Life Insurance After a Medical Diagnosis

Published Categorized as Insurance

As a financial planner who has worked with individuals navigating pre-existing medical conditions, I have often received the question of whether or not it’s possible to obtain life insurance after a major medical diagnosis. Personally, this question hits home. Approximately 9 years ago, while my wife and I were expecting our first child, I faced a significant health scare.  I was in my mid 20s at the time, recently married, and my focus was on our growing family and my recent career change into personal finance.  My pending life insurance application was quickly denied by medical underwriting, delivering an emotional disappointment. 

Ideally, adequate life insurance coverage is acquired when one is young and more likely to be healthy. Unfortunately, life insurance needs are often dismissed and little time is spent considering the life insurance needs that may also arise in the future. A career change, marriage or divorce, birth of a child, and other life events can significantly change future life insurance needs. Additionally, obtaining additional life insurance later in life is often more expensive and contingent upon medical underwriting.

If an individual is facing a pre-existing medical condition while applying for life insurance, it is important to note that not all pre-existing medical conditions are treated equally by insurance companies. Life insurance companies will likely consider when a diagnosis occurred, the severity and type of a diagnosis, as well as treatment options for a condition.  If you had a pre-existing medical condition and you were unable to obtain life insurance, you may be able to reapply at some point in the future should your condition improve.  If medical underwriting continues to be a challenge, the below sources may satisfy some life insurance needs.

Group Life Insurance:  

Group life insurance is often offered as part of an employee benefit package with an employer, but may also be offered through alumni or other professional associations.  Group life insurance may offer a detour around medical underwriting for some life insurance coverage.  This is because insurers are generally interested in the characteristics of the group as a whole rather than the medical history of an individual.  As a result, group life insurance is often simplified and inexpensive, generally allowing for some amount of life insurance coverage to be obtained without medical underwriting.  

If you are married, it is also important to explore the employer sponsored benefit package offered to your spouse as well.  In addition to offering group life insurance for employees, many employer benefit plans also offer group life insurance insurance coverage for employee’s spouses and even children.

While group life insurance often ends upon separation from your employer, some plans may allow you to continue or convert the existing coverage after separation.  The window to continue or convert life insurance coverage is often narrow, and an individual should proactively work with their benefits team to fully understand their options.  

Guaranteed Issue Whole Life Insurance:  

Guaranteed issue life insurance is a form of permanent life insurance that does not require medical underwriting.  Since medical underwriting is not required, guaranteed issue life insurance amounts are often lower and premiums more expensive.  The policy may also have a waiting period that must pass before death benefits are paid as well.  If an individual passes away prior to the waiting period ending, the policy generally refunds premiums and interest.

Review Existing Life Insurance:

If medical underwriting presents a challenge when looking to obtain new or additional life insurance, it is important that you also review any existing life insurance that you may already have.  Permanent life insurance policies, such as whole life insurance, may allow a policyholder to add some life insurance coverage via policy dividends while avoiding medical underwriting.  This feature, known as “paid up additional insurance,” directs life insurance dividends to be used to purchase additional life insurance rather than premiums.  As the paid up additional insurance grows within the policy, the additional insurance also earns dividends and the value compounds over time. 

Accidental Death & Dismemberment Insurance:  

Accidental death and dismemberment policies are different from traditional life insurance policies in that they pay out insurance benefits only when triggered by specific accidents or the loss of use of a limb(s).  It is important to know that these policies do not pay out benefits as a result of death from medical causes and not all accidents may be covered.  It is important that you understand what is included and excluded within your accidental death and dismemberment policy.  Since medical causes are not covered, medical underwriting is not required.  Since the policies are restrictive with coverage, they tend to be less expensive when compared to traditional life insurance.  Although not a replacement for traditional life insurance, these policies can at least offer some form of protection given specific circumstances.

As you can see, a pre-existing medical condition may not disqualify you from all forms of life insurance coverage available. Given this possibility, it is important to be comprehensive when evaluating life insurance options.  Careful review of insurance coverage should be done so that you fully understand how any existing or available coverage works.  Consider working with an independent insurance agent registered in your state that is familiar with the eligibility requirements for life insurance policies and your unique circumstances.

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