Life Insurance with Health Pre-Conditions: What You Must Know
Why do health pre-conditions matter for life insurance?
Having a pre-existing condition can impact your life insurance options and premiums. According to the latest data from the Canadian Institute of Health Information, over 6 million Canadians are living with different types of pre-conditions such as cancer, heart issues, diabetes, and obesity.
With so many pre-conditions, it's not easy to see through the high number of policies and find the best one that fits your needs. Don't let pre-existing conditions discourage you from getting the life insurance coverage you need. This article will take a closer look at how to get life insurance when you have health pre-conditions.
What types of health pre-conditions are there?
Pre-existing conditions refer to a broad range of health conditions that were diagnosed or treated before an individual enrolled in a particular health insurance policy. These conditions can be categorized into various types based on their causes, severity, and impact on the individuals.
- Disease/Illness Related - These are pre-existing conditions that result from a diagnosed disease or illness such as multiple sclerosis, cancer, HIV/AIDS, etc. These conditions are severe and complex and have the biggest impact on life insurance premiums.
- Lifestyle Related - These pre-existing conditions have roots in an individual's lifestyle choices, including unhealthy eating habits, lack of physical activity, smoking, and alcohol abuse. These conditions include obesity, high blood pressure, heart diseases, some forms of diabetes, reduced lung function from smoking, etc. While these conditions may still impact premiums, it is possible to get coverage for them with proper management.
- Inherited vs. Acquired - Some pre-existing conditions are inherited from the family history, such as cystic fibrosis, Huntington's disease, and hemophilia. Others can be acquired during their lifetime due to various reasons such as accidents, injuries, or infections.
While all pre-existing conditions can impact life insurance coverage, some conditions are considered more serious and may prevent someone from getting standard coverage. For instance, pre-existing conditions such as AIDS or HIV are regarded as high-risk conditions, which may cause a higher premium or prevent the applicant from getting a traditionally underwritten policy (a simplified issue or guaranteed issue policy are still options).
On the other hand, there are more common conditions, such as type 1 or type 2 diabetes, that can allow someone to apply for standard life insurance in some situations. In such cases, the insurance agency may require more details such as the level of control or treatment methods the individual has used to manage their condition.
The impact of pre-existing conditions on life insurance coverage varies depending on factors such as the cause, severity, and management of the condition. It's important to work with an insurance broker who will guide you in finding the best policy and help you navigate any challenges that may arise due to your pre-existing conditions.
What types of insurance can people with health pre-condition get?
There are different types of life insurance policies available to fit the needs of various individuals. Insurance providers offer a variety of options so that everyone can find a policy that works for them.
These options, and their pros and cons, are:
Standard Medically Underwritten Insurance
This type of insurance policy requires a full underwriting process, which includes a long questionnaire and a medical exam. Insurers use this information to evaluate the applicant’s health status and determine the policy's cost. The premiums for this policy are generally low and are based on the applicant's risk level. This type of policy is best suited for individuals who are in good health and have none or only minimal pre-existing conditions.
- Lower premium rates
- Higher coverage amounts
- Offers more options for customization
- Extensive underwriting process
- Requires a medical exam
- Higher rejection rates for high-risk individuals
Rated Medically Underwritten Insurance
Although this policy may have a higher premium rate than standard medically underwritten insurance, individuals who have high-risk factors and basic pre-existing conditions may be approved for coverage.
- More affordable than guaranteed insurance
- Benefit options are reviewed case-by-case rather than a blanket decline
- More expensive premiums than standard medically underwritten insurance
- Higher rejection rates for high-risk individuals
No Medical, Simplified Insurance
Simplified Life Insurance is a type of policy that is designed to be simple and fast to get, without requiring a medical exam. However, applicants are typically asked a few medical questions to assess their risk. This policy is best suited for individuals who cannot apply for standard insurance because of certain medical conditions. This type of insurance typically has higher premiums, but it does not require a medical exam.
- No medical exam required
- Quick and simple approval process
- Can be a good option for those who have medical conditions that prevent them from getting standard coverage.
- Higher premiums rates than standard medically underwritten insurance
- Lower coverage limits than standard policies
No Medical, Guaranteed Insurance
Guaranteed Life Insurance is designed for individuals who cannot qualify for standard coverage due to health conditions. There are typically no medical questions or exams required. The premiums for this type of policy are usually higher than the other policies, and the coverage limits are lower.
- No medical exam required
- Guaranteed acceptance
- Flexible coverage options
- Very high premium rates
- Very low coverage limits
- Limited customization options
- Does not pay out for death (unless by accident) during the first two policy years. If death occurs during the waiting period, the premiums are returned to the beneficiary.
The choice of life insurance policy depends on several factors such as affordability, medical history, and individual needs. It's essential to work with an experienced insurance advisor to help guide you and choose the best policy for your situation. Brokers have access to all of these policies listed above, and even within those categories, different insurers offer a wide range of premiums and options. So, working with a broker saves a lot of time, stress, and money.
What are the costs for life insurance if you have health pre-conditions?
When it comes to choosing a life insurance policy, cost is a major factor for most people. Here's a breakdown of the four types of life insurance policies, starting from the cheapest to the most expensive.
Insurance premiums for Standard Life Insurance
Standard life insurance policies require a medical exam and a detailed medical history questionnaire. The cost of this type of policy is typically the lowest when compared to other policy types. Not everyone can qualify for a standard life insurance policy, but for those who do qualify, this type of policy provides a wide range of coverage options and features.
- Average quote for a 30-year old man, non-smoker, good health, coverage of $500,000, 20-year term: $30-$50/month.
