The CDC estimates that 129 million people in the United States have at least one major chronic illness. If you’re one of the millions of individuals with a chronic disease, you may be wondering whether it’s possible to find life insurance. The good news is that it is possible to secure life insurance if you have a chronic illness.
What counts as a chronic illness?
The CDC defines a chronic illness or chronic disease as a condition that lasts for at least one year and requires ongoing medical attention, limits daily living activities, or both. Common examples include heart disease, cancer and diabetes.
How does a chronic illness impact life insurance underwriting?
Since chronic illness is a broad term, the impact of a chronic condition on life insurance underwriting will depend on the specifics of your situation.
In the life insurance underwriting process, insurers consider a wide range of factors to determine the level of risk behind an application. Some factors that may mean an insurer considers you to be higher risk include:
- Age: Being an older applicant
- Lifestyle: Smoking or engaging in dangerous hobbies, such as rock climbing or skydiving
- Occupation: Holding a dangerous job, such as first responder or construction worker
- Medical history: Having a history of serious medical conditions
To gather information, insurers may ask questions, require a medical exam or gather data from third-party sources. Based on the results, life insurance companies may decide to charge higher premiums – or decline to offer coverage at all.
However, this does not mean that people who fall into one or more higher-risk categories cannot obtain a life insurance policy or that coverage will be unaffordable. There’s considerable variation within high-risk categories, and each insurance company may view risk factors differently. This means that even if one company rejects you, another might offer you coverage at an affordable rate.
Being in a high-risk category may mean that you have to cast a wider net when searching for affordable life insurance, so it may be beneficial to use an insurance broker, who will be able to secure quotes from multiple insurers for you.
Why People with Chronic Illness Should Consider Life Insurance
If you have a chronic illness, you understand firsthand that good health is fleeting. Life insurance provides financial protection for your loved ones through long-term financial strategies.
Regardless of whether you have a chronic illness, you can use life insurance to:
- Pay off debt and end-of-life expenses. When people die, they often leave behind significant debt. In addition to leaving unpaid medical bills, funeral costs may be more expensive than many people expect. These expenses have the potential to become a financial burden for loved ones or to decrease the size of your estate. Life insurance offers a more straightforward way to pay for these expenses.
- Provide for loved ones. Many parents buy life insurance because they want to guarantee the future financial well-being of their children. Other people may buy life insurance because they have aging parents or siblings who depend on them financially. Beneficiaries can use life insurance benefits to cover the cost of childcare or elder care, pay for college tuition or simply help to ensure financial stability.
- Pass on generational wealth. Life insurance benefits are not typically subject to income tax. This can make life insurance a particularly useful tool for families that want to pass on wealth from one generation to the next.
Life Insurance Options for Chronic Illness
If you have a chronic illness, several life insurance options may be particularly well-suited to your needs.
- Employer-based group life insurance. Many employers offer group life insurance as an employee benefit. This may be provided as a voluntary benefit, which means the employees decide whether to participate and often pay for policy premiums using payroll deductions. This tends to be an affordable option with easy enrollment and no individual underwriting, which may make it attractive to people in high-risk categories who want inexpensive coverage. However, employees are unable to customize their policy and typically lose coverage if they switch employers.
- No medical exam life insurance. Some life insurance companies offer no medical exam life insurance. This means that applicants do not need to undergo medical tests and may not even need to answer medical questions. The term “guaranteed issue life insurance” refers to policies with no medical underwriting, whereas the term “simplified issue life insurance” refers to policies with streamlined underwriting. No medical exam life insurance may be a great option for people who have health issues or want an easy application process. However, the life insurance premiums may be more expensive compared to a policy that requires medical underwriting, and the death benefits may be smaller.
It is also possible to stack life insurance. For example, you can purchase a guaranteed standard issue life insurance policy to obtain coverage that is not tied to a job. Then, if your employer offers group life insurance, you can enroll in that policy as well to boost your coverage.
Accelerated Death Benefit and Other Riders
Riders are clauses that policyholders can add to their life insurance policies to gain additional benefits. Life insurance riders typically increase the policy premium, but the benefits they provide may be worth the extra cost, provided that they meet your needs.
An accelerated death benefit rider allows the policyholder to access some of the policy benefit during their lifetime under certain circumstances, such as if the policyholder receives a terminal illness diagnosis or requires long-term care. The insurer often provides the benefit as a lump sum, which the policyholder can use however they wish, such as to cover the cost of care or for financial support to spend more time with loved ones. However, claiming the accelerated death benefit may decrease the death benefit available to the beneficiaries after the policyholder passes. Since terms vary, it’s important to speak with your insurance advisor to compare your options and read policy terms carefully before selecting coverage.
Other life insurance riders include:
- Waiver of premium rider: Allows the policyholder to waive premium payments under certain circumstances, such as total disability
- Return of premium rider: Refunds some or all of the premiums at the end of the life insurance term if the policyholder hasn’t already received the benefit
- Child rider: Provides an additional benefit if a covered child of a policyholder dies during the coverage period, which may help with funeral costs or other expenses
Need helping securing life insurance?
If you have a chronic illness, don’t assume that you won’t be able to find affordable life insurance. An insurance broker like Higginbotham can help you understand your options to find a life insurance strategy that works for you. Talk to one of Higginbotham’s life insurance specialists today to learn more.
