Life Insurance for People With Medical Problems

Finding the best-priced life insurance isn't always an easy task. If there's something about your health that raises red flags in the application process, you might want to enlist the assistance of a professional special-risk advocate.

How to get a special-risk advocate in your corner

Unless you are looking for a lot of insurance, with face values in the millions of dollars, it probably doesn't make sense to hire an advocate on your own. The key becomes finding someone else to pick up the tab - an insurance agency that has an advocate on staff or an agent who knows where to turn.

"In some cases your local agent may bark up the wrong trees trying to find you the best life insurance," says Richard Panther, director of underwriting for Target Insurance Services, a brokerage insurance company focusing on impaired-risk coverage.

If your insurance agency has an in-house specialist who deals with impaired risks, there are some questions you can ask to find out what makes him qualified to handle your case.

Ask if the agency's specialist is a former insurance company underwriter. Former underwriters who work in insurance agencies are often well connected with current underwriters and have direct experience setting policy prices for those with medical conditions. Former underwriters will know the positive indicators insurers look for when trying to make the best offer. This experience will allow the specialist to put your case in the best light when he contacts an insurer.
Former managers at insurance companies, who have overseen underwriters, can also make good impaired-risk specialists. They are especially valuable, if they have supervised the processing of hundreds of impaired-risk applications and are familiar with the risks involved in insuring people with medical conditions. This kind of experience can be difficult to quantify, but the very best of these advocates will be members of the Risk Appraisal Forum.

Risk Appraisal Forum members, together with underwriters for insurers and life insurance medical directors; discuss new procedures and techniques with medical authorities. Risk Appraisal Forum members are familiar with how medical conditions effect life insurance, and how medical advancements can help your insurability.

If your agency doesn't have a full-time specialist or a consultant, look for an agent who has experience finding life insurance for people with medical conditions. Agents who have more than 10 years of experience, or who write 15 to 20 percent of their policies for people with health
problems, can be just as knowledgeable and well connected as former underwriters.

Agents who concentrate on finding life insurance for baby boomers are also likely to see more applications from people with health problems. Conventional wisdom in the life insurance industry is most successful baby boomers have earned their success at the price of their health.

You might consider finding an agent with the Charter Life Underwriter (CLU) designation. CLU agents have shown a commitment to learning about the business of life insurance. These agents have years of experience and have most likely taken courses on how to provide coverage to people with health problems.

Ask if your agent will contact an intermediary agency that specializes in finding life insurance for people with less-than-perfect health. For a percentage of the agent's commission - known as an "override" - these intermediaries will contact a number of insurers and solicit quotes for life insurance policies. To make sure several companies are considering your application, you should ask your agent for the names of the insurers the intermediary uses. When you get that list, ask your agent if the companies listed specialize in writing policies for people with health problems.

Also, notice the questions asked about your medical history. If your agent asks several detailed questions about your health problems, it's a sign the agent or specialist is familiar with securing life insurance for people with your condition. If you aren't being asked medical questions, the agent might be planning to treat your application the same as every other, hoping for a favorable result.

How special-risk advocates help

When you apply for life insurance, your application and medical records find their way to the desk of an underwriter. The underwriter will then compare your medical records with the results of your life insurance medical exam and blood tests. The underwriter will use that information to decide whether to offer you a policy, and how much your premiums will be.

In addition to a check of your medical records, the underwriter will request statements about your health from your doctors - known as an attending physician's statement or APS. Once all of the information is in, the underwriter will review the file and decide whether to offer coverage.

Underwriters have only one chance to price a life insurance policy, so they don't like to make decisions without as much information as possible. If a life insurance agent presses an underwriter to make a decision before all of the medical information is received, the underwriter might decide to issue a higher-priced policy.

By assembling a complete medical file and sending that information to the insurers most comfortable underwriting your medical condition, special-risk advocates work to find "standard" life insurance policies for people who have been declined. In some cases, advocates can secure the lowest possible rates, even if other insurance companies have set higher premiums because of health problems.

"By acting as the clearinghouse, [an advocate] can order the APSs, take excerpts from the file, and fax a summary to three or four underwriters to talk over the case," says Robert Littell, a special-risk consultant to individuals and insurers. The advocate can use an offer made by one insurer as a starting point in negotiations with another underwriter to get a lower priced policy.

Competition from specialist brokers and insurers has pressured traditional insurance companies to make better offers to consumers with health problems, says Littell.

Cases where can advocates can help the most

Special-risk advocates most commonly work with people who have been diagnosed with or have a history of the following:

• Alcohol or drug abuse
• Cancer
• Depression
• Diabetes
• Hazardous occupations or hobbies
• Hepatitis C
• Hypertension
• Obesity
• Stroke
• Tobacco use

For more serious or less common conditions, a good special-risk advocate can almost always find a life insurer that will issue a policy. Such policies can be quite expensive, however.