Depression can raise life insurance premiums

A diagnosis of depression can lead to higher life insurance premiums, and in cases where there is a history of severe depression, cover may be refused.

If you have a mental health problem like depression, insurance companies may assess that you have an increased risk of death by suicide or accident, making life and other types of insurance like mortgage protection, expensive and hard to get.

However, the UK’s MIND Guide to Insurance Cover and Mental Health, points out that if an insurance provider refuses to sell you life insurance on the basis of your mental health problem, or asks you to pay higher premiums, they must be able to show objectively that your condition increases your risk.

Independent life insurance broker Nick McGowan, of Lion.ie, explains what factors underwriters look for when underwriting an application for life insurance or mortgage protection policies with depression.

“The underwriters are interested in what triggered the depression (bereavement, divorce, illness, redundancy and job or money worries), who is treating it (GP only or specialist), what medication has been prescribed and their current state of mind. In cases where there has been a recent diagnosis or a recent episode, the insurer is likely to postpone offering cover until the applicant is more stable.”

Mr McGowan explains that the underwriters can load (increase the premium) due to the history of depression and how much the loading will be, depending on the severity of the depression. In cases of mild depression, it is possible to get the normal price, he says, but in more serious cases requiring hospitalisation and time off work, the insurance company may increase your premium by 50 per cent to 100 per cent.

“Where history is severe, cover may not be available. This includes applicants where there is a history of more than one suicide attempt or repeated and/or recent in-patient treatment

We deal with six insurers so a decline for life insurance from all six is rare, a significant loading is much more common than a decline,” he says.

Martin Duffy, Head of Underwriting & Protection Claims, Irish Life, said there were no blanket decisions made in relation to one illness.

“For example, where a person has a history of depression, this does not automatically mean that a premium loading will be warranted, or cover refused to that person. It would also be rare to apply a loading to someone who had a single episode of post-natal depression, in isolation of a more widespread mental illness. Irish Life can usually provide a quote for life assurance cover to the vast majority of people who have had a form of depression in the past.”

A spokesman for Zurich Ireland said the majority of applications that they receive for life cover with a history of depression are accepted with no extra loading.

When asked what impact a diagnosis of depression would make to the cost of an insurance policy, he explained: “This would depend on the individual assessment of the depression history and can vary on the basis of the type and severity of the depression, date of last symptoms, and other individual circumstances.”

When it comes to health insurance, a VHI spokeswoman explained that all policies are community rated, which means everybody pays the same premium for the same product regardless of age, gender or current state of health. Cover cannot be refused because of an existing condition under the principles of community rating and open enrolment/life cover.

She explained that VHI Life insurance policies were risk-rated and underwritten by Zurich Life Assurance plc. As with all risk rated products, a person’s medical history was taken into consideration when calculating premiums, she said.

A spokesman for Laya healthcare said they accepted all applicants for health insurance regardless of a previous incidence of depression or any other condition. However, a new private health insurance member or one who has broken their cover for more than 13 weeks will have a waiting period of five years before any pre-existing condition is covered.

He explained that Laya healthcare assesses each application for Laya life insurance on an individual basis with their underwriting team. If the Laya underwriter confirms that they can offer life insurance, the cost of the premium is not affected.

“In certain circumstances, if applicants have been hospitalised or on medication, they may not be eligible for cover – this can only be assessed on a case by case basis,” the Laya spokesman said.

A spokesman for Insurance Ireland, stressed the importance of making a full disclosure of all relevant conditions, including depression, at the outset of a policy.

“It is advisable that customers answer fully all the questions on the application form to ensure that all relevant disclosures are made and there are no issues of non-disclosure which might lead to the policy being voided by the insurer.”

Nick McGowan advises people to find out what’s not covered by their life insurance or mortgage protection policy, ie exclusions, before signing on the dotted line. Due to increased competition in the life insurance market, exclusions like acts of war, dangerous pastimes and high-risk jobs have disappeared.

However, he explained that all life insurance policies contain an exclusion for death “at your own hand” as follows: If a life assured dies within a year of the start date as a result of their own deliberate act, we will not pay you any benefit under the policy.

However, if it’s a mortgage protection policy, Mr McGowan said most insurers will pay the lesser of the outstanding loan or the amount of cover remaining on the policy, ie they will clear the mortgage.

Case study

Sarah (35), Dublin

Having been with our original provider for about five years, my husband and I switched our Mortgage Protection policy to Caledonia Life. In filling out the application form, I disclosed that I had been treated for depression for the previous two years. We applied for the life assurance policy around the time I was coming off antidepressants, the timing was coincidental and it hadn’t occurred to me that it would have any impact on the premium.

Caledonian Life then requested tele-underwriting for me and explained that a nurse would contact me at an arranged time and ask me a number of questions, with the information to be sent to Caledonian Life for further processing. The questions related to my treatment for depression. When did it start? (Following the loss of two family members in quick succession.) Was I still receiving treatment? (At this point I was not.) Had I ever contemplated suicide? (No, but thanks for asking.)

Luckily, I was at home and not at work when the nurse called as I had been given no warning as to the nature of the questions, which, coming from a stranger over the phone, were upsetting.

Caledonian Life then contacted us to advise we had been accepted for cover on non-standard rates. This meant they would offer us the cover, but they would increase the standard premium for me “for medical reasons”. The revised premium was loaded by 50 per cent for me. I was being penalised for getting treatment for reactionary depression.

I wrote to them to challenge the hike. They told me they would write to my GP to explain the loading. My question was why, as someone who had sought and completed treatment for depression, I was somehow a greater risk for insurance. Surely someone walking around depressed and never seeking treatment is a greater risk? I wanted to know how the underwriters had calculated this risk.

The letter to the GP answered none of my questions, but after some back and forth Caledonian Life gave us standard rates, as a “goodwill” gesture. However, they have yet to address my question to the underwriter.

I fully understand that an illness or pre-existing condition can have a bearing on insurance premiums. I just can not understand the logic in punishing someone for seeking treatment for that condition. It’s completely counterintuitive and sends a terrible message to anyone suffering from depression and considering seeking treatment.