Impaired Risk & High-Risk
Life Insurance
Having a health condition doesn't have to mean no, it often just means a different kind of yes...
Most health conditions are insurable--somewhere.
If you've applied for insurance in the past and been declined, spoken to an agent who has told you that you're 'uninsurable' or are worried that a chronic or recently diagnosed condition means life insurance is out of reach or unavailable to you, first, we're sorry you had that experience.
Despite what you may have been told, having a chronic or serious health condition doesn't mean you're automatically ineligible for coverage. With the right insurer and the help of a knowledgeable independent agent, the path to coverage simply looks different than the standard application.
How underwriting actually works
After you've submitted your application, it is the job of the underwriter to assess your risk profile, and compare the results of your application to their internal requirements. As part of this process, carriers verify your application in various ways, depending on the type and size of the policy, your application responses, and their internal requirements. These verifications can include:
- MIB (Medical Information Bureau) check: This is a database that most life and health insurance carriers report to. Your MIB report shows the carrier whether you've applied before, as well as a coded summary of any significant findings (such as significant diagnoses or past declines). It doesn't include full medical records; it just flags areas that should be reviewed further.
- APS (Attending Physician Statement): This is a request for your (typically primary care) doctor's records, covering diagnosis, treatment, and history for any condition(s) you have disclosed. If you're seeing a specialist for a specific condition, additional records may be requested from those doctors as well.
- Paramedical exam: This is a short exam, usually conducted at your location, where your height and weight are recorded, your blood pressure is usually taken, and there may be additional requirements such as blood and/or urine tests, and less commonly an EKG.
- Prescription history: Carriers often have access to and check your prescription drug history in order to discover any undisclosed health conditions. If your doctor has prescribed medications for 'off-label' uses, it's important to disclose this information upfront to avoid any issues or delays down the line.
- DMV records and credit checks: Some carriers check for past moving violations, DUIs, license suspensions, and credit-based risk factors.
Once all required information is in, the carrier's underwriter compiles a risk profile based on the records obtained. When an application has a risk profile outside the norm (such as a chronic condition or multiple less-serious conditions occurring simultaneously), carriers have options beyond yes or no. They have a variety of options to 'rate' or modify the policy:
Table Ratings
A "table rating" means a carrier is offering their standard life insurance contract, however they're increasing the price by a set amount to reflect the additional risk associated with your application. When a policy is 'rated' or 'table rated' there is no change to the policy terms or coverage, the only change is the premium paid for the policy.
Graded Death Benefits
If your application indicates a more serious health profile, some carriers may offer a modified policy contract. The modification is typically a 'graded' benefit. Graded benefits are not available from day one, unlike standard policies. There is usually a schedule over the first two to three years, such as:
- Year 1: If the insured passes from natural causes, the beneficiary receives a refund of the premiums paid to date, plus a small percentage (e.g. 10%). They would not receive the full face amount of the policy.
- Year 2: If the insured passes from natural causes, the beneficiary receives a percentage of the death benefit (e.g. 50%)
- Year 3 and beyond: If the insured passes from natural causes, the beneficiary receives the full death benefit, and the policy functions the same as if it were a standard policy.
In the event the insured passes of an accidental death, graded policies typically pay the full face amount.
Guaranteed Issue
For the most complex applications, guaranteed issue policies ask little to no health information at all. They are typically issued for lower coverage amounts and higher costs. While these policies are not ideal, they are an excellent option for those that would otherwise face a decline.
When dealing with impaired-risk applications, coverage should always be evaluated in that order-standard, standard with table rating, graded benefits, and finally guaranteed issue. If an insurer or agent leads with a graded or guaranteed issue product, you may want to get a second opinion.
A table rating isn't always permanent
Some carriers allow policyholders to reduce or remove table ratings over time. Some policies include built-in review intervals where if no new issues occur the rating can be modified. Others allow you to request a review if you reach certain milestones, such as lost weight, revised prognosis, or a milestone such as the time since the last time you used a tobacco product. Some carriers have endorsements or other programs that can provide credits, discounts, or other incentives for healthy choices and activities.
Not every policy or carrier is the same, which is why having the right policy specific to your situation is so important, and why an experienced independent agent can make a huge difference.
Why the first application matters the most
Remember earlier when we mentioned the MIB check? That's precisely why the first application is so important. When you apply for a policy and get declined, that decision is recorded and can cause future applications to be reviewed with greater scrutiny, as insurers may see a decline as a red flag or a potential undisclosed condition. Since the database does not include full medical records, the underwriter is forced to draw conclusions based on the information presented, and what would otherwise be a straightforward decision can easily become clouded by an unknown or unexplained decline.
This is why it's important not to just submit an application with any carrier and see what happens, or submit applications to many carriers and hope one gets approved.
Before you apply, it's important to know the requirements for that specific carrier. When we review an impaired-risk application, we can send an informal request to key carriers we work with to find out who is likely to say yes, and we work directly with an independent physician who is an impaired-risk underwriting specialist, helping present high-risk applications to carriers in the lowest-friction way we can.
The goal is simple. Get it right the first time, so you aren't submitting applications you can't take back.
Conditions we help place coverage for
- Diabetes (Types 1 & 2)
- Cardiac history
- Cancer survivorship
- Mental health history
- Elevated BMI
- Hazardous occupations or hobbies
This isn't an exhaustive list. If your situation isn't here, please reach out. We can let you know the best path forward without any high-pressure tactics.
The most challenging risks to place
While most health conditions have some path to coverage, in our experience a few situations take more work, patience, and specialized carrier knowledge. Not all of these are automatic "no"s, but they're cases where having the right agent matters most:
- Currently incarcerated or recent felony convictions: Most carriers won't consider an application from someone incarcerated, on parole, or on probation. Criminal history may require a certain amount of time to have passed before they will consider an application.
- Currently on hospice care: This is one situation where the options narrow significantly. Even if guaranteed-issue products are available, the insured may not survive the graded benefit period, depending on the prognosis.
- A very recent major health event: A recent heart attack, stroke, cancer diagnosis, or other major health event within the last several months is often scrutinized, as there is not yet an indication of whether an applicant is compliant or improving with treatment.
- Uncontrolled or poorly managed chronic conditions: Diabetes, Sleep Apnea, or other conditions that require ongoing medical management are much harder to place if the applicant isn't compliant with treatment.
- Hazardous occupations, hobbies, or international travel/residents: Some careers and hobbies (such as aviation), and extreme sports (such as skydiving or BASE jumping) can cause underwriting delays or declines. Similarly, those who live abroad part-time or travel frequently to certain countries may have trouble securing coverage.
Let's look at your situation
There is no shortcut when it comes to impaired-risk quotes. If we know the entire picture, we can provide guidance and recommendations as to how to secure the coverage necessary to meet your goals.
Feel free to reach out at 781.630.4601 or by email, quotes@vellumandsigil.com.