Key Takeaways:
- People with disabilities can still own life insurance, sometimes with little to no impact on eligibility
- Health and life expectancy are still the biggest factors insurers will be monitoring. Disabilities that may impact these will be the most likely to limit someone’s ability to purchase insurance.
- Working with a professional advisor or insurer that has experience with disabilities will make your application process easier.
Can You Qualify for Life Insurance With a Disability?
Life insurance can be one of the most important financial protection products someone can buy. Protecting your loved ones from the financial uncertainties of premature death is a vital part of a financial plan. Most people begin to consider life insurance after large life transitions such as buying a home, getting married or having children.
For the 26% of adults in America living with a disability, searching for the right life insurance policy can be confusing — but there are coverage options available. While the nature of your disability might impact the type of coverage and cost, it is still possible to qualify for a policy that will meet yours and your family’s needs.
In the event that the policy you qualify for does not have enough coverage, is too costly or you are not able to qualify at all, there are other options for managing financial risk. Outside of the typical individual term and permanent insurance options are other options that can offer varying levels of coverage. Certain policy types are specifically designed for disabled Americans.
If you need help navigating your options, speaking to a qualified life insurance specialist that has experience working with disabled people can give you a head start.
Even if you have a disability, you can most likely obtain some type of life insurance coverage. To be able to do so, is important that you work with a trusted and experienced insurance professional who can explain and assist you with your options.
Daniel J. Adams, MBA, CFP®, CLU®Founder and President of CEG Life Insurance ServicesAs the founder of CEG Life Insurance Services, Daniel J. Adams has extensive experience with life and health insurance products. Daniel assists clients in building a secure financial future as a Certified Financial Planner™ professional and independent insurance agent. He also trains new agents and advises other financial professionals.
Disabilities That Might Disqualify You From Life Insurance
Having a developmental or physical disability may not prevent someone from being able to buy a life insurance policy. The process for application and approval will be the same as anyone else and the factors the insurance company will review (age, medical history, health, career, activities, life expectancy, etc.) will be identical. However, if your disability impacts your health, or ability to earn a living, that can impact your eligibility to purchase a traditional policy or raise the premium costs associated.
Underwriting standards can vary by the insurance company, so discussing your situation with an agent or broker may offer more information specific to your eligibility. Certain general conditions can be assumed to lower your eligibility.
The following conditions can increase the risk of application denial:
- Anxiety
- Depression
- Post-traumatic stress disorder (PTSD)
- Cerebral palsy
- Advanced stages of multiple sclerosis
Source: Forbes
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How To Get Life Insurance With a Disability
The application process for purchasing a new life insurance policy will be the same for someone with a disability as someone without a disability. However, there are a few ways to make the process easier by planning ahead.
Seek the Help of a Disability-Informed Insurance Professional
Connecting with a local insurance broker and discussing your needs and situation with them can help point you in the right direction toward insurers that may specialize in the needs of people with disabilities or offer attractive rates for new policies.
A broker who can offer guidance on policy size and assist with the application process will ease your burden of research. While a broker may receive a fee for their services, it can allow you to gain peace of mind that you are not leaving options on the table.
Prepare To Be a Good Policy Applicant
Before you apply for your insurance, focusing on improving your health can make the process easier and the inevitable premium costs lower. Common health risks like smoking, drinking, poor diet or lack of exercise can be detrimental to your policy cost and eligibility.
If you have been given a specific medical treatment from a doctor, following that treatment closely will be important.
Types of Life Insurance for People With Disabilities
The two types of life insurance are term life and permanent life, each with its own benefits and drawbacks. For people with disabilities, it is important to weigh the benefits of the policy against the potential cost and difficulty of approval.
Term
The defining characteristic of term insurance is its limited insurance coverage length. Term policies are typically offered for 5-, 10-, 20- or 30-year terms and there is no cash value associated with the policy.
The limited length and lack of cash value make term insurance one of the most affordable ways to purchase life insurance. Term policies will stay in force until the term ends or the premiums lapse. As the insured, if you die during the term, your beneficiaries will be paid the full death benefit.
Term insurance is a cost-effective way to provide a large death benefit for your loved ones during periods of your life when you may have financial responsibilities, such as children, education costs or a mortgage. Premium pricing is based on age and health.
Disabled individuals who do not have a disability that acutely impacts their life expectancy can expect costs to be similar to individuals of the same health and age regardless of disability. If your disability may impact your life expectancy within the term, the premium costs may be higher or the policy may be unavailable.
