Let’s face it, qualifying for life insurance for those who are on disability can be challenging. After all, life insurance companies are very good at assessing the risk of an individual and only choosing to insure those whom they feel represent a “tolerable risk”. As a result, not everyone will be able to qualify for life insurance, and others who can, may not be able to afford the price of the insurance that they’re being offered.
Sadly though, there’s a third group of individuals who may not find the coverage that they’re looking for, not because they couldn’t qualify or afford the cost of their insurance, but only because they were never given a chance to apply.
This is because qualifying for life insurance while on disability is going to be difficult and require the help of a skilled life insurance agent with access to a wide variety of insurance products instead of being limited to just one or two different options. This is why in this article we wanted to discuss what it’s like to qualify for life insurance while on disability and answer some of the most common questions you may have.
So, without further ado, let’s get started
Can I qualify for life insurance if I am currently receiving SSA Disability Benefits?
Yes, it is possible to qualify for life insurance if you are currently receiving SSA Disability Benefits. However, as we mentioned above, obtaining coverage may be more challenging compared to someone who is not receiving disability benefits.
After all, the underwriting process for life insurance involves assessing risk, and those with disabilities may be viewed as having a higher likelihood of passing away sooner than those without disabilities. As a result, you may be offered higher premiums or even denied coverage altogether.
Why do life insurance companies care if I am currently receiving SSDI or SSI?
Life insurance companies care if you are currently receiving SSA Disability Benefits because it can impact your risk profile and the likelihood of passing away sooner than someone who is not receiving disability benefits. This even applies to medical conditions that one wouldn’t consider life-threatening.
Conditions such as:
- back pain,
And in many situations, life insurance companies will not differentiate why someone is on disability, instead, they will simply use one’s disability as a reason to disqualify them from traditional life insurance coverage.
At this point, it is important to note that not all insurance companies view disability benefits in the same way. Some insurers may specialize in covering those with disabilities and offer policies tailored to their needs. Additionally, the underwriting process can vary depending on the insurer, and some companies may be more lenient than others when it comes to covering those with disabilities. This is why working with a skilled agent with access to dozens of different insurance companies become so important because they can help you find companies that may be willing to insure you despite receiving disability benefits.
Traditional life insurance coverage vs Non-Traditional life insurance coverage.
Traditional life insurance coverage
Traditional life insurance coverage, also known as fully underwritten coverage, involves a comprehensive underwriting process that assesses your health, lifestyle, and medical history to determine your risk profile. Based on this assessment, the insurance company determines your premium and coverage amount.
This type of coverage typically offers the highest coverage amounts and lowest premiums, but it can be difficult to qualify for if you have pre-existing health conditions or engage in high-risk activities. The two most common examples of traditional coverage would include term life insurance and whole life insurance.
Term life insurance:
Term life insurance is a type of life insurance policy that provides coverage for a set period of time, typically ranging from one to thirty years. If the insured individual passes away during the term of the policy, the death benefit is paid out to the designated beneficiary. If the policy expires before the individual passes away, no benefit is paid out.
Term life insurance is typically less expensive than permanent life insurance because it offers coverage for a specific period of time and does not include an investment component. This means that the premiums are lower compared to permanent life insurance policies, which offer both a death benefit and an investment component.
One of the main advantages of term life insurance is its affordability. It can be a good option for individuals who have a temporary need for coverage, such as paying off a mortgage or providing for children until they reach adulthood. Additionally, term life insurance can be a good option for those who want to maximize their coverage for a lower premium.
However, term life insurance policies do not accumulate cash value, which means that they do not offer any investment component or savings feature. Additionally, once the policy term expires, the insured individual may need to reapply for coverage, which can be more difficult if their health has changed.
Whole life insurance:
Whole life insurance is a type of life insurance policy that provides coverage for the entirety of an individual’s life, as long as the premiums are paid. In addition to the death benefit, which is paid out to the designated beneficiary upon the death of the insured individual, whole life insurance policies also include an investment component, known as the cash value.
The cash value component of a whole life insurance policy grows over time, tax-deferred, based on a predetermined rate of return set by the insurance company. The insured individual can borrow against the cash value or use it to pay premiums. Additionally, the cash value can be surrendered for a cash payment or used to purchase additional coverage.
One of the main advantages of whole life insurance is that it provides lifelong coverage and includes an investment component. The cash value component can provide additional financial security and flexibility, as it can be used to pay premiums, borrow against, or provide a source of retirement income.
