Life Insurance for Pre-Existing Cancer

Updated

If you’ve ever completed a life insurance application, you know that your health history is of great interest to life insurance companies. They leave no stone unturned with the seemingly endless number of questions they ask about your current medical condition, your health history, and any pre-existing conditions you may have.

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They use this information to determine two things: if they’re going to approve your application and what your rates will be.

They may even request medical records from your doctors to help them make decisions concerning your insurability and rates.

Approving applications for people who have cancer, or have had it in the past, is of major concern to all life insurance companies. This is because mortality rates can be high, depending upon the type of cancer, which directly impacts insurers' profitability and financial stability. Because of this, buying life insurance if you have cancer is a challenge for many people. 

In this article, we’ll address this issue, look at the best types of life insurance for people with cancer, give you some tips on how to shop for a life insurance policy if you have cancer, and more.  

Can You Buy a Life Insurance Policy If You Have Cancer?

Yes, but it probably won’t be easy for you.

Many life insurance companies won’t consider insuring you until it’s been at least two years from your diagnosis or last treatment. They look at several factors when considering the insurability of someone who has cancer:

  • Date of diagnosis
  • Stage/severity of the diagnosis
  • Treatment history
  • Type of cancer

The more complex your cancer history is, the more difficult it will be for you to qualify for coverage. More recent diagnoses, more severe types of cancer, and more rounds of treatment will very likely raise your rates.

Some life insurers will make exceptions for non-melanoma skin cancers like squamous cell carcinoma and basal cell carcinoma. A few insurers will also consider issuing policies to people with Stage 0 or Stage 1 breast cancer.

What Are the Best Types of Life Insurance for People With Cancer?

If you’re currently undergoing cancer treatment, or if your cancer has metastasized or reached advanced stages, you probably won’t be approved for a traditional life insurance policy, such as whole life insurance or term life insurance. 

But, there are a couple of ways you can still be approved for a life insurance policy: guaranteed issue life insurance and employer-sponsored group life insurance. These two types of life insurance policies don’t inquire about your current health status or pre-existing conditions. 

Guaranteed issue life insurance

Guaranteed issue life insurance is an excellent option if you can’t qualify for term or whole life insurance because of having cancer. 

Guaranteed issue policies are the most expensive policies on the market and are sold by a limited number of life insurance companies. Because the insurer is taking on a large amount of financial risk by not requiring you to answer any health questions on the application or undergo a medical examination, the price for guaranteed issue life is unaffordable for many people. 

These policies also have two significant limitations: 

First, they only offer limited death benefit amounts ($2,000 to $25,000). A few companies will offer death benefits of $50,000 or higher.

Second, they also come with a “graded death benefit,” meaning that your beneficiary will only receive a partial payment of the death benefit if you die due to a non-accident during the policies’ first two or three years.

For example, if you bought a guaranteed issue policy and died during the first year you owned the policy from having cancer, your beneficiary would receive only the amount of premiums you paid, plus interest. 

Employer-sponsored group life insurance

Employer-sponsored group life insurance is also typically issued without requiring you to provide any background information on your health or have a medical examination. For example, whether you currently have cancer or have had it in the past, group life insurance providers will approve you up to an amount specified in the group policy they have with your employer (typically $50,000).

One drawback of group life insurance is also death benefit amount limitations. Many group life policies limit coverage amounts to a few times your annual salary, which may not be enough for your family. A financial advisor or life insurance agent can advise you on how much life insurance you need.

Group life insurance is also not portable, meaning that if you leave your job, you won’t be able to take your coverage with you. This can be of particular concern to someone who has developed a pre-existing condition after enrolling in group coverage. For this reason, many financial advisors recommend that people also own personal life insurance in addition to their group life coverage.

Does Having Cancer Affect Premiums or Payouts? 

Having cancer will affect your premium, but it won’t affect the payout of the death benefit to your beneficiary. 

Concerning premiums, if an insurer decides to approve the application of someone with cancer, the insured will pay higher than standard rates for their coverage. 

Insurance companies employ “actuaries,” whose function is to determine insurability and rates. They are typically conservative by nature, which makes them valuable to insurers when determining premiums. They are known for erring on the side of caution and setting life insurance rates for people with pre-existing conditions like cancer at very high levels to protect the insurance companies that employ them.

