Can Mental Illness Affect the Cost of Life Insurance?
There has been speculation that our current economic environment has increased people's stress levels, which may lead to increased mental illnesses like depression and anxiety (1).
In fact, research has shown that in the past, income has been a determinant of mental health risk, especially in cases where income is lost suddenly (economic shock) and resulting in people slipping into depression (1).
How does having a history of a mental health disorder affect your life insurance?
The cover offered by different insurers may vary depending on each company's premium rates and product features as well as their underwriting philosophy.
Mild symptoms - applicants who have a history of mild depression or mild anxiety in the past and have been fully recovered for at least 1-2 years may expect their death or trauma benefits assessed with standard rates and their disability benefits to have a mental illness exclusion.
Serious and/or ongoing symptoms - if the condition is more serious, or symptoms are still continuing, a premium loading may apply to death or trauma benefits, and disability benefits may not be available, as it is more likely in these circumstances the applicant will require time off work at some stage.
For example, it is known that the greater the number of depressive episodes that a person has had, the greater their risk of depression in the future, and of possibly needing time off work. For this reason, it may be appropriate for insurers to exclude depression from the policy.
If your symptoms are severe
If you are currently not working, or suffering from severe symptoms of your depression, it may not be appropriate for insurers to offer you an insurance policy even with an exclusion, when their most likely cause of claim has been excluded. You would be paying for insurance that you may not be likely to use.
In addition, it is difficult to accurately assess the risk if you may be still suffering symptoms, as the course of your condition may not be clear at that stage. For these reasons there is usually a period of time from when you last suffer symptoms before life insurance would be available to you.
The facts on mental illness in Australia
- One in five Australians will suffer from depression in their lifetime (2).
- One in ten have a long term condition (lasting more than 6 months and need time off from work).
- One of the major causes of disability claims in Australia is psychiatric illnesses, and there has been an increase in the incidence of these claims for both males and female (2).
Because of these facts, insurers have been selective when assessing applications, especially with applications for disability insurance.
Moving forward
There has been a committed effort by the life insurance industry(3), in addressing the awareness of issues surrounding life insurance products and individuals who suffer from a mental health condition. It has provided the path for the review of the life industry as a whole and also for individual life insurance companies.
If you need help finding the right life insurance policy xLife can help, we are qualified to provide advice on which company's products are best for your individual situation.
Source:
1. ANU, Mental health related to income research, 13 October 2007
2. ABS, The national survey of mental health and wellbeing (1997)
3. Mental Health Sector Stakeholders (MHSS) 2003
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