Depression's Impact: Higher Life Insurance Premiums Explained

Life insurance is a crucial financial product that provides peace of mind and security for individuals and their loved ones. While life insurance is essential for everyone, people with mental health conditions, such as depression, may face unique challenges when applying for coverage. Mental health conditions can impact life insurance eligibility, premiums, and coverage limits. This is because insurers consider the risk associated with these conditions, and depression, especially when severe, is perceived as a factor that could shorten life expectancy. However, it's important to note that not all insurers view depression in the same light, and some companies offer more competitive rates for individuals with well-controlled depression.

Severity of depression

The severity of depression plays a significant role in determining life insurance coverage and premiums. While mild depression may not significantly impact insurance rates, severe depression can lead to higher premiums or limited coverage. Mild depression, often managed through therapy or medication, is generally considered a manageable condition that may not affect one's overall health or life expectancy. As a result, individuals with mild depression may still qualify for preferred rates offered by insurance companies.

On the other hand, severe depression is associated with an increased risk of premature death, particularly due to its link with suicidal thoughts and attempts. As such, insurers view severe depression as a more complex and critical health issue. When assessing individuals with severe depression, insurance companies consider various factors, including the effectiveness of treatments, overall health, and the impact of the condition on daily functioning and independence. Underwriters may request detailed information about treatments, hospitalizations, medications, and mental health history to evaluate the severity and management of the condition.

The presence of severe depression, especially if untreated or unmanaged, can raise red flags for insurers. They may perceive it as a higher risk, leading to higher premiums or, in some cases, denial of coverage. However, it is important to note that not all insurers have the same criteria, and some companies may offer more competitive rates for individuals with severe depression. For example, Prudential is known for providing better health classifications and more affordable rates for individuals with moderate to severe depression.

Additionally, individuals with severe depression can improve their chances of obtaining life insurance by seeking treatment and demonstrating its effectiveness. Insurers are more likely to offer favourable terms if the condition is well-managed through regular treatment, medication adherence, and supervised medical care. Simplified issue life insurance or guaranteed issue life insurance may also be options for individuals with severe depression who have been declined traditional coverage. These alternative policies do not require medical exams or extensive health questionnaires, making them more accessible to those with mental health conditions.

In conclusion, the severity of depression significantly influences life insurance coverage and costs. While mild depression may have minimal impact on premiums, severe depression can lead to higher rates or limited options. However, by effectively managing their condition and shopping around for insurers with flexible criteria, individuals with severe depression can still find suitable life insurance plans.

History of hospitalisations

Life insurance companies typically request medical records, which include visits to mental health professionals. While seeing a psychiatrist isn't necessarily a red flag, insurers will evaluate why you're seeking treatment and the severity of your condition. If you are receiving treatment for mild depression or anxiety, it may have minimal impact on your policy. However, severe cases or a history of hospitalisation could result in higher premiums or limited coverage.

Insurers will be interested in the number, types, and strengths of the medicines you are taking. They will also want to know how your mental health affects your daily life and how recently and how often you've been in the hospital. They may also request access to medical records or a statement from your healthcare provider.

If you have been hospitalised due to depression, insurance companies will consider this a pre-existing condition, and you should declare it to your insurer. It is vital that you answer as honestly as possible. If you don't tell your insurer and it comes to light later, they can void your policy, meaning your beneficiaries won't receive a payout, and you'll have lost all your premiums.

Insurers will also want to see consistent and effective treatment for at least six months to one year. If you are in the middle of switching medications or treatment, they may ask a few more questions about your health to determine your rates.

If you have been hospitalised due to depression, it is important to remember that you still have options for life insurance. You may need to apply to more than one insurer to get the coverage you are looking for. You can also consider a specialist insurer that has more experience catering to customers with specific needs and should be able to offer a policy tailored to your circumstances.

