You don’t have to be perfect to get insurance

If you have a health condition, a dangerous hobby or risky occupation, you might think that you won’t be able to get life insurance.  While this may have been the truth a few years ago, thankfully a lot has changed in the insurance industry.

“With so much emphasis on living a healthier, safer lifestyle, many people feel overwhelmed when it comes to completing an application for life insurance where fully disclosing all health, family history and lifestyle details is crucial. The reality is that very few people are in perfect health and live the perfect lifestyle, but that shouldn’t stop you from being able to get affordable and essential insurance cover.  It’s a financial necessity for every person to be able to take care of their loved ones, as well as themselves, in the face of a life-changing crisis,” says Hayley Taylor, Head of Underwriting at Hollard Life.

How do insurers deal with perfect imperfections?

While a health condition, dangerous hobby or risky occupation may mean your insurance is a little more complex or expensive than the average Joe, it shouldn’t stop you from getting cover at all. With the help of two important insurance tools, called ‘loadings’ and ‘exclusions’, an insurer can address even the most challenging health or lifestyle issues.

A loading is an additional cost applied to your premium when a life insurer believes that statistically your health, hobby or work makes you more likely to claim than the average person. In other words, you still get all the cover but you pay more for it. Here’s a practical example:  Paul, aged 40, has a family history of high cholesterol and his father had a fatal heart attack before the age of 50. Paul’s routine medical tests also reveal that his cholesterol levels are much higher than the acceptable range for his age. Because of this, Paul has a much higher risk of having a heart attack than the average person, so the insurer will apply a ‘loading’ on his premium. This loading would apply to the premiums for his life, critical illness and disability covers since his condition makes him more likely to claim under all three of these types of cover. In this example, Paul will still be covered for a heart attack (in other words his insurance would pay out for a valid heart attack claim) but he will pay more for his monthly premium.

An exclusion is applied to your policy if an insurer determines that the risk of you making a claim related to a medical condition, dangerous hobby or risky occupation is too great. In a case like this, an insurer would provide you with cover with no additional cost but let you know upfront that they won’t pay a claim related to that specific condition, hobby or occupation. Exclusions can be permanent or for a specific period of time. Consider this example: Mary has sciatica, a condition caused by compression of a spinal nerve in the lower back. Although not a serious health threat, it causes a lot of pain which means Mary needs medication and bed rest from time to time.   Mary’s chances of claiming for a temporary or permanent disability due to an injury of her lower back are much higher than normal because of her sciatica, so the insurer will offer her standard disability cover at the standard premium, but Mary won’t be able to make any claims related to her sciatica.

“While an exclusion or loading may upset you initially, they really do have a positive outcome because they allow you to get the cover you need instead of having that cover declined because of your health or lifestyle.  In many cases, applying exclusions means that we can provide cover at standard rates for everything except that specific condition to someone who would otherwise be unable to get any sort of cover at all,” explains Hayley.

Specific exclusions protect you and the insurer

There is often a misconception that there’s little point in having insurance if it doesn’t cover you for a condition you already have. Sure, you’re more likely to claim for that condition but that doesn’t mean you won’t find yourself really needing that cover for other unrelated conditions. Exclusions are often very specific, which means they limit your ability to claim as little as is reasonably possible.

Consider Mary’s story again.  Although Mary has a lower back exclusion on her disability cover, she still has cover for all other conditions that could cause a temporary or permanent disability.  If Mary was involved in a car accident and suffered a serious spinal injury that left the lower part of her body paralysed, she would still be covered under her disability policy even though she has a lower back exclusion.  This is because Mary’s paralysis would be as a direct result of an injury caused by the car accident, and not as a result of her sciatica. 

In another particular case, a client who hadn’t been able to get critical illness cover from other insurers due to her chronic diabetes managed to get cover with Hollard Life. Her cover had exclusions for conditions related to her heart and kidneys because her diabetes put her at a higher risk for these conditions.  A year after taking out the policy, the client was diagnosed with kidney cancer. Although an insurer could have declined to pay this claim because of the kidney exclusion, Hollard believed that the exclusion had very specifically related to kidney failure related to her diabetes.  It was never the intention to exclude cancer, which was an entirely unrelated condition. Hollard made the decision to pay the claim in full despite the kidney exclusion.

“You may not see it this way initially when faced with a loading or exclusion, but when you consider the likelihood of all the reasons to claim you could be faced with, it’s worth having the conversation with your financial advisor before you decide it's not worth it.  Choosing to be without cover when it is available to you could put you and your family’s financial future at stake,” concludes Hayley.

Make sure you choose an insurer that goes above and beyond to do the right thing.  You need your cover most when it comes time to claim, so make sure your insurer has a claims philosophy that you can depend on.