One in five Australians aged 16-85 experience a mental illness in any year.* As the awareness of mental health conditions increases, so do the claims for life insurance. Mental health is fast becoming one of the highest claimed conditions for Income Protection and Total & Permanent Disablement. As a result of this, insurance companies are looking to put exclusions or loadings (additional premiums) on life policies for clients who have a history of this condition.
Some of my clients have expressed their concerns about mental health exclusions saying they’re a doubled edged sword. Clients feel as they’re being punished for seeking treatment from their GP but weren’t aware of the impact it would have on obtaining life insurance in the future. Keep in mind that not all mental health disclosures will be treated the same.
Case Study 1: Jess sought treatment from a psychologist when her father died. She attended six sessions as per her mental health treatment plan provided by her GP. She is now applying for cover 5 years later.
Outcome: The likelihood of Jess obtaining a mental health exclusion is slim as this would be considered a ‘life event’ and she has not received further treatment for any other mental illness conditions.
Case Study 2: Daniel experienced some anxiety at age 19 when he was attending university. Daniel spoke to his GP and was referred to a mental health treatment plan however he did not attend these sessions. At age 31 Daniel spoke to his GP again about suffering depression after receiving a redundancy at work and was again referred to a mental health treatment plan and this time he attended his sessions. Daniel is now 33 and is applying for cover.
Outcome: Due to Daniel’s history of mental illness (anxiety and depression) and given the short period since his last episode, it is likely the insurance company would apply a mental health exclusion. There may be room to renegotiate these terms in 3-5 years if Daniel’s mental health continues to stay well, however, this would be at the discretion of the insurance company.
To some, this may seem unfair but insurance companies are aware that over 50% of people diagnosed with depression may relapse into a depressive state and it is most likely to return within three years of the first episode.^
If you’ve suffered from mental health problems in the past and are looking to obtain life insurance, you should keep in mind the following:
- Make sure you disclose all mental health issues. You have a legal obligation when applying for cover to disclose all health conditions, you would be in a far worse position if you don’t disclose this condition.
- Know exactly what you’re covered for. If the insurance company decides to put a loading or exclusion on the policy, make sure you have a good understanding of what this means.
Above all, speak with your adviser. Advisers have the advantage of having a relationship with the insurance company’s and can, therefore, assist you in receiving the most favourable terms.
Please note that this article provides general advice, and has not taken into consideration your personal or financial circumstances. If you would like more tailored advice regarding life insurance or any of our financial services, please contact us today. One of our advisers would be delighted to assist you.