The good news is that payouts aren’t affected by someone having cancer. A life insurance policy is a bilateral contract. The insurance company has agreed to pay a death benefit to a beneficiary named in the policy upon the insured person's death.

Legally, they must honor this agreement regardless of the cause of death unless it’s specifically excluded in the policy. How long it takes to get a life insurance payout will depend on the company that issued the policy.

How to Shop for a Life Insurance Policy If You Have Cancer

While there are many websites provided by insurance companies, agents, and brokers that will give you policy choices and rate quotes, if you have cancer, your best bet is to find coverage through an independent life insurance agent who specializes in helping people with pre-existing medical conditions.

Independent agents are appointed by many different life insurance companies, and if they are experienced, they often know which companies will accept which types of risks. For example, some companies specialize in insuring people with diabetes, while others cater to those with high blood pressure.

Frequently Asked Questions: Buying Life Insurance With Pre-Existing Cancer

Buying life insurance with any pre-existing condition can be tricky, particularly cancer. Here are some of the most frequently asked questions about buying life insurance for pre-existing cancer.

Q: Is there a difference in buying life insurance if you have early-stage or late-stage cancer?

Yes, there is a difference if you’re buying a traditional whole-life or term-life insurance policy. With these types of policies, insurers will fully underwrite the policy, meaning that they will assemble detailed information on each person applying for a policy, review that information, and make decisions on insurability and rates on a case-by-case basis.

Someone with early-stage cancer may be able to buy a higher face amount and get lower rates than someone with late-stage cancer. It all depends on the insurance company and the underwriter.

However, it doesn’t matter what stage your cancer is in if you’re buying a guaranteed issue life insurance policy. But remember, these policies have graded death benefits that limit the payout amount to beneficiaries during the first two years of the policy. The stage of your cancer won’t affect the length of that waiting period.

Q: What are the best life insurance policies for cancer survivors?

People who are in remission may qualify for traditional life insurance policies. The longer you’re cancer-free, the better your chances are of being approved for a policy with standard rates. The best policy types for cancer survivors are term life insurance and whole life insurance. 

Term life insurance is the least expensive type of coverage you can buy because it is “temporary coverage,” meaning it only offers protection for a predetermined period of time, such as 5, 10, or 20 years. Term life only provides a death benefit to your beneficiary if you die during the policy term. 

Though term insurance is appealing to many buyers because it’s generally less expensive than other types of life insurance, it does have a major drawback. The drawback is that if the policy’s term expires and the insured is still alive, the insured may not qualify for another term policy if they’ve experienced any complications related to their cancer. 

Some term policies offer a rider called a “guaranteed insurability rider.” It allows policyholders to convert their term life policy to a permanent type of life insurance that they can keep for the rest of their lives. It’s best to consult with a life insurance agent who can help you find term policies with this rider. 

Whole life insurance is more expensive than term life insurance, but it has several advantages. 

First, whole life insurance builds cash value. A portion of every dollar you pay in premiums goes into the policy’s cash value. The cash value is credited interest regularly at a rate determined by the life insurance company, and dividends paid by the company may also be added to the cash value, depending upon the company's profitability. 

Also, whole life insurance will never expire. Unlike term life insurance, which is temporary by design, you can maintain your whole life policy for your entire life as long as you pay your premiums on time. 

And, whole life insurance premiums never increase. Regardless of how long you live or how the condition of your health changes, like if your cancer returns, your premiums will always remain the same with a whole life policy.

Q: What happens if you get cancer after you’ve purchased a life insurance policy?

Once a life insurance company has reviewed your application, and you’ve completed the rest of their underwriting process, like undergoing a medical examination, they’ll decide whether or not to issue your policy. If they approve your application and issue the policy, any medical conditions you develop after approval, including cancer, will be covered unless expressly excluded in the policy.

Q: Will a history of cancer in my family affect my chances of being approved for life insurance coverage?

Your family's medical history concerning cancer will very likely not affect the life insurance company’s decision to issue you a policy, but it could affect your rates. 

Be Truthful and Accurate When Applying for Life Insurance if You Have Cancer

Regardless of the type of cancer you have or its severity, you must submit truthful and accurate information on your application. Insurance companies can deny paying a claim within the first two years after issuing a policy if the application contained misleading or false information. Therefore, always be as detailed as possible when applying for life insurance.

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