However, whole life insurance is typically more expensive than term life insurance due to the added investment component. The premiums are typically fixed for the life of the policy, which means that they can be more expensive than term life insurance premiums in the early years of the policy.
Non-traditional life insurance coverage
Non-traditional life insurance coverage, on the other hand, is designed to be more accessible to those who may not qualify for traditional coverage. This includes guaranteed issue life insurance, which does not require medical underwriting, and simplified issue life insurance, which has a simplified underwriting process that does not require a medical exam. These types of coverage may have lower coverage amounts and higher premiums compared to traditional coverage, but they can be a good option for those who have difficulty qualifying for traditional coverage.
One of the main advantages of non-traditional coverage is its accessibility. It can be easier to obtain coverage, and the application process may be faster and simpler compared to traditional coverage. However, non-traditional coverage may not offer the same level of protection as traditional coverage, and it may have more restrictions or exclusions. Additionally, the premiums for non-traditional coverage may be more expensive over the long term.
What kind of information will the insurance companies ask me or be interested in?
When applying for a traditional life insurance policy while on disability, insurance companies may ask for information related to your disability benefits to assess your overall health and mortality risk. The information they may request includes:
- Type of disability: Insurance companies may ask about the type of disability you have, as well as the severity and duration of your disability.
- Medical history: You will likely need to provide detailed information about your medical history, including any past or current illnesses, hospitalizations, medications, and treatments.
- Current health status: You may need to provide information about your current health status, including any ongoing medical treatment or medications.
- Lifestyle factors: Insurance companies may ask about your lifestyle factors, such as your diet, exercise habits, and whether you smoke or drink alcohol.
- Social Security disability benefits: Insurance companies may ask for information about your Social Security disability benefits, including the amount of your monthly benefit and the reason for your disability.
- Additional medical records: In some cases, insurance companies may request additional medical records from your doctors or other healthcare providers to better understand your health status and mortality risk.
It’s important to be honest and forthcoming when providing this information to the insurance company. Failure to provide accurate information could result in a denial of coverage or a reduced death benefit if the insurance company discovers that you provided inaccurate or incomplete information.
Factors that can affect eligibility
When applying for a traditional life insurance policy while on disability, there are several factors that can affect your ability to qualify for coverage. These factors include:
- Type of disability: The type of disability you have can impact your ability to qualify for life insurance. Some types of disabilities may be considered high-risk by insurance companies, which can make it more difficult to get approved for coverage.
- Severity of disability: The severity of your disability can also impact your ability to qualify for life insurance. If your disability is severe and affects your ability to perform daily tasks, insurance companies may view you as a higher risk and charge higher premiums or deny coverage altogether.
- Age: Your age can also impact your ability to qualify for life insurance. Older individuals may face higher premiums or have a harder time getting approved for coverage.
- Underlying medical conditions: If you have underlying medical conditions that are related to your disability or other health issues, this can also impact your ability to qualify for life insurance.
- Length of disability: The length of time you have been on disability can also be a factor in whether or not you qualify for life insurance. If you have been on disability for a long time, insurance companies may view you as a higher risk and charge higher premiums or deny coverage.
- Insurance company policies: Each insurance company has its own policies and underwriting guidelines when it comes to insuring individuals with disabilities. Some companies may be more willing to take on high-risk applicants, while others may be more conservative in their underwriting approach.
What life insurance rate can I qualify for if I’m currently receiving disability benefits?
The rate you may qualify for when applying for life insurance while on disability will depend on a variety of factors, including the type and severity of your disability, your overall health, and the amount and type of coverage you are applying for.
That said, it’s safe to assume that most individuals with disabilities if approved for traditional coverage will be considered higher risk by the insurer, which will result in higher premiums and most likely a more limited selection of coverage options.
However, the exact rate you may qualify for will depend on a number of factors, including your age, overall health, and any particular lifestyle factors that may come into play. So at the end of the day, it’s really impossible to know what rate someone on disability might qualify for (if eligible at all) which isn’t all that different from anyone applying for coverage because until all the information has been collected and reviewed by the insurance company, all anyone can do is guess based on previous experiences.
What if I can’t qualify for a traditional life insurance policy?
If you are unable to qualify for a traditional life insurance policy due to health reasons or other factors, there are still other options available to you. Options such as guaranteed issue life insurance and/or accidental death policies.
