By Bryan Baker
Insurance is often considered a part of healthy financial planning – a way to protect loved ones and your future. However, people living with chronic conditions such as Crohn’s disease and ulcerative colitis often face an uphill battle when trying to obtain Life, Disability or Critical Illness Insurance. This may leave some people, or their dependents, feeling exposed. For instance, Canada Mortgage and Housing Statistics noted that almost half of mortgage foreclosures are a result of a homeowner suffering a serious illness. Read more here
How hard can it be to get insurance coverage? Ten percent of all Life Insurance applications are denied every year in Canada. The percentage reaches almost 25% for Disability or Critical Illness Insurance. I know the statistics. I have been a financial advisor specializing in insurance for the last 14 years, and I have been living with Crohn’s and colitis for 30 years.
When I became a financial advisor in 2002, I applied for coverage for Life, Disability and Critical Illness Insurance – and was swiftly declined for all but some Term Life Insurance (for which I paid dearly, as a “high risk”). The lesson? Traditional insurance companies prefer to insure people with a good health history.
Unless you work for a company with good group benefits coverage, you may struggle to find an insurer that will consider covering you.
This refusal to provide coverage was not acceptable to me:
I was in remission with no flare-ups for a couple of years and had no hospitalization for over a decade. Still, I was not considered a good bet for Disability or Critical Illness Insurance. Over the next 10 years, through research and consultation with Canadian insurers, I found companies with insurance products designed for people living with chronic conditions.
Applying for insurance coverage
These companies offer Guaranteed Issue Life Insurance and Simplified Issue Life Insurance. Guaranteed Issue and Simplified Issue Life Insurance products are issued with no medical exam and just a few medical and lifestyle questions. In fact, they are very similar to group benefits coverage available through many employers. These insurance companies act like “secondary lenders” would in the mortgage industry, lending to people with less than stellar credit. In this case, these “secondary insurers” provide insurance coverage for people with less than stellar health history.
Just like you can expect to pay a higher interest rate when dealing with a secondary lender, you will pay a higher premium than the average person with no health issues. How much higher will depend on your health at the time. I paid 50% more for Life Insurance when I got it. Disability and Critical Illness coverage are about the same. In most cases, however, you can get good quality coverage for about what it costs you to insure your vehicle every month (or less).
When trying to obtain Life, Disability or Critical Illness Insurance coverage while living with Crohn’s and/or colitis, we have to be strategic. Going about it the wrong way can, at best, cost you in higher premiums and, at worst, leave you uninsurable for a time.
Here are a few steps you can take that can make the process easier, and more successful:
Find the right advisor.
There are few advisors across Canada that specialize in this area. Some financial advisors concentrate on investments, while maintaining an insurance license “in case” a client wants coverage. However, just because someone holds themselves out as an “insurance advisor” doesn’t mean they know how to find coverage for a high-risk individual. Ask the advisor if they specialize in “hard to insure” people and Guaranteed Issue and Simplified Issue Insurance. Ask them who they would recommend for Disability and Critical Illness Insurance that will cover your condition.
If the advisor doesn’t know who they’d recommend, OR if they start to recommend any of the top, well-known insurers, move on to another advisor. To date there are only a couple of companies in Canada that will provide Disability Illness Insurance and only four that will provide Critical Illness Insurance to people with Crohn’s or colitis: none are large players in the traditional insurance market.
Don’t put yourself in a position to be declined or rated for coverage.
Being “declined” for coverage means the insurer has chosen not to insure you. Being “rated’ means an insurer has increased the premium by a percentage (up to 500%) because it has determined that you are a higher than normal risk. Before letting an advisor write an insurance application from a traditional insurer, have them put in place Guaranteed/Simplified Issue coverage first.
If you find yourself declined or rated by a traditional insurer, Guaranteed Issue coverage will be either unavailable or end up costing you more. So get Guaranteed Issue in place first, before putting yourself in a position to be declined. Once you have all the Guaranteed Issue coverage in place, you may want to try a traditional insurer for your life insurance coverage. If they decline or rate you with a premium higher than the guaranteed coverage, it won’t matter, as you have the Guaranteed Issue in place. If they approve you, you can cancel the Guaranteed Life coverage at that time.
Apply for coverage while you are employed and at work for a 24 month period without more than 15 consecutive days off due to illness.
Even Guaranteed and Simplified Issue Insurance underwriters (the people that decide if you are “worthy” for coverage), look for patterns. They like people who are functional, even if they may be living with a chronic condition. Their applications contain eligibility questions regarding employment history and disability claims.
Do not apply if you have any pending new treatments or investigations.
This is an eligibility question on many Guaranteed Issue insurance applications. If the investigations are part of your regular follow up (barium tests, colonoscopies, etc.), DON’T let the doctor schedule one until you have your coverage. Your doctor will understand and delay booking the appointment if you explain that you are in the process of obtaining insurance coverage.
I know, it seems like a no brainer. Following your treatment and meds is important. As I mentioned previously, insurers look for patterns. Whatever condition you have, if it is under control through medications, diet, lifestyle or surgery, you are likely insurable.
You are still eligible for Guaranteed Issue Insurance coverage even if you have been previously denied coverage. If you have been declined in the last two years, life insurance coverage is still available up to about $475,000. Disability coverage is available up to about $4,000 per month benefit for illness and injury; higher if you are only looking to be covered for injury. Critical Illness coverage is limited to about $25,000 until two years have passed since you were last declined. After two years you can obtain up to $225,000.
While difficult and more expensive to obtain, people with Crohn’s disease or ulcerative colitis still have options for Life, Disability and Critical Illness Insurance coverage in Canada. Follow the steps outlined here to improve your chances of obtaining coverage. Most importantly, follow step one above and find a knowledgeable advisor. A quality advisor specializing in Guaranteed and Simplified Issue Life Insurance will easily be able to guide you through the next four steps outlined above.
Bryan Baker is the founder of youareinsurable.ca, specializing in finding Life, Disability and Critical Illness Insurance for people living with chronic conditions such as ulcerative colitis, Crohn’s disease, multiple sclerosis, diabetes and AIDS/HIV, survivors of cancer, heart attack and stroke and/or people with risky careers, hobbies or lifestyles.
This article is for informational purposes only, and not specific to your particular circumstances. It is not intended to be and does not constitute financial advice or any other advice.
||Disability insurance pays a monthly income benefit if you are unable to do the main duties of your occupation. Some Canadians have this coverage through their Employer’s Group Benefits plan.
|Critical Illness Insurance
||Critical Illness Insurance pays a lump sum tax-free benefit (up to 2 million dollars) 30 days after diagnosis of one of 28 named conditions. The main conditions (accounting for 83% of claims) are heart attack, stroke, cancer and paralysis.
|Guaranteed Issue & Simplified Issue Life Insurance
||These products are very similar and offer a payout upon death of the individual, to protect dependents, to pay off debts, and/or to make final arrangements. They are offered with no medical exam and just a few medical and lifestyle questions. They are very similar to group benefits coverage available through many employers.
|“Declined” + “Rated” for coverage.
||Declined: the insurer has chosen not to insure you.
Rated: an insurer has increased the premium by a percentage (up to 500%) because they have determined that you are a higher than normal risk.