Life insurance can be used for many purposes, such as income replacement, college-education funding and wealth preservation. But sometimes, just when you need life insurance the most, you can't get it because of poor health. Nevertheless, don't be so quick to jump on the "I'm uninsurable" bandwagon. Many life insurance companies offer policies just for the not-so-healthy. Why? Because better healthcare, improved lifestyle, advances in medical care and improved diagnostic procedures have generally increased life expectancies for those applicants with health impairments.
Before you submit that life insurance application, consider how most life insurers determine whether they'll sell a policy to an individual and how much they'll charge for the insurance protection. Thinking like an insurer can help you get the coverage you need.
The Insurance Company's View of You
The process that the insurance company undertakes to evaluate whether an applicant is insurable is called underwriting. Each company's underwriting is somewhat different, yet the basic concepts are the same. The company will look closely at your present health as well as prior health conditions, diseases or ailments, but generally, the insurance company also considers a number of other factors, such as:
- age of the insured
- family health history
- purpose of insurance
- marital status
- amount of insurance applied for
- history of smoking
- dangerous hobbies/activities
Specifically, the company will request your medical records and request that you undergo some type of medical examination. If you have an illness, medical condition or disability, the insurer may also ask that you be examined by a doctor of its choice who will likely also review your medical records.
The underwriting process for life insurance is not the same as it is for health insurance. There are some chronic illnesses and diseases that do not affect ones life expectancy, yet they may require regular medical treatment. In this case, you may have a harder time getting health insurance than life insurance. For example, life insurance has been issued to people with asthma, heart disease, cancer and hypertension.
It's a Numbers Game
Once all the information is gathered, the company will assign a rating to you as the insured. The rating is the company's measure of the risk or probability that it will have to pay a death claim within a certain period of time. You're pooled with other applicants of the same risk category. The company figures some will "beat the odds" and outlive the projected life expectancy, others will die prematurely, while some will die within the projected time period. Based on the underwriting factors, the greater the likelihood you'll die sooner rather than later, the more the company will charge for a premium to cover the cost of funding the benefit it'll have to pay at your death. If the company determines that the risk of having to pay the death claim prematurely is too great, it will refrain from offering a policy.
But that's where companies differ. Some companies are more conservative in evaluating the risk you pose, whereas others are more aggressive in their assessments. This is where it might help you to use the services of an impaired-risk specialist.
An Impaired-Risk Specialist Can Help
An impaired-risk specialist is an insurance broker who is familiar with life insurance underwriting in general and the variables that companies will consider when insuring applicants based on their particular health issues. In short, they speak the language of the underwriters and can point you in the right direction when it comes to finding the right carrier for the insurance you want.
Some impaired-risk specialists may also serve as advocates for you and negotiate with insurers to get insurance at the best price possible. In essence, you have to demonstrate to the company that you don't fit the risk category it projects. An impaired-risk advocate can help present your case in the most favorable light. If you have health problems, consider using special-risk advocates or impaired-risk specialists who help find impaired-risk life insurance coverage.
Some Helpful Tips
The following are some tips that will help get you the coverage you want and need at a price you can afford.
Talk To Your Doctor
The insurance company will ask your doctor for your medical records, so it's a good idea to talk to your physician about your health and alert him or her to the likelihood of the request from the insurer. If your doctor thinks you've progressed favorably and that you're following a prescribed health plan to control or prevent the health condition, having that opinion in your medical record can only help your cause.
Choose the Right Time
Sometimes the passage of time helps as well. If you've had treatment or surgery recently, the longer you remain healthy after the procedure, the better the odds you'll continue in your recovery, increasing your life expectancy.
Different insurance companies often take significantly different views of various illnesses so it's wise to shop around. While one company may deny coverage entirely or charge a much higher premium due to a specific ailment, another insurer may offer coverage for the same illness at a lower cost.
Some companies offer insurance to higher-risk applicants because they share the cost with another insurance company (called "reinsurance"). These companies are more likely to insure you if you have health issues.
Demonstrate that you're taking steps to control or improve your health. Demonstrating that you exercise and have a healthy diet increases the chances of living a longer life, making you a better insurance risk.
Investigate Group Plans
Many companies offer life insurance to all employees, regardless of their health histories. Some alumni associations and professional organizations also offer life insurance on a group basis without requiring a physical.
The Bottom Line
Even if you've been turned down for coverage in the past, you may be able to get coverage now. Understanding the potential insurers' points of view and taking measures to demonstrate that you're not the risk they may think you are may get you the life insurance policy you need.