How does Mental Illness affect your Insurance cover?

On a day-to-day basis, you probably would not think to tell anyone about your mental illness. However, non-disclosure to your insurance company carries the risk that your needs will not be accommodated and a future claim may not be paid.

Mental health problems are more common than you might think. One in five Australians are affected by mental illness annually, with over two million people living with an anxiety disorder. About 20% of adults will be diagnosed with at least one mental illness during their lifetime. Regardless, you may still be worried about what might happen if you tell an insurance company about your past or current mental health condition.

With the growing concern around mental illness and non-disclosure, we take a look at how your condition might affect your insurance cover.

What is Mental Illness?

According to the National Alliance on Mental Illness, a mental health condition impacts a person’s thinking, feeling or mood and may affect their ability to relate to others and function on a daily basis. Of course, each person will have a different experience, even people with the same diagnoses.

A mild form of mental illness may contribute very little to impairment while a severe disorder could substantially interfere with or even limit a person’s major life activities.

The proportion of Australians estimated to have long-term mental or behavioural problems increased progressively between 1995 and 2005, according to the Australian Institute of Health and Welfare. Still, the prevalence of mental illness is underestimated, in part due to missed diagnoses in areas without affordable access to mental health services, and low reporting rates, possibly because the condition is easily overlooked.

Disclosing Mental Illnesses?

If you do not answer questions about your mental health truthfully, and the insurance company finds out later, you may find that your policy becomes invalid. This can happen whether the claim is related to your mental health problems or not.

If you’ve been symptom-free and off treatment for more than two years, with no history of hospitalisation, it’s unlikely that a loading or exclusion will be applied. Generally, applicants who have suffered mild depression or a mild form of anxiety in the past and have been fully recovered for at least 1 to 2 years could expect their death and trauma benefits to be assessed on standard rates. However, depending on your situation an exclusion for mental illness may be applied.

Serious and/or I ongoing symptoms may warrant a premium increase (loading) to death and trauma benefits. Disability benefits may not be available in these cases, as such individuals are likely to require time off work at some stage.

Based on your adequately disclosed information, an insurer can accurately assess whether there is a need to increase your premium or include an exclusion to accommodate the additional health risk. This will vary depending on the severity of your condition and the insurers underwriting guidelines for the condition.

Income Protection Insurance or Total Disability Cover

If you’ve NOT been symptom free for at least two years, mental conditions may be excluded from your cover. Depending on the severity, an application might be declined, but the reports from your doctor will assist in giving the underwriter, from the insurance company, the clearest picture of your medical history. Leading to the most accurate offer possible.

Insurers take your individual circumstances into consideration when assessing your risk.

The most critical things they look for include:

  • Severity and nature of the illness.
  • Number of episodes and the duration of those episodes.
  • Whether you’ve recently missed days of work due to a mental health issue.
  • If you’re currently off work.
  • How long you’ve been receiving treatment for and if you’re showing signs of not being able to control the issue, e.g. changing medications frequently.

Does having a Mental illness effect your Life Insurance

Beyond the concern regarding disability related to mental conditions, in some instances clients who suffer from severe symptoms also represent an increased risk on life cover.

Adults who have serious mental illness are at an increased risk for chronic medical illnesses such as coronary artery disease and hypertension. Adults living with serious mental illness die on average 25 years earlier – the result of not receiving treatment for such chronic medical conditions.

But, because these conditions are very treatable you can obtain life insurance on standard rates (No loadings / Increases). Insurers generally become concerned when you are on multiple medications at once, or hospitalised to stabilise your condition.

Even serious clinical depression or bipolar disorders won’t necessarily prevent you from getting life insurance so long as you have been treated and have taken medication that successfully controls your condition. If not, then your application may be declined. Each person’s situation is unique and will be assessed on a case by case basis.

Life insurers will want to know:

  • The type of condition and symptoms experienced
  • When last you experienced symptoms and has it been once-off or recurrent
  • When you were diagnosed
  • Severity of the illness
  • Degree and duration of control
  • Who is treating you and what type of treatment you’re undergoing
  • Length of your treatment and how you’ve responded towards it

Most insurers view hints of a problem riskier than a well-documented mental illness and its treatment. The more accurate the details you can provide, the better.

When to apply?

If you’ve recently been diagnosed with a mental illness, it might be wise to wait a couple of months before applying for life insurance. Give your body adequate time to adjust to your medication and treatment first.

Trauma insurance

Trauma insurance pays out a lump sum upon the diagnoses of one of a list of specific illnesses such as a heart attack, cancer or stroke.

Trauma insurance will usually only attract a loading in very severe mental illness cases. Generally it will be as a result of poor control or when the illness exhibits particularly severe symptoms.

What if I have not been officially diagnosed?

Do not self-diagnose. For example, people with mood swings might think they have Bipolar disorder, however, mood swings are a symptom that can be part of many different clinical scenarios. When you self-diagnose, you are essentially assuming you know the subtleties that diagnoses constitutes.

For a person to be diagnosed with a mental illness they must have a clinically significant impairment, which could be either social or occupational. Simply presenting symptoms, especially when symptoms are milder in nature, is not enough for a diagnosis of mental illness.

Mental illness and the Underwriting process

Underwriting mental health conditions is challenging, especially when underwriters are assessing disability benefits such as Income protection and TPD cover. The underwriter’s ability to provide you with the best outcome for your mental health policy is largely dependent on the amount and quality of information you provided them with. You can help this process by giving them as much detail about your condition as possible, especially if you’re applying for disability cover.

Have the following information prepared:

  • All your doctors’ names and phone numbers should be available.
  • Have copies of all your records regarding treatment ready.
  • Have a list of all medications and their dosages available.
  • Make sure the cause of your mental condition is well documented in your medical records, e.g. Death of a loved one, chemical imbalance, side effects of medication etc.
  • Do not skip any follow up visits with your doctor.

As well as basic personal information (such as height and weight) you can expect to be asked for medical information about your physical health as well as you mental health. You will be asked for information about specific diagnoses, symptoms and treatments. Also, you can expect to be asked whether or not you have ever attempted suicide and to provide relevant dates.

It’s important to know that if an insurance company refuses to insure you, applies exclusion, or increases the premium on the basis that you have said you have a mental health problem, you can ask them to explain to you why and when this may be re-viewable.

Do not limit yourself by applying to just one company. Shop around and get multiple quotes. Select insurers put a blanket exclusion on all mental health conditions, so if you want this type of coverage you’ll need to shop around to find one that doesn’t apply such an exclusion.

Insurance shopping tips

Read the PDS to find out how the insurer describes a mental health condition or illness and what exclusions, exemptions or extra premiums may apply. If the information isn’t clear, Ask an Expert.

Fully disclose information regarding your condition. The more details you provide the better.

Ask the insurer how it defines a mental health condition or illness, as definitions tend to vary between companies.

Understand the offer

If an insurer is happy to cover you with a loading, you need to understand when this may be reviewable, e.g. when you are symptom and treatment free. Similarly, if there is an exclusion you need to know what exactly this means and when it will be reviewable (symptom and treatment free).

Conclusion

Remember, just because one insurance company denied your application does not mean another company won’t accept you. It all depends on your individual circumstances, the details you provide and the company you apply to. Still, disclosing mental illness remains crucial in receiving appropriate coverage.

Even when it comes to more serious cases, life insurance companies won’t necessarily give you higher rates. If you are in control of the situation and adhering to your treatment plan, you can find affordable life insurance cover.

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Published: November 4, 2015

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