Can I Buy Life Insurance with a Pre-Existing Condition?
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UPDATED: Apr 5, 2011
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Life insurance eligibility is sometimes taken for granted by consumes fortunate enough to be enjoying youth and good health. All it takes is one medical problem to change things. Life insurance premiums can jump 30 to 50 percent or more when a person tries to get insured after being diagnosed with any number of medical conditions. Fortunately, there are still ways to find life insurance once a diagnoses has been made; although finding it involves a little more work. Some strategies follow that may prove helpful in the search for pre-existing condition life insurance, whether seeking a term or permanent life policy.
Starting the Search
Before searching for an agent or getting online quotes, copies of an individual’s medical records should be gathered. This package needs to be provided to insurance agents so they can assess the entire picture of the individual’s health and make the right policy recommendation, rather than putting a person through the 8-week application period only to have them denied. If the agent does not ask for any health records, they may be planning to treat the policy application like every other one, which could spell disaster for someone with a pre-existing condition. Most important: avoid falsifying or withholding medical information from a life insurance agent, as it will result in a denial.
Consumers with pre-existing conditions can qualify for a certain type of life insurance called guaranteed issue. Guaranteed means the insurance company will issue a policy no matter what, as long as the customer pays his premium. The insurance company will ask for the age of the policyholder, and will not ask any medical questions. Guaranteed issue life insurance helps people who are not able to find any other alternatives for life insurance.
A few downsides exist with guaranteed life insurance, however. The premiums are generally high, possibly 4 to 5 times higher than other types of life insurance. Before an individual decides she is uninsurable, she should at least ask for quotes from other life insurance companies. Life insurance premiums are based on actuarial data and complex algorithms used by each life insurance company to determine the odds of a person’s staying alive, and each insurance company has a different opinion on how insurable a person is.
One warning about guaranteed life insurance policies should be noted. If the policyholder dies within two years of the initiation date of the policy, the only money that will come from the insurance company is a refund of the original premiums paid. The person must survive for longer than two years in order for the full policy face value to be paid out upon his death, although most companies will pay out the full policy amount before that time, if death was due to an accident. Guaranteed issue life insurance also has fairly small policy face values. These range somewhere between $5,000 and $50,000. Since it costs nothing to check around for life insurance quotes, an individual would be better off exhausting that route first, before going with guaranteed issue life insurance.
Individual life insurance policies have the tightest health restrictions; consequently, these policies are the toughest to get. If an insurance company rates an individual as being in good health, this is the least expensive policy available. When this is not the case, consider applying for group life insurance coverage through an employer. Often, an employer will provide a small life insurance policy, which usually includes an option for supplemental life insurance up to a specific multiple of the employee’s salary. This insurance will not require employees to answer health questions if they sign up at enrollment time. Applying during a non-enrollment time, or applying for larger amounts of insurance will often require the employee to answer questions about her health.
Find a Specialist
The market for pre-existing condition insurance is also known as the impaired risk life insurance market. Some brokers or agents operate as specialists in the impaired-risk life insurance market, and will actively search for the lowest-cost, highest quality life insurance to meet the needs of an individual with medical issues.
Look for an insurance company that has an in-house impaired risk agent, preferably one who has at least 10 to 20 years of experience. Whether working in-house for a large insurance company or operating as a one-person operation, an agent specializing in impaired risk life insurance should have experience as a former underwriter, as they tend to be well-connected with other underwriters and also have direct experience determining and setting policy rates for people with medical conditions.
Also consider using an agent who has the Life Underwriter Training Council Fellow (LUTCF) or Chartered Life Underwriter (CLU) designation. These agents usually have at minimum several years of life insurance experience; have most likely taken courses on how to provide life insurance for those with medical conditions, and have shown their commitment to understanding how the life insurance business works.
If an individual accepts a life insurance policy in a higher-risk category, it might pay off in the future. When life insurance companies charge a higher premium for impaired risk policies, the individual has been “rated.”, meaning they are in a non-standard premium category. After a period of several years with proven recovery, many individuals, even cancer survivors, can get standard or slightly-rated premium policies. Policyholders may also ask their insurance company to reduce their rating after holding a policy for several years. The longer an individual lives with a health condition, the more likely the life insurance company is to consider reducing the person’s rating if he has successfully treated his condition.
Credit Life Insurance
As a partial alternative to standard life insurance, some individuals buy life insurance specifically to cover credit card balances or loans. Many of the companies that issue credit life insurance do not ask any health questions. This type of coverage is expensive, the amount usually depends on the size of the loan, and the maximum coverage available is typically quite small.
Clubs and Other Organizations
Many clubs and other groups offer their members group life insurance. Some larger organizations have group policies that will not require a health review if an individual purchases small amounts of insurance. Check professional industry groups, warehouse shopping clubs and community or civic organizations. The likelihood is higher if the organization has a national presence.
Online Life Insurance Quotes
Many companies provide life insurance quotes on the Internet, which can make shopping around much easier. The lowest quote is not always the best premium, however. Often times, the insurer offering the lowest premium has based it on a very conservative good health requirement, which ultimately can lead to a higher premium once the individual provides his full health history. The health requirements for a low premium are hard for most individuals to meet, and finding the right life insurance company for an individual’s needs may require quotes from at least a dozen different companies. Discussing an individual’s situation with knowledgeable insurance agents, whether found online or not, will help find an insurance company that offers the lowest possible premium given a person’s existing medical history.