Understanding Life Insurance and Mental Health Challenges
Kyle Moore, an advocate for mental health awareness, expresses concerns about his future insurance needs without currently seeking life insurance. Based in Halifax, Moore is the head of mental health initiatives at the League of Innovators, a charity focused on supporting entrepreneurs. Having faced his own mental health challenges, he is acutely aware of the barriers that individuals with similar experiences may encounter when attempting to secure life insurance.
Challenges in Obtaining Life Insurance
Insurance brokers and disability lawyers highlight that individuals who have been prescribed mental health medication or who have undergone counseling—even for mild issues—might find themselves either denied coverage for privately purchased life insurance or facing significantly higher premiums. For Moore, this reality is “incredibly disheartening.”
He notes, “It has become standard practice to flag individuals on mental health medication, which can serve as a reason to deny or restrict their access to life insurance.” Many Canadians seeking treatment might be unaware of the potential hurdles they face in securing life insurance. However, by focusing on maintaining medical stability (ensuring no changes in prescriptions or conditions), collaborating with knowledgeable brokers, exploring simplified or guaranteed life insurance, and shopping around, individuals can improve their chances of securing a policy.
The Irony of Mental Health Awareness
According to Courtney Mulqueen, the principal lawyer and CEO of a Toronto-based disability law firm, she frequently observes denials of coverage—a situation that she finds deeply ironic given the emphasis placed on mental health by prominent organizations. She points out, “With all the conversation surrounding mental health and the encouragement to seek treatment, individuals often find that merely discussing their anxiety or depression puts them at risk of being denied coverage or facing exorbitant premiums.”
Need for Standardization in Underwriting
Statistics Canada reported in 2022 that over five million Canadians (18% of those aged 15 and older) experience mood disorders, anxiety, or substance use disorders. While insurers assert that most applicants with mental health concerns are eventually approved for some level of life insurance, those with severe or untreated conditions—such as schizophrenia or borderline personality disorder—may still be denied coverage.
According to representatives from major insurance companies, approximately 85-90% of life insurance applications from individuals with mental health issues receive some level of coverage. Karen Cutler, an executive at Manulife Financial, emphasizes, “Mental health is just one of many factors we consider and is not assessed in isolation.”
Concerned advocates, like Mulqueen, argue that many individuals with mental health challenges fall through the cracks. They emphasize the need for a more nuanced underwriting process that differentiates between severe and mild mental health conditions, suggesting that such changes would not only be fair but also make sound business sense.
Exploring Available Options for Coverage
Many Canadians already have some life insurance coverage through employee benefits, while others invest in private plans—be they traditional, guaranteed, or simplified policies. Premium rates are influenced by numerous factors, including age, health status, and lifestyle choices. For instance, a healthy 30-year-old male non-smoker might pay approximately $30 per month for $500,000 in 20-year term life insurance. However, individuals with mental health conditions may face a premium increase of 50% to 300%.
For those with mental health histories, applying for life insurance entails careful planning, akin to securing mortgage pre-approval. A single denial can remain on an applicant’s record, as insurers share information with one another indefinitely. To improve the chances of approval, experts suggest allowing as much time as possible between treatment and the insurance application while maintaining stability for at least 12 months.
Speaking to multiple insurers is vital. It is recommended that individuals consult with at least three agents or companies to find the best coverage tailored to their circumstances. Engaging with an independent broker familiar with the nuances of different insurers can also prove beneficial, as they can submit preliminary assessments without leaving a trace on the applicant’s record.
Product Options for Mental Health Issues
For individuals with prior mental health struggles, a simplified insurance plan might be the best route, entailing fewer medical questions than a fully underwritten plan, which requires a comprehensive evaluation and could involve a medical exam. Though this option typically has premiums ranging from 10% to 40% higher, it’s less intimidating for those anxious about detailed scrutiny of their medical history.
Guaranteed life insurance can be a solution for more complex cases, as it only requires basic personal information without any health-related inquiries. However, this typically comes with a higher cost and lower coverage amounts. For individuals with significant mental health histories, a guaranteed issue policy may be another avenue to secure necessary coverage, providing a last resort for access to life insurance.
For someone like Moore, the prospect of having to opt for reduced or more expensive coverage due to mental health challenges feels unjust. He advocates for greater consideration of individuals with mental health conditions in the insurance industry. “People are exposing their most vulnerable aspects to obtain support,” he remarks, stressing the importance of not penalizing individuals for their past struggles.
Ultimately, the conversation surrounding life insurance and mental health highlights the need for empathy and reform within the insurance industry. As the landscape of mental health awareness continues to evolve, it is crucial for insurers to adapt and craft policies that reflect a deeper understanding of their clients’ experiences.
