Can Mental Illness Affect the Cost of Your Life Insurance?

A lot of our clients wonder if mental illness will affect the cost of their life insurance policies. Quite simply, the answer is yes. If you have looked into life insurance, you may understand that loadings and exclusions can be placed onto policies. If not, we’ll look into that as well.  

Insurance companies will apply a loading on top of the standard premium when they believe there is an increased chance of a claim being made. This means, the cost of your premium can double (or more than double) in price. Very rarely, will a loading be placed onto a policy due to mental health issues.

In regards to term life insurance, there are not generally issues with mental health declarations on an application. As we tell our clients, each case is different and assessed individually by the underwriter. We can’t definitely say that you won’t have a loading or exclusion placed on your life insurance policy. If you have an extreme mental health condition or have attempted suicide in the past, a loading or exclusion may be placed onto your policy.

For a lot of the applications that come through Lifebroker, people have smaller cases of mental illness. They may have depression or anxiety for a time after a break up or an accident. Majority of the time, these cases will not affect the cost of your life insurance premiums. It is the same with trauma insurance as well, rarely will mental illness have a loading or exclusion placed onto it.

When it comes to income protection or total and permanent disablement (TPD) insurance, it is generally not so clear cut. If you no longer display signs of mental illness, and haven’t for a number of years, it is possible to have your policy accepted at standard rates. When it comes to income protection however, if a revised term is placed onto your policy it will usually be in the form of an exclusion, as opposed to a loading onto the policy. This is the general rule to go by for TPD insurance as well.

An exclusion is an event or a medical condition which is not covered by the insurance policy. This is used for pre-existing conditions or dangerous hobbies, which may cause injury or illness in the future.

When it comes to applying for insurance and you have had or still have a mental illness, it is best to make sure your application is being medically assessed upfront. This won’t leave you paying for a policy for years, only to find out at claim time that your mental illness is actually excluded, when you believed it to be included.

Unlike a lot of other insurance brokers, Lifebroker perform reviews of our client’s policies, so if you have recovered for a substantial time from your mental illness, there is a good chance we can assist in having the exclusion removed.

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