Life Insurance

Life insurance for pre existing medical conditions

For many people life insurance is a ‘must have’ product. Dealing with bereavement is traumatic in itself but having your grief compounded by money worries is not a good place to be.

For people in perfect health obtaining life insurance is usually easy and relatively cheap (see our perfect health life insurance guide however if you have a medical condition the situation can be very different.

This guide will not only look at the types of cover available to you but will also look at the most effective ways of obtaining your cover and some pitfalls to avoid and some tricks of the trade to keep your costs down and avoid paying over the odds.

TOP PICKS

Please read all the article before making a selection

Specialist Brokers for Pre Existing Conditions:

Special Risk Bureau*
(any medical condition)

The Insurance Surgery*
(any medical condition)

Pulse
(very serious medical conditions)

Discount Brokers offering advice relating to Pre Existing Conditions:

Cavendish Online

IN A RUSH? JUST NEED TO KNOW WHERE TO GET A COMPETITIVE QUOTE?

Top Specialist brokers for pre existing medical conditions

Special Risks Bureau

Independent, whole of market, medical conditions specialist.
www.specialrisksbureau.co.uk*

The Insurance Surgery

Independent, whole of market, medical conditions specialist.
www.the-insurance-surgery.co.uk*

Pulse

For very high risk medical conditions.
www.pulse-insurance.co.uk

Top Discount brokers offering advice relating to pre existing medical conditions

Cavendish Advisory

Charge a £25 fee if you receive NO advice or offer a discounted premium if you take advice. They do not however solely deal with pre existing medical conditions.
www.cavendishonline.co.uk

Quick tips on finding the best deal

Use a specialist

To make sure you have the best chance of obtaining the cheapest cover we would suggest approaching a Specialist in life insurance for medical conditions (Special Risks Bureau*The Insurance Surgery*). These specialists will have years of experience dealing with all sorts of pre existing conditions and will know which insurance companies offer the best rates for your circumstances. If your condition is common and mild then a discount broker who offer advice could also be a good starting point such as Cavendish Advisory.

Check existing policies

Check your existing policies documents and see if you have any form of Guaranteed Insurability Option. This allows you to increase the amount of cover under certain circumstances without medical evidence and could save you significant costs. If you are unsure ring your Insurance Company. Quote your policy number and ask if you have the option.

Regularly review your policies

Did you start your existing policy before or after you were diagnosed with your medical condition? If it was after then ask a Specialist Broker if he can obtain the cover at a lower rate. There is a good chance they will beat your existing cover if your medical condition has stabilised or improved, if the ‘wrong’ insurer was originally approached or just purely because life insurance rates have reduced over the years. Please however DO NOT cancel any existing policy until new cover is in place.

Don’t expect overnight results – It is highly likely that before cover is offered the insurance company will want to obtain information from your GP or medical specialists. This takes time especially if further additional information is required. A good Specialist will co-ordinate all the medical information and will regularly contact your GPs Surgery to chase any outstanding information.

Constantly Declined?

If you have been declined on several occasions don’t give up hope. Speak to a Specialist as they may know an insurer who could cover you. It is not unusual for people to be declined several times yet still obtain cover through a Specialist. There are also what we call  ‘last resort’ options, these are policies that offer cover irrespective of your medical condition but either have a time period before you can claim or have certain exclusions on the cover.

Types of Life Insurance – What do you want it for? 

There are several main types of Life Insurance. We’ll explain the main options here.

Level Term Insurance

This provides a lump sum on death providing you die within the term of the policy. The amount of cover doesn’t change through the term as it is ‘level’. For example you may take out £100,000 of cover for 25 years. If you die anytime during the 25 years term the £100,000 is paid to your dependents. If you died however after 25 years and 1 day then no payment would be made. This type of cover is often used to protect your family and is one the cheapest ways of arranging cover.

Mortgage Life Insurance or Decreasing Term Insurance

This works in a similar way to Level Term Life Insurance except the amount of cover decreases during the term. It is mainly used to cover the outstanding amount on a mortgage. As the amount you owe on the mortgage reduces over the years, the amount of cover on the policy reduces. This type of policy is typically around 30% cheaper than Level Term.

Whole of Life

This policy will pay a lump sum on death whenever it occurs. Obviously at some point you will die (sorry to break this bad news) so the policy WILL have to pay out whereas for the term insurance policies they only ‘might’ have to pay out. This makes the Whole of Life policies a considerably more expensive option. They are often used to cover bills that arise on death such as funeral expenses or Inheritance Tax liabilities.  

What we call ‘Last Resort’ policies

These are policies that offer cover without any medical evidence. If you are in perfect health they usually offer poor value but for someone with a medical condition they can be extremely useful. They can be broken into two main areas:

  • Policies where the full cover does not come into force until a certain time span has past usually 12 or 24 months. This is typical of the often advertised ‘over 50’ type plans such as Sun Life, Axa etc. There are also now similar plans available for younger clients from age 18 upwards.

  • Policies that exclude pre existing medical conditions. These are a relatively new offering and will pay out providing your death doesn’t relate to your pre existing medical condition. They are a valid option if you really cannot find cover elsewhere but we suggest you read our guide to fully understand the advantages and limitations of these policies.

Pros & Cons of Term assurance

  • cheapest form of cover
  • simple
  • premiums can be guaranteed
  • lots of providers
  • cover for most illnesses​
  • no savings element
  • high cost for serious illnesses
  • decline a possibility
  • only pays out until term ends

How much do I need?

