Life Insurance Policy for the Disabled
Life insurance companies go to great lengths to analyze the risk involved with issuing new policies. Since an insurance contract obligates the carrier to pay your family a potentially significant sum of money if you die, the company must determine the likelihood of you dying earlier than the average person.
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Underwriting Explained
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When you submit an application for life insurance, the carrier begins an investigation to determine your insurability. This investigation is called "underwriting" and often consists of multiple background checks, a review of your responses to application questions, a brief physical examination and a compilation of relevant medical records. Based on prior industry experience, profit margins and overall conservativeness, each insurance company maintains minimum standards within which your risk profile must fall. If underwriting results indicate you represent too much risk, the carrier will decline your application.
Significance of Disability
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Simply being disabled does not immediately indicate a negative effect on your life insurance application. Carriers will obviously take your disability into consideration during the underwriting process, but unless your disability in and of itself presents a direct threat to your natural lifespan it should have no bearing on your application. However, if the manner in which you became disabled indicates the prevalence of habits or lifestyle choices that present an increased risk to your life, that fact may result in higher premiums or an outright decline.
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Assigned Risk
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If underwriting determines that your disability poses a statistically significant risk to your natural lifespan, the cost for your policy will be increased to offset this additional liability. Your underwriting categorization may notate a "table rating" that indicates just how much additional risk the insurance company believes you represent as compared with an average healthy person.
Guaranteed Issue
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Should your disability result in the decline of your life insurance application, you may still obtain coverage elsewhere. Most major life insurance companies share very similar underwriting standards, meaning that if your application with one carrier was declined it is highly likely that a new application with another carrier will have the same outcome. Guaranteed issue policies exist for precisely this reason. These policies can be purchased by anyone, regardless of their health status or the presence of a disability. Unfortunately, since the only people who typically need guaranteed issue products are those with serious medical issues or other unfavorable characteristics, the insurance companies providing those policies must charge much higher rates. But if you absolutely cannot be without life insurance, and have been declined by other carriers with traditional underwriting standards, guaranteed issue policies may be the only remaining choice.
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