Kyle Moore, an advocate promoting awareness of mental health concerns, in Halifax, on May 16.Darren Calabrese/The Globe and Mail
Challenges in Life Insurance Access for Individuals with Mental Health Issues
Kyle Moore is not actively seeking life insurance but is apprehensive about the potential implications if he ever finds himself in need of it. Based in Halifax, Moore leads the mental health initiative at a charity that supports entrepreneurs. Despite overcoming personal mental health struggles in the past, he is aware of the hurdles that individuals like him face in securing life insurance.
Individuals with a history of mental health treatment, including those who have received counseling or been prescribed medication—even for mild conditions—may encounter denial of coverage or be subject to exorbitantly high premiums when applying for life insurance. Moore describes this reality as “incredibly disheartening,” emphasizing that people on mental health medications are often flagged by insurers, which can severely limit their access to life insurance products.
Many Canadians who seek mental health treatment may be unaware of the potential obstacles they could face when applying for life insurance. However, there are strategies to improve their chances of obtaining coverage. This includes maintaining a stable medical condition, collaborating with knowledgeable insurance brokers, considering simplified or guaranteed life insurance options, and shopping around for the best offers.
The Irony of Mental Health Advocacy and Insurance Denials
Courtney Mulqueen, a disability lawyer based in Toronto, frequently encounters clients whose applications for coverage are denied, a fact she finds deeply ironic in light of the emphasis placed on mental health awareness by many high-profile organizations. While there is a significant push for individuals to seek help and treatment for mental health issues, the requirement to disclose such conditions can ultimately jeopardize their chances of obtaining affordable coverage.
Mulqueen points out that disclosing a diagnosis, such as anxiety, may lead to unfavorable outcomes, including denial of coverage or inflated premiums. The prevailing message about the importance of mental health treatment is at odds with the realities faced by those who take proactive steps to address their conditions.
The Scope of Mental Health Disorders in Canada
Statistics from 2022 indicate that over five million Canadians, approximately 18 percent of those aged 15 and older, experience mood disorders, anxiety, or substance use disorders. Insurers suggest that most of these individuals typically find some form of life insurance when applying. However, severe, unstable mental health conditions such as schizophrenia or borderline personality disorder can significantly complicate or hinder the application process.
According to Karen Cutler, an executive at Manulife Financial, 85 to 90 percent of life insurance applicants with mental health concerns are able to secure coverage on some basis. She encourages individuals to pursue insurance as most people can become insurable with appropriate planning and timing.
Jennifer Dahl, another executive at Sun Life Financial, asserts that mental health conditions are considered among various factors during the underwriting process and are not viewed in isolation. Despite this assurance, a perceived disconnect remains, with many feeling that existing underwriting practices do not accurately reflect the nuances of mental health issues.
The Need for More Inclusive Underwriting Practices
Mulqueen emphasizes that too many applicants with mental health challenges fall through the cracks of the current insurance system. She advocates for a more nuanced approach to underwriting that distinguishes between severe and mild mental health conditions. Such differentiation would not only reflect the realities of those seeking insurance but also make sense from a business perspective.
The high rate of denials and increased premiums for individuals with mental health issues highlights the potential need for reform in underwriting practices. More inclusive criteria could prevent those who have made strides in their mental health from being unjustly penalized.
Life Insurance Options Available to Canadians
Many Canadians already possess some level of life insurance through their employer-sponsored benefit plans, while others may purchase policies independently. The premiums for life insurance vary widely, influenced by factors such as age, health status, and lifestyle choices. For instance, a healthy 30-year-old male non-smoker may pay around $30 monthly for a 20-year term policy with a coverage of $500,000.
Individuals with mental health conditions, on the other hand, may face premiums that are 50 to 300 percent higher if they manage to secure coverage at all. For this reason, obtaining life insurance for these individuals often necessitates careful preparation, akin to undergoing a pre-approval process for a mortgage. A single denial can impact an applicant’s record, as insurers share this information amongst one another.
Experts suggest that applicants should leave ample time between the completion of mental health treatment and their insurance application, ideally ensuring a period of stability of twelve months or more. Engaging with multiple insurance providers is crucial, as obtaining opinions from at least three different agents or companies can provide a clearer picture of the available options.
Additionally, working with an independent insurance broker can be beneficial. Brokers familiar with lenient insurers can submit a preliminary assessment to gauge the likelihood of approval without impacting the applicant’s record. They can also shop the application around to various carriers simultaneously.
Types of Policies Suitable for Individuals with Mental Health Challenges
When applying for life insurance, individuals with mental health histories may find simplified plans appealing. These plans typically involve fewer medical questions than traditional fully-underwritten policies, which require extensive health evaluations and often a medical examination. Although these simplified options may come with slightly higher premiums, they can offer a more accessible path to coverage.
For more complex cases, guaranteed life insurance is available that focuses on basic personal details without requiring health disclosures but tends to come with higher costs and lower coverage amounts. Insurance experts note that for individuals with substantial mental health histories, guaranteed issue policies may serve as alternative options to ensure some level of coverage.
For those like Moore, the prospect of facing higher premiums or reduced coverage due to mental health histories feels deeply unjust. He advocates for greater understanding and consideration from insurers regarding the impact of mental health conditions on individuals’ lives. Access to support should not be hindered by past experiences.
In conclusion, it is crucial to foster a more compassionate approach to underwriting and insurance practices that considers the unique circumstances of those with mental health challenges. With better awareness and advocacy, those seeking insurance should be met with fairness, understanding, and options reflective of their current state, rather than past struggles.
Editor’s note: This article has been updated to clarify that while the Canadian Life and Health Insurance Association did not provide comment, the organization directed inquiries to data available on their website.
