Does Mental Illness Affect your Ability to Get Life Insurance?
Mental illness is a more common health issue than many people realize. The National Institute of Mental Health (NIMH) estimates that 1 in 5 adult Americans will develop a serious mental illness sometime during their lives. Certain mental illnesses are strongly correlated with suicide risk, with the vast majority of suicide victims suffering from a diagnosable mental health issue.
Insurance underwriting is based on risk assumption, and for this reason applicants living with mental illnesses often have trouble finding coverage. Three significant mental illnesses are particularly problematic for applicants, with people suffering from major depression, bipolar disorder and paranoid schizophrenia face significant obstacles in their efforts to purchase life insurance.
Major depression is a health condition characterized by persistent despair, disrupted sleep patterns, and most significantly, suicidal thoughts and tendencies. These tendencies are important to insurers because they increase the risk of mortality in prospective policyholders. For this reason, many mainline insurers either will not insure those who have been diagnosed with moderate to severe depressive symptoms, or they are forced to charge extra for their policies. This can be done in a few different ways:
• A flat rate increase, which adds on a set financial amount to premiums for a set period of time. Flat rates sometimes drop off over time, provided the insured continues to successfully deal with symptoms and remains compliant with medical advice.
• A “table rating,” which is similar to a flat rate but instead tacks on an additional percentage to premiums based on the insurer’s assessment of the severity of symptoms and the insured’s medical history.
Flat rate and table rating increases help insurers offset the increased expense of insuring individuals with major depression. According to Mental Health Matters, the annual cost of depression treatment is second only to cancer at an estimated $44 billion. Adding in other mental illnesses greatly increases that figure.
Though many people mistakenly think they are one and the same, bipolar disorder and major depression are two distinct mental illnesses. In bipolar disorder (more popularly referred to as “manic depression”), patients experience extreme mood swings that take them from euphoria to despair, often with intervening periods of normalcy.
Bipolar disorder is a significant health concern for life insurance providers because of the marked impact it has on early mortality. People dealing with this disorder may take extreme risks with their health during the manic phase of the cycle, or tend toward unhealthy lifestyle choices and even suicide during the depressive phase.
• An increased risk of suicide is something most serious mental health issues have in common.
• Suicide clauses are fairly universal in life insurance policies; in most states, this means that policies will not pay out if the insured commits suicide within the first two years of coverage.
• Insurers such as AAA Life, Prudential and many others feature two year suicide exclusions in their policy language.
One of the most important factors underwriters take into consideration when examining patient histories is how applicants deal with the disease and responding to treatment. Major depression and bipolar disorder do not necessarily disqualify anyone from getting insured; a solid history of treatment and medication can make it easier to get a policy written.
This same principle is also true with paranoid schizophrenia—treatment and response to medication are important in policy underwriting. According to the Mayo Clinic, paranoid schizophrenia is a chronic mental illness in which the afflicted becomes psychotic, losing touch with reality. The most common features of this illness are having delusions and/or hearing sounds that are not real.
• Like major depression and bipolar disorder, paranoid schizophrenia can sometimes disqualify a life insurance applicant.
• However, there are companies who will insure such applicants. One option many people in these circumstances look into is no-medical exam coverage.
Some insurers offer policies to applicants without an exam and without looking at their medical records. However, these plans still require applicants to disclose conditions such as paranoid schizophrenia and other mental health issues. Failure to disclose this type of information can render coverage void and lead to policy cancellation.
Insurance Alternatives for Mental Illness
Mental health patients face a challenge in trying to obtain life insurance. But there are additional options they might investigate. For example:
• Guaranteed acceptance policies offer membership in permanent group policies regardless of health history. AARP members, for example, can get into a guaranteed acceptance level premium policy through New York Life.
• Impaired risk carriers are a great option to look into as well. Impaired risk policies are written to help any “high-risk” applicant get coverage. American General Life (AIG), Empire General Life, Prudential, Transamerica, and United of Omaha are just a handful of leading companies offering impaired risk policies.
Getting insured in spite of mental illness is tough, but it can be done. By examining the market and comparing policies offered from various providers, applicants living with mental illness have a better chance of finding quality coverage they can afford.