For most people, finding affordable life insurance is simply a matter of finding the term policy that best fits their needs. For others, however, health conditions and other factors can lead to them being classified as “impaired risk”—a classification that can lead to dramatically increased insurance rates. Guaranteed issue policies accept all applicants regardless of health status, but these policies tend to be limited in scope and expensive for the amount of coverage received.
What is Impaired Risk?
Insurance companies place policyholders into different risk classes in order to assign premium rates. Young, healthy people with healthy lifestyles will generally get the best rates. Those with poor family histories, some health problems or a few bad habits may get slightly higher rates. Smokers may have very high rates, and those with significant health concerns or a strong family history of certain health problems may be considered impaired risk or even uninsurable. Diabetes, heart problems, a history of alcohol or drug abuse and certain types of cancer can all have a profound effect on an individual’s ability to obtain affordable health insurance.
How Does an Impaired Risk Affect a Policy?
In the past, many who suffered from serious or chronic health conditions would be denied life insurance. Today, life insurance companies insure more than 90 percent of applicants, including those with cardiovascular disease, cancer, diabetes and other major health conditions. They can do this by sorting applicants into different risk categories and pricing policies accordingly. Preferred plus, preferred, standard, standard smoker, substandard and impaired risk are common classifications.
While some life insurance companies have strict underwriting guidelines from which they will not deviate, others often are more flexible. Most who have been placed in the impaired risk category will still be able to obtain coverage at a cost.
Anyone who has a serious health condition or who enjoys high-risk hobbies that have led to an impaired-risk classification can seek help from an impaired-risk specialist. These are insurance brokers who have extensive experience in locating the best policies for certain situations. An impaired risk specialist can point out the various ways an individual applicant is a better risk for a particular company. Whereas insurance companies tend to focus on the big picture, an impaired-risk specialist can narrow the focus down to the specific applicant. For example, heart attack survivors may, as a group, be a greater risk for the insurance company, but a specific heart attack survivor who has taken healthy steps to prevent future heart attacks and who is receiving high-quality medical care will likely be a lower risk to the insurance company.
Armed with medical records and other pertinent information about the applicant, access to the right insurance companies and extensive experience in the field, the impaired-risk specialist can then act as the applicant’s advocate and work to locate the best-priced policy, regardless of the applicant’s health history.