Permanent
Permanent insurance, as opposed to term insurance, contains a cash value component. A portion of each premium payment is allocated towards the cash value account within your insurance policy. Over time, this value will grow through contributions and accrued interest on the existing balance. Permanent insurance will last for your entire life as long as the policy is maintained through paid premiums. Both whole life and universal life contain a cash value account and are considered permanent life insurance.
The existence of the cash value account within the policy will make the permanent policy have a much higher starting premium than the term policy with the same death benefit. The benefit of permanent insurance for someone with a disability is that it cannot expire or be taken away as long as you pay your premiums.
If you expect your disability to become worse or limit your life expectancy, permanent insurance may be valuable to acquire while you are young.
Alternatives to Traditional Life Insurance for People With Disabilities
Not everyone will be able to qualify for traditional life insurance options such as individual term or permanent life insurance. If that is the case, there are multiple alternatives that can offer protection for yourself and your family.
Group or Supplemental Life Insurance
Most employers today will offer some type of insurance benefit for their employees to opt into. Group or supplemental life insurance are plans which do not require any medical exams or personal questions (up to a certain benefit limit) and will provide coverage as long as you remain employed at that company. Many companies’ group policies will offer an amount equal to or greater than one year of salary.
Joint Survivorship Life Insurance
Like traditional individual life insurance policies, joint survivorship life insurance covers the insured persons for their whole lives but is structured to only pay out the death benefit when the second of the two people dies. Sometimes called “Second-To-Die” policies, these can offer otherwise uninsurable people access to personal life insurance coverage and may reduce the cost of a single policy on the insurable spouse.
Joint Survivorship Life Insurance is used for many reasons, including paying estate taxes, funding legacy bequests like charities or trusts or passing assets directly to heirs.
Guaranteed Issue Life Insurance
Policies that offer applicants insurance without the possibility of being declined are called guaranteed issue life insurance or guaranteed acceptance life insurance. The death benefit offered through these policies is usually limited to $25,000 or less but there are no medical exams and minimal application questions.
Insurers who offer these policies may also further diminish the death benefit if the insured person passes away within a certain number of years after the policy is in force to protect the company from applicants who are already in poor health and expect to die very soon.
Service-Disabled Veterans Life Insurance (S-DVI) and Veterans Affairs Life Insurance (VALife)
Offered through the U.S. Department of Veterans Affairs, this type of life insurance is designed for veterans who were disabled through their military service. The Service-Disabled Veterans Life Insurance (S-DVI) application window expired as of December 31, 2022, and was replaced by Veterans Affairs Life Insurance (VALife) as of January 1, 2023.
Both types of insurance offer eligible service members access to low-cost, guaranteed acceptance life insurance. To determine if you are eligible for this VA benefit, please visit https://www.va.gov/life-insurance/.
Funeral and Burial Insurance
Funeral and burial insurance (commonly known as final expense policies) is a simple type of life insurance that does exactly what it describes. It allows family and friends to cover the expected costs of providing a funeral and burial for the insured person. It normally will not require a medical exam or a lengthy approval process to receive coverage. Often applicants will fill out simple forms with minimal questions.
The average cost of a funeral and burial in the United States is between $7,000-$10,000. If there is money left over in the policy after burial expenses are covered, the heirs are entitled to that money.
Frequently Asked Questions About Life Insurance & Disabilities
Yes, you can still purchase life insurance while receiving Supplemental Security Disability Income (SSDI). However, the amount you can purchase may be limited and you may be declined by some insurers. Many insurers will inquire about why you are receiving SSDI before considering your application. Life insurance companies will consider many factors of your life and health while reviewing your application. It will be important to compare many companies or employ a life insurance broker who can recommend insurers most likely to offer you the best benefit.
There are two common definitions of disability: own-occupation and any-occupation. Insurers may specifically list different levels of disability within their risk models, for example, “partial disability” that they will use to measure policy eligibility.
Common reasons for someone to be considered disabled are injuries, pre-existing conditions or developed conditions that will impair an applicant’s ability to work and may reduce their life expectancy. Inability to work will not necessarily preclude an applicant from being approved, but a disability that can limit or shorten life expectancy such as chronic illness may cause an applicant to be declined.
Generally, yes. The condition causing your disability is likely to be viewed by the insurance company as an additional risk either directly or indirectly and can cause your premiums to be higher than someone of your similar age and health without your disability.
Yes, children can also be insured while having a disability and the limitations for approval will be similar to adults. Premiums may be higher than a child of similar age and health without the disability but if the disability does not impact life expectancy, the child should be able to be approved for a policy.
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