Shopping for Life Insurance with a Medical Condition

If you’re young, healthy, and don’t spend your time riding around on an ATV or trawling for the Deadliest Catch, there are plenty of life insurance companies that are happy to sell you a dirt-cheap term policy (Mint even has a Life Insurance Wizard to sort through your many options).

But not all of us are so lucky. If you have a medical condition in your past or present, insurance companies will look you over with a magnifying glass, and if you qualify for insurance, you’ll pay a higher rate.

That’s the bad news. The good news: insurers want to sell you a policy as long as they can think they can make a profit, and there are agents who specialize in obtaining policies for people with conditions ranging from high cholesterol and hypertension to heart disease and breast cancer. Here are five things to do if you find yourself in this common situation.

1. Don’t assume the worst

If you have dependents, you need life insurance, and it’s relatively rare for a person to be genuinely uninsurable. An insurance company wants to see stability: if you’re in the midst of cancer treatment or have a terminal illness, you can’t get a policy. But if you have a condition such as Type II diabetes or hypertension and have it under control with medication, many insurers will want your money.

“Even a breast cancer survivor who can demonstrate that they’ve been cancer-free can get a decent rate for a life insurance policy,” says Amy Danise, Senior Managing Editor at Insure.com.

2. See a specialist

“Three words: impaired risk specialist,” says Danise. “These are folks who know the market really well and know which companies are more lenient on rates for certain conditions, because each life insurance company, they all have their own playbook.”

You probably won’t work with an impaired risk specialist directly, says Danise, but your agent should be able to coordinate with one. “And if they don’t, if they seem rather clueless about it, then you should switch agencies to one who can provide more experienced people for your health condition.”

Tony Steuer is a Chartered Life Underwriter and author of Questions and Answers on Life Insurance. When working with a client with a medical condition, he calls on an agent who shops the case around anonymously. “He’ll informally email underwriting contacts at different companies and ask, what rate class would you offer?”

Danise recommends getting at least four quotes before making a buying decision. It’s hard to generalize about how much more you’ll pay in premiums if you have a medical condition. Most insurance companies have about 16 different health categories. Once a specialist has shopped around for you, then you can decide how to craft your policy (what length of term and amount of coverage) so that, ideally, it’s both affordable and provides sufficient coverage for your dependents.

3. Be honest and take care of yourself

“Sometimes clients are, for lack of a better word, totally delusional,” says Steuer. “They’ve had four heart attacks and they can’t understand why an insurance company’s not going to offer them the best available rate.”

You know what’s worse, though? Pretending you only had three heart attacks. If you have a health condition that you know is going to be an issue during the underwriting process, be upfront about it and disclose everything. The insurer will be receiving your medical records, and if they find that you misrepresented anything about your condition, your policy will be terminated. (The industry term for this is “rescission”; leave it to insurance companies to come up with a scarier word than “terminated.”)

Showing the insurer that you’re following doctor’s orders is good evidence that you’re a risk worth taking. And vice versa: “If the client has a health condition and doesn’t see the doctor for their follow-up, they remain a high risk,” says Steuer.

4. Request a do-over

If you’re paying a high premium because of a medical issue and your health has improved—perhaps you had high cholesterol which is now under control with statins—you can ask the insurance company to review your case and see if you qualify for a lower premium. “The companies will never charge you a high premium if you ask them to reconsider,” says Steuer.

Why are they willing to do this? Is it because they really like you? No, actually, it’s because they know you can always go to another insurance company.

5. Buy term insurance unless you have a good reason not to

Insurers sometimes pitch more costly permanent insurance (also known as whole or universal life policies) to clients with medical conditions, says Steuer. It goes like this. “The company will say, if you apply for permanent, we’re going to lower you by a table.” (A “table” is a health category. Lower is better.) “But you’re already paying ten times more for the permanent insurance. Now you may only be paying nine times more.”

I asked Steuer whether the fact that you have a medical condition should ever drive the decision between term and permanent insurance. “Never,” he said. Term insurance is for temporary needs; permanent insurance is for permanent needs and for high-net-worth estate planning. That goes for people with a medical condition—and everyone else.

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.

Photo: Whistling In The Dark