A 2018 study by the Kaiser Family Foundation (KFF) found that approximately 54 million adults (non-elderly) in the United States had pre-existing conditions that would cause an insurance company to decline their application for certain types of insurance. The foundation listed AIDS/HIV, congestive heart failure, diabetes, epilepsy, severe obesity, pregnancy, and severe mental disorders as being some declinable conditions.
In this article, we’re going to take a look at pre-existing conditions and how they would affect your application for life, health, disability, or supplemental insurance. We’ll also look at some of your options if your application is declined by an insurance company.
There are different definitions of what a pre-existing condition is, but a good, concise definition is “a pre-existing condition is any health condition that a person has before applying for insurance.”
People generally are aware of having any pre-existing conditions when they apply for insurance, but that’s not always the case. For example, when applying for life insurance and having a required medical exam by a paramedic, an applicant may find out that unbeknownst to them, they have abnormally high blood pressure or a potential kidney problem.
How damaging are pre-existing conditions when it comes to buying insurance? Unfortunately, they’re very detrimental to your chances of having your application approved. Let’s use hypertension (high blood pressure), which affects more than 33 million adults under age 65, as an example.
One KFF study of medical underwriting practices of insurance companies involved asking different insurance companies to consider a hypothetical applicant with hypertension who was also obese and smoked cigarettes. In 60 applications for coverage, this applicant was declined any coverage 33 times (55%), offered a policy with surcharged premiums 25 times (42%), and only was offered coverage twice (3%) with no restrictions or premium surcharges.
Every life insurance company has its own process for deciding whether or not to issue a policy (underwriting), but just about all of these raise a red flag when spotted on an application:
- High blood pressure
- High cholesterol
- Heart disease
After their underwriting department has reviewed your application, medical exam results, and any medical records they’ve received from your doctor, life insurers will group you into a rate class, such as standard or preferred (if they accept you). Your classification will be used to determine your rates.
Depending on the pre-existing condition, you may only qualify for standard rates because the insurer uses statistics from data they’ve acquired over many years to predict your chances of having an early or unexpected death. If your pre-existing condition is well controlled by medication, such as high blood pressure, you may be approved for preferred rates by some insurers.
If you do have a chronic health condition, you may be offered a policy at a higher premium. If you’re not satisfied with the rate you're quoted, you could investigate a type of policy called guaranteed issue life insurance. With guaranteed issue policies, you don’t have to answer any medical questions or have a medical exam to qualify. The rates are higher than the life insurer's standard rates, but you might find them to be within your budget. One drawback – they’re often available with limited face amounts, such as $25,000 or $50,000.
Some life insurers cater to applicants who have a specific pre-existing condition. For example,
- Guardian Life offers a whole life insurance product for people with HIV.
- Prudential offers coverage to HIV-positive applicants on a case-by-case basis.
- John Hancock’s Aspire™ with Vitality policy is specifically designed for people living with diabetes.
- Fidelity Life offers life insurance solutions for applicants with cancer. The type, stage, and treatment prognosis can affect your eligibility for coverage.
There’s positive news for people who aren’t covered under a group plan at work and need to purchase individual health insurance coverage:
Under the Affordable Care Act (ACA), also known as Obamacare, health insurers cannot decline you for coverage or charge you an extra premium because you have one or more pre-existing conditions. This applies to any health insurance plans that began on or after January 1, 2014.
The less than positive news: insurers can set their own rates under Obamacare. Because they must approve anyone that applies for coverage regardless of their health history, insurers often price their policies out of the range of many people. It’s not uncommon for individuals to be charged $1,000 to $1,500 per month for their health insurance coverage.
Supplemental insurance, such as critical care insurance or cancer insurance, is not provided for under ACA, making it more challenging to be approved for coverage if you have pre-existing conditions. For example, it’s not very likely that you’ll be approved for a cancer policy if you’ve had cancer in the past, and a person with a history of heart problems will have difficulty getting approved for critical care insurance.
It is quite possible to be approved for a disability insurance policy if you have one or more pre-existing conditions. Much depends on the severity of your condition, and you’ll probably have to pay a higher premium if the condition is covered under the policy.
Some pre-existing conditions will automatically cause your application for disability insurance to be declined if you’re still suffering from a condition when you submit your application for coverage.
For example, if you were recently diagnosed with cancer, your application will very likely be declined. But, if the cancer has been in remission for three years or more (depending on the insurer), you may be approved for coverage, but cancer would be an excluded condition under the policy.
Similarly, you may have had an issue with your back in the past, such as a disc problem, but you haven’t received treatment for it in years. With disability insurance, your application will likely be approved with an exclusion for any claim related to your back.
If you don’t disclose your pre-existing conditions when completing your insurance application and it slips by underwriting, your future claims could be denied. This could be financially devastating not only to you, but also to your family if they were named as the beneficiary of a life insurance policy you were issued without disclosing a pre-existing condition.
You’re better off having a policy with a higher premium where a claim can’t be contested by the insurer than having one with lower rates because you didn’t disclose all of your previous health history. While it may not always be comfortable, being truthful is the best policy.
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