A pre-existing medical condition is a condition you have or have had prior to buying life insurance.
It can be something that requires ongoing treatment or that you have been treated for in the past. It can also be a condition that's been resolved – essentially, any health issue that could affect your life expectancy and health or ability to work. If you die or suffer a severe illness as a result of a pre-existing condition, your claim can be refused if it's listed as an exclusion on your life insurance policy. Some common pre-existing conditions examples are:
"Typically, when applying for any type of life insurance policy, whether it be life insurance, total and permanent disability, income protection or trauma, your medical history and any pre-existing medical conditions will be taken into consideration. Your medical history will either be a hurdle at the time of applying for insurance, or it will be a hurdle in making a claim on your policy.
As a rule, if your medical history isn't examined when you apply for insurance, you run a very real risk that a claim isn't going to be paid on your policy in the future as the insurance company can lean on pre-existing medical conditions as a reason not to pay – so in most regards, it's best to deal with the pain (medical examination) upfront and remove any uncertainty about your ability to get insurance."
"If you do have a pre-existing medical condition that the insurer feels may have a material effect, then you're likely to either have your policy accepted at a higher rate – called a loading. If you're a smoker, premiums for insurance are usually higher as you represent a higher risk to the insurance company. If you have other medical issues that the insurer feels put you at a similar risk as a smoker to early death, then they will charge you accordingly. You can expect to pay from 50 – 100% more for your premiums in this situation."
"If you are declined for your insurance, it's always best to ask why – sometimes the answer isn't what you were thinking of. While it may be based on a pre-existing medical condition, it may be a combination of things. It could be a family history of heart disease coupled with higher blood pressure, high cholesterol and a high BMI. In this circumstance, you may be able to focus on improving your health and losing weight and then applying again. Sometimes just 5kg could make the difference. The family history might still be there, but there is one less factor for the insurance company to be worried about.
Sometimes your medical history is bad enough that it's a flat no and you won't be able to be accepted no matter what you do. You may be tempted to find a less reputable insurance company to see if they will insure you – if you go down this path, be very careful and read all the fine print."
"Even if you do have a complicated medical history, it's worth getting pre-assessed for an insurance application. This is a shortened version of an insurance application that a medical underwriter will assess and give guidance on how they would likely deal with such an application. They may indicate that it's still worth putting it in, or that they need further information. As with most things in life, if you don't try, you'll never know. "
Brenton Tong is the managing director and senior financial adviser at Financial Spectrum.
If you're able to get cover, a life insurer will generally apply one of the following to your policy:
A loading is when you will be covered for that pre-existing condition but there is an increase to the cost of your premium.
"For example, you may have a loading applied instead of/in addition to an exclusion if you suffer from: high BMI (typically over 32 is where you may start to see loadings, but some insurers will allow a BMI of up to 37 before a loading is applied)," says Inspired FP's financial adviser Grant Millar. "The extent to which a loading is applied could be up to +300%, or 4 times, the original premium in extreme cases".
An exclusion is when you can get life insurance but you won't be covered for claims related to your pre-existing condition. Mental health conditions are common exclusions.
"Any symptoms, and possibly even any treatment for mental health symptoms, in the past 3 or so years is more likely to lead to an exclusion on any mental health related condition," says Millar.
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You generally have 3 options:
You might be able to get life insurance for a pre-existing condition if you take out a policy directly with an insurer. In most cases, you will need to go through the underwriting process upfront. This means you'll be asked questions about your health, lifestyle and occupation when you apply.
A financial adviser can shop around for a policy on your behalf. These are often medically assessed upfront so you'll know whether any exclusions will be applied to your policy before it's issued.
You usually get group life insurance through a super fund or employer. It may cover pre-existing conditions because it usually requires minimum or no personal information to apply, unless you want to increase your level of cover within the group insurance product.
When purchasing an insurance plan with a pre-existing medical condition or illness, you will need to disclose personal information. The required information can vary depending on the condition and brand.
For example:
Other information may require you to disclose if you have been in the hospital, seen a doctor for a condition, have been prescribed medication in the past 5 years or any of the following:
During the underwriting process, your insurer will look at various life insurance risk factors, which can generally be broken down into 8 risk groups:
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