Guaranteed issue life insurance
Guaranteed-issue life insurance policies can be a good option for individuals who may have difficulty qualifying for traditional life insurance policies due to health reasons or other factors. However, they also have some potential drawbacks to consider. Here are some of the pros and cons of a guaranteed issue life insurance policy:
- Guaranteed acceptance: Unlike traditional life insurance policies, guaranteed issue policies do not require a medical exam or health questionnaire. As long as you meet the age requirements, you are guaranteed to be accepted for coverage.
- No health restrictions: Because guaranteed issue policies do not require a medical exam, they are a good option for individuals with pre-existing health conditions that might make it difficult to qualify for traditional life insurance.
- Cash value: Some guaranteed issue policies may accumulate cash value over time, which can be borrowed against or used to pay premiums.
- Higher premiums: Because guaranteed issue policies do not take health status into account, they often have higher premiums than traditional life insurance policies. This means that you may end up paying more over time for a smaller death benefit.
- Lower coverage amounts: Guaranteed issue policies typically have lower coverage amounts than traditional policies, which may not be sufficient to meet your needs.
- Waiting periods: Many guaranteed issue policies have a waiting period (or graded death benefit) before the death benefit becomes payable in the event that one’s death is caused by natural causes. This means that if you were to pass away due to natural causes during the waiting period, your beneficiaries would not receive a death benefit. Most graded death benefits will last between 2-3 years so it is a significant amount of time.
- Limited options: Guaranteed issue policies may not offer as many coverage options or riders as traditional policies, which may limit your ability to customize your coverage to your specific needs.
Accidental death policies
Accidental death policies provide a benefit to the beneficiaries of the policyholder in the event that the policyholder dies as a result of an accident. Here are some pros and cons to consider:
- Affordable premiums: Accidental death policies typically have lower premiums than traditional life insurance policies, making them more accessible to people who may not be able to afford a more comprehensive policy.
- Easy to qualify for: Since accidental death policies are designed to cover deaths resulting from accidents, they are easier to qualify for than traditional life insurance policies, which may require a medical exam or detailed health information.
- Provides additional coverage: Accidental death policies can provide an additional layer of protection for people who have other types of insurance, such as life insurance, disability insurance, or workers’ compensation.
- Quick payout: If the policyholder dies as a result of an accident, the payout is typically made quickly, which can provide financial support to the beneficiaries during a difficult time.
- Limited coverage: Accidental death policies only provide coverage for death resulting from accidents. If the policyholder dies from a non-accidental cause, such as an illness or natural causes, the policy will not pay out.
- No cash value: Accidental death policies do not have a cash value component, which means that the policyholder cannot borrow against the policy or receive any type of payout if they cancel the policy.
- Limited benefits: The amount of the payout for an accidental death policy is typically limited to a specific amount, which may not be sufficient to cover all of the policyholder’s financial needs.
- Limited beneficiaries: Accidental death policies typically only allow the policyholder to name one or two beneficiaries, which may not be sufficient if the policyholder has a large family or complex financial situation.
Overall, accidental death policies can be a useful tool for providing additional protection in the event of an unexpected death, but in our opinion, they should not be relied upon as a sole source of coverage.
Steps someone can take to qualify for traditional life insurance coverage while on disability
Qualifying for traditional life insurance coverage while on disability can be challenging, but it is possible with some proactive steps. Here are some things someone can do to improve their chances of getting approved for coverage:
- Determine the type of policy: There are different types of life insurance policies available, and some may be more suitable for people with disabilities. For example, a guaranteed issue life insurance policy may be an option that doesn’t require a medical exam or health questions.
- Work with a knowledgeable agent: Working with an experienced insurance agent who understands the challenges of insuring someone with a disability can be beneficial. They can help you navigate the application process and find the best policy for your situation.
- Get a doctor’s statement: A doctor’s statement can provide valuable information about your health condition, treatment, and prognosis. It can also show that you are actively managing your disability.
- Provide as much information as possible: When applying for life insurance, it’s essential to provide as much information as possible about your disability and health history. This can help the insurer assess the risk and make an informed decision about coverage.
- Consider a smaller policy: If you’re having difficulty qualifying for a larger policy, consider a smaller one. Some insurers may be more willing to offer coverage for lower amounts.
- Be patient: The underwriting process for life insurance can be lengthy, especially if you have a disability. Be patient and stay in touch with your agent to ensure that the application process is moving forward.
And lastly, don’t give up!
It’s important to note that qualifying for traditional life insurance coverage while on disability can be challenging, and there are no guarantees. However, taking proactive steps and working with an experienced agent can increase your chances of getting the coverage you need. So, if you’re ready to give it a try, pick up the phone and give us a call, we would like nothing better than to help you qualify for the coverage you need!