insurance landscape.

Substance abuse as a factor in insurance underwriting

Substance abuse is a significant factor in insurance underwriting, and it can have a considerable impact on the approval and cost of life insurance. While it is possible to obtain life insurance coverage with a history of substance abuse, it may be challenging and more expensive.

Underwriting Process for Substance Abuse

The underwriting process for individuals with a history of substance abuse involves a comprehensive assessment of their specific situation and risk factors. This includes evaluating the severity and frequency of substance abuse, any associated complications or withdrawals, legal problems such as DUIs, abuse of multiple drugs, and participation in support groups like Narcotics Anonymous.

Impact on Life Insurance Rates

A history of substance abuse will likely result in higher life insurance rates due to the increased mortality risk associated with substance abuse. Underwriters consider substance abuse as a maladaptive pattern of substance use that can lead to clinically significant impairment or distress. It can increase the risk of deaths from natural causes, accidental overdoses, trauma, suicide, and homicide. Other factors that contribute to the increased risk include polydrug use, substance abuse with a known psychiatric impairment, legal issues, and social or behavioural problems.

Life Insurance Options for Individuals with Substance Abuse History

There are several life insurance options available for individuals with a history of substance abuse:

• Term and Permanent Life Insurance: Individuals who have been clean and relapse-free for three years or more may qualify for term or permanent life insurance, including whole life and indexed universal life. However, a full underwriting process is required, including a paramedical exam to check for drugs or alcohol in the system. Expect a table rating, which increases your premium to offset the higher risk. The longer the period of stability and clean time, the better the chances for a lower premium rate.
• Simplified Issue Life Insurance: Simplified issue life insurance is a whole life insurance plan with a small death benefit, typically around $50,000. It is suitable for final expenses such as burial and funeral needs. Underwriting is simplified, requiring only a health questionnaire, and most carriers accept people with a substance abuse history. Some carriers don't even ask about drug or alcohol abuse on the application, indicating that it's not a critical underwriting factor for them. To qualify, individuals must be at least 12 months clean from substance abuse, and they may be eligible for a graded benefit or immediate benefit policy.
• Guaranteed Issue Life Insurance: Guaranteed issue life insurance is an option for individuals currently struggling with substance abuse or on parole. The carrier automatically approves the application without any underwriting process. However, there is a 2-year benefit period for the death benefit on illness or natural causes, and the death benefit is limited to $25,000 or $50,000.
• Annually Renewable Term Life Insurance: This option is available in specific situations, such as satisfying a business loan or divorce decree requirements. It provides coverage until the individual qualifies for a traditional policy.

Case Studies

• A 43-year-old male with an alcohol addiction and four DUIs over ten years was able to secure $2,000,000 in term insurance at a table 2 rating.
• An individual with a history of cocaine use two years ago and no other substance abuse history was able to obtain $250,000 in term life insurance at a table 6 rating.
• A 38-year-old male with daily marijuana usage and no other substance abuse issues was offered $2,000,000 in guaranteed universal life at a standard non-tobacco class.
• A 35-year-old woman currently dealing with substance abuse was able to enrol in a $50,000 guaranteed issue term life insurance policy and a $25,000 whole life insurance policy.
• A female business owner who needed life insurance to secure a $500,000 bank loan was denied traditional term life insurance due to substance abuse within the last year. We were able to provide her with a 1-year annual renewable term policy until she qualified for a traditional carrier.

Factors Considered by Underwriters

When evaluating a history of substance abuse, underwriters focus on several factors:

• Severity and frequency of abuse
• Severity of associated complications
• Evidence of dependence and/or withdrawal
• Legal problems related to abuse, such as DUIs
• Abuse of multiple drugs, including alcohol
• Participation in support groups like Narcotics Anonymous

Importance of Honesty in Applications

It is crucial to be completely honest when applying for life insurance. Lying on the application is considered fraud, and insurance companies have access to prescription drug histories and other databases to verify the information provided. Additionally, medical exams include blood and urine tests, which can detect traces of illegal substances.

Hospitalization history and its role in insurance applications

When applying for life insurance, you will need to provide your medical history, which will reflect any diagnosed mental illnesses. This information is crucial to an insurer's coverage decision and will impact your premium rates.

Hospitalization due to mental illness, including depression, can affect your life insurance application and rates. Underwriters will assess your history to determine the severity of your condition and the associated risks. If you have been hospitalized for mental health reasons, it indicates a higher level of risk, which can result in higher premiums or even denial of coverage.

Insurance companies view hospitalization as a significant factor in evaluating your mental health. It suggests that your condition may have been severe enough to require intensive treatment and monitoring. This information, along with other factors such as medication usage and treatment history, will be considered in their assessment.

The length of your hospital stay and the reason for hospitalization will also be taken into account. Longer stays or multiple hospitalizations may indicate a more complex or severe condition, increasing the perceived risk for insurers. Additionally, the reason for hospitalization, such as suicide attempts or self-harm, can significantly impact your application.

It is important to note that each insurance company has its own underwriting process and criteria for evaluating mental health history, including hospitalization. Some companies may be more lenient than others, so working with an independent broker who can advocate on your behalf is advisable. They can help match you with insurers that are more favourable towards applicants with a history of depression and hospitalization.

While hospitalization can impact your life insurance application, it does not automatically result in denial of coverage. Each case is evaluated individually, taking into account various factors such as the type of depression, severity, treatment methods, and overall health. Being honest and providing detailed information about your hospitalization and recovery can improve your chances of obtaining coverage.

In summary, hospitalization due to mental illness is a significant factor in life insurance applications. It indicates a higher level of risk, which can lead to higher premiums or coverage limitations. However, by working with the right broker and providing comprehensive information, individuals with a history of depression and hospitalization can still secure life insurance coverage to protect their loved ones.

Frequently asked questions