It used to be that getting life insurance with a preexisting condition was mission impossible. However the industry has been able to improve its underwriting processes to offer coverage to people that are considered high risk. Of course it varies from company to company when it comes to getting approved with a certain medical condition or risky occupation. Factors such as the ones below continue improving the chances of people that were in the past turned down.
Improvement in medicine have helped people with serious medical conditions have normal life expectancy. This phenomena is happening since medication and treatment is keeping all sort of ailments under check. In addition to that life insurance companies have collected data which showed them the mortality risk for large variety of health conditions, dangerous hobbies and occupations. And because life insurance companies are better equipped to measure risk and determine who they can and can’t insure. This has created opportunities for people who were not able to get coverage before.
Another reason high risk applicants can be accepted is that companies have different rate classes they assign that will determine the monthly payment. Beside the normal preferred and standard rate they also assign substandard rates. The substandard class has 10 levels with a 25% surcharge on each level. So you can imagine how much extra revenue the company can collect with high risk applicant to level things out. This allows them to remain financially strong so that they can continue to pay out claims.
Life insurance companies have in house actuaries that calculate risk and determine at what threshold is an applicant eligible and at what rates. This will usually cause a difference in what specific conditions the company will take on. For instance let’s say you are trying to get life insurance with diabetes, company A will not insure diabetics but company B will take all comers if the diabetes is under control. Thanks to the life insurance market being large, more and more people are able to get life insurance that were previously turned down.
This trend will continue and improve especially since the passage of the health reform. The reform is creating a e-record database that is only getting better. Pretty soon life insurance companies will not have to request records from the doctors but rather pull them up instantly. It will cause two things to happen, one the companies will be better to evaluate each individual for higher approval percentages. Second it will give them data from all the policies they issued based on the e records and how those policy holders held up over time. All this is a great news since life insurance is no longer only for the healthy folks. Now everybody has a chance of securing a policy as long as the entire marketplace is searched for the right company.