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What Are My Life Insurance Options If I Have a Pre-Existing Condition?

If you have a medical issue, insurance is a constant worry. Fortunately, there are many options for people looking for coverage. Even if you have a pre-existing condition, there’s a policy out there for you. Find out more about how life insurance works with medical needs and how to choose a plan that fits you.

How a Pre-Existing Condition Affects Life Insurance Coverage

Pre-existing conditions are health problems you’ve been diagnosed with before applying for life insurance. Your health plays a significant role in the price of insurance coverage. Anything from heart disease to a cancer diagnosis affects your premiums.

They can also cover broader issues like depression or tobacco and marijuana use. To find out how your pre-existing condition affects your insurance, you’ll have to look into your risk and rate class.

Risk and Rate Classes

Rate classes are categories providers use to classify different types of policies. Each of these categories is based on the risk of a policyholder. 

Life insurance is a gamble for insurance providers. They want to do their best to find policyholders who will pay more in premiums than they’ll cash out in their insurance payout. If providers know a person has a higher risk of passing away, they’ll charge a higher premium. This is why insurers investigate your medical records and even your family’s medical history.

The greater the risk, the higher the premium. However, this means that not all pre-existing conditions are treated the same. Providers have different insurance classes for different kinds of risks. 

A person may have a standard policy, a preferred policy, or a super preferred policy. While some people with medical issues may pay more, it also means providers don’t charge a person with high cholesterol the same as someone with a terminal illness. To find out your rate class, you’ll need to compare quotes and explore different types of plans.

Different Types of Life Insurance for Pre-Existing Conditions

Though medical problems can limit your insurance options, don’t lose hope. Many providers still offer affordable coverage for people with pre-existing conditions. Learn more about how different types of life insurance work with pre-existing conditions below.

Permanent Life Insurance

Permanent life insurance plans are created to last your entire life. Though some permanent plans may limit how much coverage you can get, many people with health problems still qualify for these types of plans. Besides coverage, permanent life insurance allows you to earn cash value

Cash value is interest that you can use to pay your premium, invest, or borrow against. If your policy has a higher premium because of a medical condition, the cash value can be used to offset costs. Plus, your money isn’t taxed unless you take it out of your account. Typically, permanent policies are broken into two main types: whole and universal plans.

What type of life insurance incorporates flexible premiums?

If your health is up and down, it’s a good idea to find a plan with a customizable payment schedule. There are a few different options, but generally, any kind of permanent plan is more flexible. Both whole life and universal life accounts grow cash value that you can use to pay towards your premium. 

However, variable universal life insurance is generally the most flexible. With variable policies, you can change how you pay your premiums over months, years, or even decades.

Term Life Insurance. 

Coverage under term life insurance lasts for a limited period. Typically, providers give out term plans for specific periods. Instead of getting coverage for your entire life, you’ll apply for a one, five, 10, or even 30-year plan. This makes it much cheaper than a whole-life plan, which typically costs around ten times more. 

Plus, the shorter your term, the easier it is to qualify for. If your pre-existing condition makes it hard to qualify for a whole-life plan, you might be able to get a short-term policy. Once the term is finished, these policies will need to be renewed. This usually means trading in a more affordable policy for a more expensive one.

As you age, your provider starts to see you as a higher risk. Even “healthy” policyholders will end up paying more for their coverage. If you have pre-existing medical conditions, you’ll need to take a hard look at how your health may decline in 10 or 20 years. Paying less now may result in more expensive plans in the future.

Group Life Insurance

Companies usually offer group life insurance to their employees. They are some of the easiest plans to qualify for, making them a great option for those with pre-existing medical conditions. Though they’re more limited than other plans, you can always look into supplemental private policies if they want more coverage. If your employer offers life insurance, consider entering into their group plan.

Keep in mind that both your health and the underwriting process will affect the price of your plan.

How Insurance Underwriting Can Affect Your Policy

Underwriting is the process in which a provider calculates the cost of a potential policy. An insurance underwriter will look into the various risks associated with a potential client. These can include your current health, high-risk behaviors, past health problems, and even your family’s medical history. Insurance underwriting comes in three main types: fully underwritten, simplified, or guaranteed issue.

Fully Underwritten Insurance

This type of plan takes a comprehensive look at your current and past medical history. Fully underwritten insurance uses medical exams, medical records, and family history questionnaires to calculate your premium. 

Your health significantly affects costs, so those with pre-existing conditions tend to get stuck with more expensive plans. Some underwriters will even reject customers based on medical history. If you have a hard time qualifying for a standard plan, try looking at alternatives.

Alternatives to Fully Underwritten Insurance

Simplified Issue Life Insurance

If you have a pre-existing condition, you might want to avoid a full medical exam with your provider. Unlike a fully underwritten plan, simplified issue life insurance skips the medical exam. However, this doesn’t necessarily mean that you won’t get hit with higher rates. 

With simplified issue plans, you’ll still need to answer a few medical questions. Depending on your answers, you may end up paying more or less than a standard plan. If you want to avoid answering any medical questions, look into guaranteed issue life insurance.

Guaranteed Issue Life Insurance

Some people with pre-existing conditions opt for guaranteed issue life insurance. In exchange for higher rates, these types of policies guarantee coverage for anyone, no matter their medical history. (Many policies that don’t need a medical exam or questionnaire are a type of guaranteed issue coverage.)

Because guaranteed plans are more expensive, they’re typically the last resort. Before settling on a guaranteed issue plan, make sure you don’t qualify for cheaper options under a regular policy. 

Tailored Life Insurance

Even if you have a severe health problem, many plans cater to specific medical conditions. Tailored life plans can offer specialty coverage for people with specific health concerns, such as:

  • Diabetes
  • HIV
  • Cancer
  • Medical Marijuana

Rates from these kinds of plans can be much lower than those from standard plans. If you have an underlying condition, ask if there are options for tailored or specialty policies.

Finding the Best Types of Life Insurance Policies for Pre-Existing Conditions

The best way to find the right policy is to go out and research different policies and providers. You can do this on your own or with an online comparison tool. Websites can help you compare life insurance plans side-by-side with their competitors. 
If you would like to know more about using an online comparison tool, visit Versured and get started with a free quote!

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