Life insurance is something that common sense would suggest is obtained more by the unhealthy because… well, crudely put, they’re more at risk of dying. The reality of the situation, however, is different. Weirdly, life insurance is more often bought by people with lower rates of high cholesterol, diabetes and even depression. A possible contributor to this might be that if you have poor health you have higher premiums, or even those with poor health may think that insurance companies will reject their policy application. However, for the most part, you can get life insurance if you have bad health.
The Insurance System in Detail
Life insurance rates are based on a series of factors. The company typically collects a series of data from you in order to work out how likely you are to die. Factors like age, health and recorded behaviour (like a driving record) can impact how expensive your life insurance premium is. Risk in any of these factors can accumulate and you can get higher premium costs if the risk crosses certain thresholds. Insurance companies have several tiers of health: preferred plus, preferred, standard plus, standard and substandard (ranging from substandard A to J). If you’re preferred plus then you will pay the least for the same cover, and if you’re substandard J you will pay the most. Your rating will vary between companies who each have their own algorithms. There’s one thing that will immediately lower your grade – you can probably guess that it’s smoking.
However, not all health problems are equally damaging to your premium costs. There are some conditions that will almost always get your policy denied. These are alcoholism, cancer history, drug use, heart disease, HIV/AIDs or a disease of the kidney/liver/major organ. Your rating will likely decrease if you have anxiety/depression, asthma, diabetes, blood pressure issues, obesity or sleep apnea.
If you suffer from any of those conditions, you do have options. For starters, you can get guaranteed life insurance that doesn’t need a medical exam from a company that doesn’t ask health questions and still get a guaranteed life insurance benefit. If you want to see what your rate is, you should be upfront about your condition as the insurer has access to your medical records. They will find out if you lie, and if they don’t immediately, they could cancel your policy at any point afterwards – including when your dependents need it most. Smokers have their own tiers, they’re either preferred smokers (smokers who have good health otherwise) or standard smokers (who have average or worse health).
You can also get healthier if you get a terrible premium quote due to your bad habits. Take a year to work on your health with exercise, a better diet and by working hard to quit smoking. When you get back to the medical exam a year later you will have a lower premium, a higher rating and you will also have the benefit of being healthy. There’s little reason not to.