How health conditions affect your life insurance

If you have a pre-existing health condition, you might be wondering if this precludes you from taking out a life insurance policy. The good news is it is still possible for you to get life insurance tailored to your situation: but due to the risk your insurance provider is taking on, you will face some extra hurdles someone without your condition wouldn’t. One of the reasons many people choose to get life insurance when they’re fit and healthy is that it’s more difficult when your health has started to deteriorate.

 Commonly your life insurance policy might contain a “stand-down” period before the cover for your condition kicks in, higher premiums, or exclusions, whereby you’re covered for everything except your illness.  You might also find that you qualify for life insurance and your condition is covered, but the amount you can insure your life for is limited - or you are unable to add on certain benefits and extras that would otherwise be an option with your policy.

Different insurance providers take different approaches, so have a look around to see what works best for you. Getting an insurance adviser to help you through the complexities of the situation might be a good step. Quashed can set you up with a free chat to an experienced, independent insurance adviser – all you need to do is subscribe to our free online platform!

Which conditions are excluded?

Here are some examples of pre-existing illnesses and conditions insurers that are excluded from life insurance policies in New Zealand:

• Depression  

• Diabetes 

• High cholesterol  

• Cardiac issues 

• HIV/AIDS  

• Epilepsy  

• Obesity 

• Asthma  

If you do have one of these conditions or another underlying health problem, don’t give up – you might just have to hunt around a bit longer to find the right insurer and policy.

Getting assessed

Once you’ve decided which insurer you want to go with, your insurer will usually want to see detailed medical information before offering you a policy. You might even need a medical assessment, a step referred to as medical underwriting: this can include a physical examination, X-rays and a battery of tests.

If an insurer is on the fence, there are a few different factors that play into whether you will be covered and the amount of cover you can receive, such as your general health, the severity of your condition, and how well-managed your illness is. If you can take even small steps to improve your overall health, such as switching to a healthier diet, exercising, regularly taking your medication, or losing a bit of weight, this could be beneficial for you.

Unfortunately, if you have recently been diagnosed with a serious condition or experienced an event such as a serious heart attack, it's more likely you will be declined. You can always reapply, and this might be something to consider when your health begins to improve.

Potential features of your policy

• Stand-down periods: A stand-down period is the length of time you must have a policy for,  before your cover begins. For instance, if your stand-down period is three years, you won’t receive any cover for the symptoms of your illness in that time. If you have a well-managed condition that affects your health but isn't posing any immediate risk to your life (such as asthma), this might not present a problem to you - but it is something to be aware of.

• Increasing your premiums: The younger and healthier you are, the cheaper your premiums will be – so if you do have a serious health condition, you can unfortunately expect to pay more.  Before you sign up to your policy make sure you understand what your premiums will be and whether they will be affordable to you. If you choose a stepped premium structure, remember your premiums will start lower and increase. Unfortunately, while some life insurers will give potential customers online quotes, they rarely do this for people who have pre-existing health conditions: you may need to either go through an adviser or speak to the provider directly.

• Exclusions: Exclusions means conditions or situations that aren’t covered in your life insurance policy – for instance, if any person dies while engaged in a very high-risk sport or activity or dies by suicide within 13 months of taking out the policy, their policy owner usually won’t receive a pay-out. Exclusions can apply to pre-existing medical conditions as well: if you have cancer or HIV, you could be covered if you die in an accident, but not covered if you die as the result of your illness. Sometimes exclusions are permanent but in other cases they have a set timeframe (functioning similarly to a long stand-down period).

• Limitations: Generally, people who take out life insurance are able to pick their own amount – however when you have a pre-existing health condition, you might find your insurer offers you a fixed sum. If you’re looking at a range of different providers, think about your family’s circumstances before you accept: most people take out enough life insurance to enable them to settle their debts after they pass away, and to support their family for a period of time (particularly if they have young children), taking into account any costly events they can see on the horizon. Once you subscribe to Quashed, you can use our free calculator to estimate how much cover you need. 

When you have pre-existing health conditions, you might also find that some add-ons and benefits commonly offered with the policy don’t apply to you: for instance, you might be unable to access a long-term care benefit (a living benefit to help with long-term care expenses). Don’t be afraid to ask either your adviser or your insurance provider about potential limitations on your policy.

Group life insurance and guaranteed life insurance

If you’re unable to get an individual policy via the traditional route, remember it is possible to get group life insurance via your employer, which isn’t as reliant on your individual medical status. The amount you can get may be limited, but you might find that some coverage is better than nothing - even if it’s not what you had originally envisaged.  Your insurance adviser should also be able to provide you with advice on this.

Other options include taking out a guaranteed life insurance policy, which does not rely on your medical status: often everyone within a certain age range, e.g. 21 to 60, can take out a policy. The downside of this type of policy is that it tends to be more expensive, and you might also find the amount of cover you can take out is limited. You should bear in mind that you may also have a stand-down period factored in.

If you’re finding it very difficult to find a life insurance policy that works for you, building your savings or investing, is also an option: there is a lot of information available online, and you might also like to speak to a financial adviser to work out a savings plan.

Next steps

If you’re interested in life insurance, you can check out Quashed’s brief guide here. Once you've signed up, take a look at Explore > Life on your dashboard for more detailed information and to access our calculator! And once you get your policy, remember to upload it to Quashed – our free online platform allows you to see both your life insurance policy and any group insurance policies you have, via your employer, in one place. Other life-insurance documents, such as your will, can also be added to Quashed for easy access.