When you apply for life insurance, it can feel like the most intimate details of your life are on display.
Most life insurance is medically underwritten, which means that the insurer looks at your health when deciding whether to offer you coverage and at what price. As a result, you’ll be asked questions about your health and lifestyle.
While no-exam life insurance offers the possibility of skipping the medical exam, you might need to undergo a health exam for the life insurance application in some cases, especially if the underwriters have questions about your health (or mental health) history.
If you’re one of the millions of Americans living with mental illness, this may be an intimidating prospect. Not only will you be asked to discuss a deeply personal topic, you may worry that you’ll automatically face higher premiums. The reality is a bit more complicated.
In general, individuals who are riskier to insure—those who are older, have certain health conditions, or have a predilection for dangerous hobbies—will pay higher premiums for life insurance. That’s because insurers need to account for the likelihood they’ll need to make a payout.
But even though that idea seems relatively straightforward, life insurance pricing is actually quite complex. Underwriters take a variety of circumstances into account when figuring out how much a policy should cost, and no one factor is guaranteed to raise your premiums a certain amount. (Learn more about the reality behind common myths about life insurance.)
Coleen Moser, Senior Director at ESMI Underwriting, helps underwrite life insurance policies for Fabric. When considering an applicant with a mental illness, she says that underwriters may think about these factors:
Severity/duration of an illness, and whether it has recurred
Whether a patient is undergoing treatment, and if so, what kind of treatment
Personal or family history of mental illness or suicide
Associated medical complaints or conditions
Age of onset
Of course, mild depression after losing a loved one is a very different situation than severe lifelong schizophrenia.
“There are many types of mental illness,” acknowledges Moser, and underwriters know that. “For some situational, minor or completely controlled conditions, an applicant may qualify for the best rate.”
Underwriters most commonly see applicants with anxiety, depression, and bipolar disorder, says Moser.
The severity of a condition is an important factor for underwriters, as is the amount of time an applicant has been living with an illness. If a condition is situational or temporary (for example, anxiety around a new job or depression following a divorce), that will be factored into an underwriter’s calculations.
It may be tempting to leave a history of mental illness off of your life insurance application—after all, it’s not something that would necessarily be visible on your medical exam. But that’s a mistake. If you fail to disclose a mental illness, or any health condition, your policy could be rescinded.
Underwriting a life insurance policy involves a lot of information-gathering, and you’re not the underwriter’s only source. Underwriters also gather medical records and medication histories. In some cases, they’ll fact-check your application via the Medical Information Bureau, or MIB. The MIB’s job is to prevent life insurance fraud, and they use information from previous insurance applications to verify certain aspects of your medical history.
“Thankfully,” Moser says, “the stigma around mental health issues appears to be waning and many do self-report on the application.”
Not only is it important to disclose any mental health conditions during the application process, there’s a chance that more information can actually work in your favor.
“Underwriting mental illness is definitely not ‘one size fits all,’” Moser explains. “The more information that can be provided at the time of application, the better. Each person who carries these types of diagnoses has a very individual experience. The impact to their daily life and all of this is considered when someone applies for insurance.”
Because underwriters look at more than just an applicant’s diagnosis, there are steps you can take to change the way an illness will impact your life insurance costs. As Moser explains, if you’re following your prescribed treatment, keeping up with day-to-day tasks and employment, and steering clear of alcohol or recreational drugs, you can “mitigate the impact of [your] diagnosis at the time of underwriting.”
If you’re wondering how your mental health will affect your premiums, there’s no easy answer. But the choice to apply for life insurance should be a simple one—if someone relies on your income (or your labor, if you’re a stay-at-home parent or caretaker) life insurance is an important way to safeguard your family’s financial future.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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