Mental illness life insurance, critical illness cover and income protection
The facts about getting life insurance with Mental Illness
Common Mental Health Illnesses include anxiety, depression, bipolar, schizophrenia and stress. 1 in 4 people will experience Mental Illness problems in any given year, with 9 out of ten facing some form of discrimination as a result. 25% of people with a Mental Illness do not discuss their problem with their GP. If you are looking for Life Insurance and suffer with Mental Illness, you will need to disclose medical and personal information about your condition to be considered for cover.
What does Mental Illness life insurance cost?
When you apply for Mental Illness Life Insurance, the underwriters will want to know some details about your condition. It is likely that you be asked about the following:
- When you were first diagnosed and at what age
- What you have been diagnosed with
- Severity of associated symptoms
- How you manage your symptoms
- Periods of hospitalisation
- Whether you have had suicidal thoughts or attempts
Your premiums for Mental Illness life insurance will also depend on:
- Sum assured (£’s)
- Term of cover (years)
- Type of policy (e.g. Family, Mortgage, Whole of Life etc.)
Mental Illness life insurance rates/ratings
Rates for any non-standard cover such as Mental Illness life insurance will vary from one insurance provider to another depending on their underwriting philosophy. Insurance providers use a risk-based scale to determine the amount you will pay for your cover which uses a ‘percentage loading’ or ‘£’s per mille loading’. All insurance companies have their own underwriting criteria, which will also change over time, so can be difficult to predict unless you regularly speak to them.
Percentage (%) loading for Mental Illness life insurance
A percentage loading basically applies a % to your standard premium based on the levels of risk calculated for your own circumstances. Your percentage loading will apply a multiple to your Mental Illness life insurance premium, which will be based on your health at the time of your application. You should also know that some insurance providers have different maximum levels to others, so some are prepared to take on higher risks (e.g. 250% or 400%).
Per mille loadings for Mental Illness life insurance
You may also find that a ‘per mille loading’ could be applied to your Mental Illness life insurance premiums, but this is more rare and only tends to be used for more severe conditions. A ‘per mille loading’ will be an additional amount that is applied to your premiums, which is based on the amount of cover you are applying for (e.g. £2 per thousand £’s of cover). The other difference with a ‘per mille loading’ is that it can be applied for the whole term of your Mental Illness life insurance policy or for a period of time from the start of your policy (e.g. 2, 3, 4 or 5 years).
Another potential outcome when applying for a non-standard cover such as Mental Illness life insurance, critical illness cover or income protection is for an ‘exclusion’ to be applied to your policy. This means that you may have certain conditions which can be linked to your Mental Illness excluded from your policy. You may also find that certain additional benefits could be excluded such as Total and Permanent Disability, Waiver of Premium or Guaranteed Insurability.
It is difficult to say how much cover you need when you are applying for a Mental Illness life insurance, critical illness cover or income protection policy. There are however some simple rules that you can follow which will give you a good idea for how much cover you need before you apply.
- You should also be aware that a Mental Illness life insurance, critical illness cover or income protection policy could increase after underwriting to reflect any additional risks of claim, so affordability may be a consideration.
- Mortgage amount (£’s)
- Outstanding debt (e.g. Loans, second charge, credit cards and other)
- Spouse or partner
- Income (after tax)
- Assets (e.g. car, house, business etc.)
Applications for Mental Illness Life Insurance are assessed on an individual basis, and your premiums will reflect your symptoms and any treatments you are currently having. You may have a standard rate, which is a basic rate, based on your age and smoker status if you are in good health. Depending on the severity of your symptoms and history of your condition, you may need to pay more than a standard rate.
Critical illness cover is slightly different to life insurance in the sense that it is designed to provide a lump sum payment if you are diagnosed with a critical or serious illness. Most people relate this type of cover to Cancer, which is the biggest reason for claims for critical illness cover. Things to consider are:
- Income (after tax)
- Mortgage payments (annual)
- Cost of living (annual)
- Any other possible costs (e.g. medical treatment or adaptations)
Critical Illness Cover is often available for those with Mental Health issues but, sometimes the underwriters will place exclusions on the policy based on your personal circumstances. In most cases, a Critical Illness Policy will cover you for conditions such as cancer, heart attacks and stroke.
Income protection is a very flexible product with a lot of options and variables, so you need to consider your own circumstances before you consider this type of policy. If you work, and especially for people who are self-employed, a Mental Illness income protection policy can be a valuable product to give you peace of mind if anything happens to you. Some of the main aspects to consider are:
- Monthly income (after tax)
- Mortgage/rent payments
- Debts (other)
- Cost of living
Income Protection cover may be available for individuals with a history of Mental Health problems that affect their daily work. In this case, underwriters will want to know how your condition affects your ability to work.