Mental illness affects people from all walks of life. According to government data, around 19% of American adults experienced a mental illness in 2018.
Discussions around mental health have become more common and more treatment options are available. But what does this mean when it comes to life insurance?
Millions of Americans with mental illness and other pre-existing conditions often worry about their ability to obtain affordable life insurance. Here's what you need to know about how mental health disorders can affect life insurance coverage.
Life insurance and mental health
Mental illness includes mental health conditions that affect your thoughts and behaviors. These conditions can range from dementia and bipolar disorder to clinical depression, anxiety and attention-deficit disorder.
Insurance underwriters consider several factors when deciding whether to issue a policy. They review your age, health, weight, medical history and lifestyle habits. Your medical records will reflect any diagnosed mental illnesses. Insurers will consider that when they assign a rating to determine your “risk.”
Generally, you'll be placed into one of the following rating classes:
- Super Preferred (or Preferred Plus)
- Standard (or Regular)
A Standard or Substandard rating equates to more risk for an insurer. These policies have higher premiums. Another option is the insurer could deny you if it feels you’re too much of a risk.
A Preferred or Super Preferred rating indicates less risk to an insurer. You'll get the best rates and a more affordable premium.
Here’s how much a classification can cost you. The annual average 30-year term annual premiums for a 40-year-old nonsmoker woman in September 2019 are:
- Preferred Plus -- $796
- Preferred -- $883
- Standard (or Regular) -- $1,077
How does mental health affect life insurance?
If you have a mental health disorder, you can still get life insurance. However, you may pay higher premiums.
When you apply for life insurance, you'll have to provide your medical history. You'll likely undergo a medical exam and answer additional questions about your mental health history.
"The carriers will also run a prescription search to see what sort of medications an applicant is taking and they can sort of triangulate the severity of the condition via their medical questions that are completed during an in-person interview or a phone interview," says Jason Veirs, president and owner of Insurance Experts Solutions, Inc., a family-owned and operated independent broker. "In certain situations when an applicant has a mental illness, such as bipolar disorder or schizophrenia, it can prove to be rather challenging in getting coverage. It ultimately depends on the total history and what's in the medical records."
You could be considered more of a risk to insure if:
- You’re on multiple medications
- Have been hospitalized as a result of mental illness
- Have other health conditions related to mental illness, such as a history of drug or alcohol misuse
- You have a history of suicide attempts
"Life insurance carriers typically do not look favorably at past suicide attempts, unless it was sort of a one-off situation or a single occurrence. With that being said, if the attempt was more than five years ago, then there may be more carriers who would possibly be open to offering coverage. But it can be difficult, as carriers are very sensitive to previous suicide attempts," Veirs says.
However, if your condition is under control with treatment or medication, an insurer could give you a better rating with lower premiums.
"Control is everything. If someone's condition is controlled and it's medically documented in their records by their physician, then they usually have a very good chance of obtaining life insurance rates at Standard or sometimes even Preferred rates," Veirs says.
Your medical history will be crucial to an insurer's coverage decision. However, if you've experienced brief bouts of depression or isolated mental health episodes, you shouldn't be overly concerned about how this will affect your life insurance rates.
"Insurance carriers know there are certain life situations, such as postpartum depression, the death of a loved one or even stress due to work or medical school, where someone can have a brief bout of depression or anxiety," Veirs says. "An isolated incident, such as the ones [I] previously mentioned, typically don't affect one's life insurance rates and you usually have nothing to worry about. At the end of the day, the underwriters are humans just like you and me, and they can empathize with someone's situation depending on the particular circumstances."
What if I can't get traditional life insurance coverage with a history of mental illness?
If you can't qualify for a standard policy, you may want to consider simplified issue or guaranteed issue life insurance.
- Simplified issue life insurance doesn't involve a medical exam. However, you still have to answer a few questions about your medical history. Simplified issue policies don't have the same level of medical underwriting requirements as traditional life insurance, so they’re an option for people who can’ that coverage otherwise.
- Guaranteed issue life insurance doesn't involve a medical exam or medical questions. Because these policies are designed for consumers that are the riskiest to insure, guaranteed issue policies come with lower benefit amounts and higher premiums. However, if you have trouble getting a standard policy, simplified or guaranteed issue life insurance may be the best option. They may have a smaller death benefit, but those policies can still help offset expenses, such as funeral costs, housing or other day-to-day living costs.
Veirs says accidental death and dismemberment insurance also might be a good option if you have a mental health disorder and have trouble getting a standard policy. He says this type of insurance doesn't require medical underwriting, which is usually a barrier for those with mental illness who are applying for coverage.
He also suggests looking into group life insurance through your employer. You might be able to get on a group plan without a medical exam or application questions.
Getting life insurance with a mental health disorder
It's typically better to apply for life insurance sooner rather than later. However, if you have a mental health disorder, waiting could be beneficial. If you are taking medication for your condition, this could give your body time to adjust and allow the medication to take effect.
Insurers also like to see that the condition has been under control for a while, which could mean less risk for them and a better rating and more affordable premiums for you. Veirs says even if you’re initially denied coverage, working with an experienced insurance professional can give you a better chance of being approved for coverage if you reapply later.
"If you end up applying with a particular carrier and the underwriting process does not go as planned, then a good broker should find out exactly why you were declined from the underwriter and then formulate a game plan as to when you should revisit [reapplying], and what you will need to show the underwriter at that time so you can get the life insurance in place sometime in the future."