How mental illnesses affect life insurance policies


Perhaps there is no greater confusion than how various mental illnesses affect the purchase of life insurance coverage. Next in line is when a policy will pay a death benefit from suicide.

Mood and anxiety disorders are common in today’s world.  From a life insurer’s point of view the risk of mortality is directly related to how severe the mental illness is. They often manifest themselves primarily as suicide attempts, although they may increase the occurrence of both cardiovascular disease and substance abuse.

Today, about 26% of the adult population of the US has some form of diagnosable illness, from mild depression to psychosis requiring institutional management.  From my experience, most people along this continuum mistakenly think that will not be able to obtain the necessary coverage to protect their family.  However, an examination of underwriting criteria at major life insurance companies suggest that most potential applicants can qualify for either term or permanent coverage.

The great majority of adults with mild depression and/or anxiety can qualify for standard rates assuming they are talking 1 medication which isn’t an antipsychotic or MAO inhibitor, have rare anxiety attacks, and have not been hospitalized for mental illness.  In addition, they must not have attempted suicide or been on disability for mental issues for at least 3 years.

Individuals with more severe symptoms but still able to perform normal activities who have not been hospitalized for at least 2 years will be given a premium higher than the standard rating. With even more severe symptoms insurance may still be possible although expensive when compared to either preferred or standard rates.

All new policies have a two year period where they will not pay for suicide. Therefore, in the event of death of an insured within 2 years from the policy’s effective date, the insurer will not pay a claim for suicide.  Policies also have a 2-year period of “contestability’.  This means the carrier has the right to investigate the claim to make sure there was no fraud or misstatement of fact in the application.

In recent years drug therapy has become the most effective and common way to treat individuals with mental illness issues. Life insurance companies have become somewhat more lenient in their underwriting as more information becomes available.

It’s important to remember that mental health issues are not the type of illnesses amenable to diagnosis from blood, urine or other quantitative measurements of health.  Therefore, when applying for coverage you may find that 2 underwriters can view the same information and arrive at different health ratings.

What’s the best way to proceed?  First, deal with an agent that represents many life insurers and is willing to take the time to present your case in the most favorable light.  If the case is large enough to warrant obtaining medical records, it’s a good idea to speak with your practitioner and let them know you are applying for life insurance.  There are many ways to present your symptoms and you’ll want to make sure that its done in the most positive way.  In addition, ask you agent to write a cover letter to the underwriter that puts your mental issues in context.  For example, Insurance companies will look at depression differently if you’ve had a recent death in the family or other extenuating circumstances that would commonly result in a temporary (or situational) depression or anxiety.

I can’t stress enough that mental issues are fluid in most cases, and you will want to use that information to your advantage.  If you work or volunteer, exercise regularly or participate in other activities, these activities can lead to a more favorable premium outcome.

In all my years of being an agent specializing in life insurance for seniors at LifeNet Insurance Solutions I have only had one case of a carrier failing to pay after a death.  On investigating the case, the insurer found that there was a failure to disclose a diagnosis of schizophrenia including hospitalization for it in the person’s history.  Unfortunately, this might have been avoided with proper disclosure and careful attention to current work and family history.

The bottom line is this.  Be upfront with your agent.  The insurance company will find out about these issues whether you disclose them or not.  An underwriter who feels that information is not forthcoming or that the proposed insured failed to be candid will make a less favorable decision. It’s up to you to give your agent the information needed to get you the best rating possible.


Author Bio: Lenny Robbins is an owner/agent at LifeNet Insurance Solutions and has been in financial services for over 30 years.