How to get life insurance when you have a catastrophic illness

Many people think being diagnosed with a catastrophic illness like cancer or heart disease is both a death sentence and an end to your chances of receiving life insurance.

They could be wrong on both counts.

Medical advances and healthier lifestyles have resulted in higher survival rates for many high-risk diseases, including breast cancer and diabetes, in the past decade. Insurance companies have responded with more affordable, albeit still rated, policies.

Insurance options are even available for those with the most catastrophic of illnesses, such as lung cancer or ALS (Lou Gehrig’s disease), where chances of surviving more than a couple years are slim. Graded benefit and guaranteed benefit products are viable alternatives to term and traditional whole life, which are practically impossible to get in these instances, according to Ryan Pinney, high-risk specialist with Pinney Insurance Group, an insurance brokerage firm in Roseville, Calif.

He says both are whole life policies that usually max out at $50,000. Graded benefits pay a small percentage the first year, with a little more each year after that until the fifth year, when it levels off. He recommends this for people with illnesses with a longer survival prognosis like multiple sclerosis, prostate or colon cancer. Pinney says the cost varies greatly, depending on age, illness and whether the person smokes.

With guaranteed whole life insurance, there are no questions asked and no medical exam. Anyone can get it, but it costs about $3,000 a month for a 40-year-old and about $5,000 a month for someone 50 or older, Pinney says.

“To make this worthwhile you need to live at least three years, but not more than eight years. After eight years it is a losing investment,” Pinney says.

Someone with Alzheimer’s could not get insurance with most companies not only because of the terminal nature of the illness, but because you have to be cognizant when signing a policy, says Dr. Craig Davidson, senior medical director with The Hartford.

Pinney says those with high-risk, but not terminal, illnesses can expect to pay 25 percent to 50 percent more per month in premiums, if their eligibility falls below standard.He says if a standard policy costs $100 per month, someone with well-controlled diabetes could be rated in Table 2, at $150 a month. If they have Type 1 Juvenile Diabetes, they would be rated harsher, more like Table 4, at a cost of about $200 to $250 a month, he says.

“Underwriters will look at the type of disease you have, at what stage the disease was detected, the type of treatment you are receiving, and the length of time the doctor gives you to live to determine if you will get insurance and how it is rated,” Pinney says.

The overall five-year relative survival rate for breast cancer from 1999-2005 was 89.1 percent, but only 5 percent if the cancer already metastasized, according to the U.S. National Institutes of Health National Cancer Institute Surveillance Epidemiology and End Results Cancer Statistics Review.

According to the American Diabetes Association, 23.6 million kids and adults have diabetes. It is the seventh leading cause of death. However, it is also controllable with a combination of nutrition, exercise and medication. Pinney and Davidson offer the following advice when it comes to purchasing life insurance.

  • Buy when young and healthy, when the cost is much less and before you have a serious health issue. Once you have purchased a policy, it can never be taken away from you and the price can never go up, as long as you pay the premiums every month, Davidson suggests. If you buy when you are healthy, you can get either term or whole insurance, whereas you can only get the more expensive whole life if you’ve been diagnosed with a high-risk illness.
  • Buy accidental death and dismemberment insurance. Pinney says this is an alternative if you can’t get traditional life insurance or afford guaranteed benefit insurance. These policies are easy to get, relatively inexpensive and no medical test is required. However, they only pay out in the event of an accidental death, so it is a gamble you must decide that you want to take. “Chances are, the illness isn’t what kills you,” he says. He suggests these policies to people who have an illness with a longer lifespan, such as multiple sclerosis.
  • Don’t give up. Underwriters look at the test of time, Davidson says. If your doctor can document you have been disease-free for at least five years (your cancer or leukemia has been in remission or your cardiac tests show no heart disease for that length of time, for instance) and that you have been leading a healthy lifestyle and following your doctor’s diet and medication directives, you could qualify for insurance, even if you’ve been denied in the past. He says companies don’t look at the number of heart attacks someone has had, for instance, but the severity of the attacks, how close together they were and if you now have a favorable cardiac testing.
  • Apply for a new policy. If you’ve had a life insurance policy for years, especially if you bought it after the diagnosis, it might be less expensive for you to buy a new, better policy than to retain your current one if you have been disease-free for at least five years, Pinney says. Prices have been going down every year, and insurers should be amenable to providing you with a new policy. If not, he suggests switching to an agent who would be. He recommends reviewing your policy every two to three years, and changing whenever it is worthwhile cost-wise.
  • Be good to yourself. The best way to get insurance at lower rates is to stay or get healthy, Pinney and Davidson agree. Insurers look at you favorably if your doctor verifies that you exercise, lost weight, eat healthy, follow his advice, participate in wellness programs and visit him or her regularly.It’s good for your health and your pocketbook.