- Average quote for a 30-year old woman, non-smoker, good health, coverage of $500,000, 20-year term: $20-$40/month.
Insurance premiums for Rated Life Insurance
Rated life insurance is when an insurance company charges a higher premium to cover someone with a higher risk profile. This type of policy requires an applicant to undergo a full medical examination and complete a detailed medical history questionnaire. Compared with standard coverage, rated insurance policies are more expensive due to the higher risk the insurance company is taking on.
- Average quote for a 30-year old man, non-smoker, some pre-conditions, coverage of $500,000, 20-year term: $50-$87/month
- Average quote for a 30-year old woman, non-smoker, some pre-conditions, coverage of $500,000, 20-year term: $35-$70/month.
Insurance premiums for Simplified Life Insurance
This type of policy doesn't require a medical exam and only requires an applicant to answer a few medical questions. As a result, this type of policy is often a good option for individuals who may have pre-existing conditions that would cause a standard policy to be declined.
- Average quote for a 30-year old man, non-smoker, serious pre-conditions, coverage of $500,000, 20-year term: $37-$98/month.
- Average quote for a 30-year old woman, non-smoker, serious pre-conditions, coverage of $500,000, 20-year term: $28-$65/month.
Insurance premiums for Guaranteed Issue Life Insurance
Guaranteed issue life insurance is designed for those who can't get coverage anywhere else due to a serious medical condition or health risk factors. As a result, this type of insurance has the highest premiums. Guaranteed issue policies have no medical exam requirements and the application process is relatively fast and easy. However, this ease of access comes at a high cost for a small coverage.
- Sample quote for a 40-year old man, non-smoker, life altering pre-conditions, coverage of $40,000. $88/month.
- Sample quote for a 40-year old woman, non-smoker, life altering pre-conditions, coverage of $40,000. $63/month.
It is important to note that the sample quotes above are averages. The cost to an individual of a life insurance policy depends on various factors such as age, gender, health history, and the level of coverage they want, or the coverage caps on certain policies. In general, a younger and healthier person will pay a lower premium than an older and less healthy person. However, regardless of age or health status, there is an insurance policy available to fit the needs of each individual. We recommend speaking to an experienced insurance broker who will provide you with options and guide you in making an informed decision.
What to pay attention to when getting life insurance with pre-conditions?
Life insurance can be more complicated for those with pre-existing health conditions. Here are some key aspects to consider when dealing with life insurance and health pre-conditions:
- Comparing rates is extremely important: The rates and premiums can vary significantly across providers, especially for those with pre-conditions. It's best to get several quotes so that you can make an informed decision.
- Check how various insurers treat your particular pre-condition: Different insurers may have different underwriting standards and experience when it comes to underwriting certain health conditions.
- Be aware of guaranteed life insurance policy clauses: Claims made during the first two years may not be paid due to the policy's waiting period.
- Be mindful of the maximum coverage limits offered: Simplified issue often offers up to $300,000 in coverage and, guaranteed life insurance typically only offers up to $40,000 in coverage.
- The same coverage limits apply for standard and rated life insurance policies: Standard and rated policies are the best option if you need a large coverage limit like $1M or more.
- Be careful when applying for a standard insurance policy: Being rejected for a standard policy can make it challenging to apply for a simplified or guaranteed policy.
- Check for any restriction clauses in the policy: Some policies may have clauses or exclusions that limit the coverage or payout for certain types of death.
- Look into available riders: Insurance companies offer riders that can cover additional situations, such as accidental death or dismemberment, critical illness, or long-term care, and may provide an additional level of protection.
When dealing with life insurance and health pre-conditions, it's important to compare rates from multiple providers with expertise in underwriting your particular condition. Ensure that you understand the coverage limits, policy clauses, any exclusions, and riders available to make the best decision for your unique situation. Seeking an experienced insurance broker to guide you through the process is highly advised.
Where to get insurance with health pre-conditions
When purchasing life insurance, there are different channels available, each with its own pros and cons. Here are the common channels:
- Agents: Agents are representatives who work for a single insurance company. They can provide information on different policies offered by the insurer they are contracted with. However, they may have limited options for comparing policies with other insurers.
- Banks: Many banks also offer life insurance policies to their customers. It's convenient because there's already an established relationship with the bank. However, it is not their main business, so the policies may be limited and not comprehensive. In some cases, the policies favour or even pay out to the bank (to cover loans or mortgages, for example) and do not pay out to a beneficiary.
- Brokers: Independent brokers are not affiliated with any particular insurance company, so they can offer life and living benefits policies from multiple providers. They offer more comprehensive coverage and choices and can compare different policies' pros and cons. Brokers have expertise in different markets and can offer a broader range of solutions that meets the client's specific requirements. It is free to use a broker as they are compensated directly from the insurance company after a successful application is processed.
- Comparison platforms (also called insurance aggregators): Life insurance comparison platforms are becoming popular because they offer comparison services that make finding life insurance policies more accessible. They allow consumers to compare prices and policies from different insurance providers and make an informed decision. The downside of comparison platforms is that they may not have access to all insurance providers or policies available. While starting on a platform for research can be helpful, working with a broker provides the best range of options and advice.
We hope that you found this information helpful when looking for a life insurance policy tailored to your situation.
About the author
This article was written by Lorne Marr, who is Director of Business Development at Hub Financial. He is a founder of LSM Insurance, a division of Hub Financial. He has won numerous sales and services awards and has appeared as a life insurance and living benefits expert in the Toronto Star, The Globe and Mail, The National Post, The Toronto Sun, The Investment Executive, and Money Sense Magazine.