Medication and treatment

Antidepressants are often used in conjunction with psychotherapy (talk therapy) to treat the symptoms of depression. It is important to note that antidepressants do not always address the causes of depression, hence the recommendation for talk therapy. In addition, antidepressants can have side effects, including temporary difficulty with attention, judgement, thinking, reaction speed, and motor skills. Due to these side effects, it is recommended that patients do not drive or operate machinery until the day after a restful sleep.

The number, type, and strength of medications for depression are all factors that insurance companies consider when determining coverage and premiums. Following a treatment plan and taking prescribed medication as directed can increase the chances of being approved for life insurance at a better rate. This is because insurers are more likely to grant life insurance if a mental health condition is well-managed and under supervised medical care.

In terms of specific insurance providers, Legal & General America offers competitive rates for people with a history of medical conditions, including depression. They can offer affordable rates if the applicant is on no medication, one medication, or two medications for depression. Similarly, Prudential offers competitive coverage options for people with common medical conditions, including depression. Prudential is more likely to offer a better health classification for moderate to severe conditions than other insurers.

Guaranteed issue life insurance is another option for individuals with mental health conditions. This type of insurance does not require any health questionnaires or medical exams, and approval is guaranteed as long as the applicant meets the age requirements (typically 50 to 80 years old). However, the available death benefits for guaranteed issue life insurance are usually capped at around $25,000.

Risk of suicide

Life insurance providers consider several factors when assessing an individual's application, including their mental health condition. While a mental health condition does not automatically disqualify an applicant from getting life insurance, it may impact the premium they have to pay. This is because insurance companies are in the business of risk—the higher the risk, the higher the premium.

Depression, a common mental health condition, is associated with an increased risk of suicide, and this risk is a critical factor in determining life insurance coverage and costs. Insurers may be hesitant to offer coverage or charge higher premiums to individuals with depression due to the potential for early claims related to suicide.

Historically, life insurance companies have been wary of applicants with a history of mental illness, fearing they would commit suicide. While suicide clauses have existed in the industry since the 19th century, they have proven challenging to enforce. In the first half of the 20th century, life insurance companies considered variables like sex, race, and alcohol use in their models, with certain groups deemed as posing higher suicide risks than others.

Today, insurers continue to assess suicide risk when evaluating applicants with mental health conditions. They may consider factors such as the severity of the condition, hospitalisation history, treatment compliance, and the stability of the applicant's condition. For example, individuals with severe depression may be viewed as posing a higher risk than those with mild depression. Additionally, a history of suicidal thoughts or attempts can significantly influence an insurer's decision, potentially leading to higher premiums or, in some cases, application denial.

It is important to note that each insurer's decision must be based on reliable and relevant information, such as medical records, and they must provide a reasonable explanation for their decision. While mental health conditions can impact life insurance costs, well-managed conditions may have a lesser impact on premiums. Seeking treatment and following a treatment plan can improve an individual's chances of obtaining life insurance at more favourable rates.

Lifestyle and occupation

When applying for life insurance, insurers use your age, gender, overall health, and lifestyle habits to determine how risky you are to insure. They will also consider your occupation. Based on these factors, they will assign you a health classification that will determine how much you will pay for coverage. The lower the impact of your mental health condition on your overall health, the better your health classification will be, and the cheaper your rates.

Insurers are particularly concerned with the risk of hospitalisation, medication use, and whether the condition is associated with other health issues. They will also consider how well you manage your condition, your treatments, and your overall health. If your condition is well-managed through regular treatment and medication, insurers are more likely to offer favourable terms.

In terms of lifestyle, some insurers look favourably at applicants who get regular check-ups, are physically active, eat healthily, and maintain a healthy weight. Making healthy lifestyle choices can also prevent your depression from progressing, which may be viewed positively by insurers.

When it comes to occupation, certain jobs may be deemed too high a risk for an insurance company to insure. For example, if you work in a dangerous industry or have a risky hobby, this may impact your premium.

Frequently asked questions