Can Mental Illness Affect the Cost of Life Insurance?
With the rise in unemployment due to the Global Financial Crisis (GFC), 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).
The facts on mental illness in Australia
One in five Australians will suffer from depression in their lifetime (2). While not all of these people will have a condition severe enough to need to take time away from work, many will, with one in ten having a long term condition (lasting more than 6 months). The cost of this will be shared between employers, the government and the insurance industry. 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 this, insurance companies have been selective when assessing Life Insurance applications, especially with applications for disability insurance.
How does having a history of a mental health disorder affect your life insurance?
The terms offered by different life insurers may vary depending on each life insurance company’s premium rates and product features as well as their underwriting philosophy. 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. 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 Life Insurance Companies 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 life insurance companies 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.
Moving forward
There has been a committed effort by the life insurance industry, working in conjunction with stakeholders from the mental health sector (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.
How to find the right insurance policy
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. We specialise in difficult cases, please contact xLife today to see how we can help you or request free Life Insurance Quotes.
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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