This is an impossible question to answer without knowing your individual circumstances.

A good starting point is insuring for an amount of ten times your annual salary. So if you earn £350 per week that’s roughly £18,000 per year so a starting point would be £180,000.  This figure however is only a very basic guide and would need to be adjusted for the level of your mortgage, number of children etc. If you apply for cover through a route that offers advice they should be able to tailor the cover to your circumstances.

The next decision is how long you need the cover for. Again it is a personal decision based on your individual circumstances but a good starting pointy would be until your youngest child leaves full time education. So if you have a 4 year old that you are hoping will attend University until they are 23 years old than a 19 year term is a starting point.

How do medical conditions affect life insurance?

Put simply if an insurance company thinks there is ANY chance that your pre existing medical condition could cause you to die any earlier than average they will increase the cost of the cover.

This process is called ‘loading’.

The amount of loading can vary from illness to illness and from one insurance company to another. It can range from as low as 25% to as high as over 1000% with certain specialist companies. There is also the possibility of being declined cover completely.

The difficulty is finding the insurance company that AFTER they apply the loading offer the cheapest premium.  The safest way of doing this is by using a Specialist that has experience of knowing which insurance companies are good for which illnesses.

One thing that is vital is that you always answer the insurance companies questions fully and honestly about any condition you may have. If you fail to do this it could be classed as ‘non disclosure’ and your policy could become invalid leaving your dependents without financial security.

If your pre existing condition improves or is cured then you need to review your cover ASAP. There is a strong chance you can obtain the same cover for a much cheaper premium.

Tricks of the Trade

Here are a few tricks that we have gathered over the years that may result in cheaper premiums for your life insurance.

Guaranteed Insurability

If you already have a life insurance policy it may allow you to increase the amount of cover without any further medical evidence. This is usually on a significant event like a house move or a new baby arrival but it can be extremely valuable if you have developed a medical condition after you started the existing policy. Ask your current insurer if you have any option to increase your existing policy ‘without medical evidence’. For more information read our article on Guaranteed Insurability.

Employer life cover schemes

Does your Employer offer life insurance? If so you may be able to join the scheme or top up your cover. Often Employer Schemes allow you to take out/increase life insurance without any medical evidence. Ask your employer and make sure you check the rules carefully.

Don’t fall into the ‘bogus’ specialist marketing trap 

Life Insurance is a lucrative business and over the years this has resulted in marketing companies being top of ‘google’ offering life insurance for a range of illnesses. They then simply sell the enquiries they generate. There is nothing wrong with this practice providing the enquiries are being sent to a true pre existing conditions specialist, however please satisfy yourself that this is the case. Click to see our list of true specialists.

Barter

When a broker sets up a life insurance policy for you they receive commission. The amount of commission usually relates to the size of the premium, the higher the premium the greater the commission. The broker usually has the facility to reduce the amount of commission he receives, this will then reduce the cost of the policy. Obviously the broker needs to make a living and he will have significant overheads. If your case was a difficult case to place with multiple applications and numerous medical reports to chase he may have spent in the tens of hours completing the work and therefore be unwilling to reduce his commission. If however it was a simple case with little workload he may be open to negotiation…… it’s always worth asking “Could you sacrifice some commission to make the policy more affordable?”

‘Last resort’ policies

These are policies that can provide cover when others can’t. They either ignore or exclude your pre-existing medical condition. See our Guide here.

They don’t offer great value if you are in good health, but if you have a medical condition they can provide some cover which would not be otherwise available.

They can be broken into two main areas:-

  • Policies where the full cover does not come into force until a certain time span has past usually 12 or 24 months. This is typical of the often advertised ‘over 50’ type plans such as Sun Life, Axa etc. There are also now similar plans available for younger clients from age 18 upwards.

  • Policies that exclude pre existing medical conditions. These are a relatively new offering and will pay out providing your death doesn’t relate to your pre existing medical condition. They are a valid option if you really cannot find cover elsewhere but we suggest you read our guide to fully understand the advantages and limitations of these policies.

Where can I buy it from?

As with any life insurance policy it is vital you buy it in the right way if you want to achieve the most competitive premium. If you are in perfect health this will usually be from a discount broker such as Cavendish or a comparison site such as confused.com, often it can be bought without advice and you are simply looking for the cheapest premium.

What is different when buying life insurance with a pre existing medical condition is that what you see is not what you get. You can obtain a quotation from a comparison site but it will not give you any idea of how much extra you need to pay for your medical condition. The only way of truly finding the final cost is by applying to the insurance company and letting them access your medical information, this could involve writing to your GP, sending you for a medical or completing a screening process with a nurse.

This is why we would suggest using a Specialist in pre existing medical conditions such as The Special Risks Bureau* or The Insurance Surgery*.

Once the insurance company has all the information they will offer you a ‘loaded’ premium. The amount of ‘loading’ can vary dramatically from one company to another and the companies that offer the cheapest initial premium can often apply a high loading rendering them uncompetitive.

So let’s next look at your options and the pros and cons of each:

Comparison Sites and Discount Brokers

2/5
  • provides a wide range of quotes
  • These quotes may be discounted
  • The quotes are for people in perfect health
  • They will not take into account your medical condition so could rise dramatically
  • They will probably not have the expertise to direct you to an insurer sympathetic to your condition
  • Will not provide advice on type and amount of cover
  • Suitable if you are in perfect health
  • Possible suitable if your condition is very common and very mild (eg very well controlled asthma)

Typical Independent Financial Advisor

2/5

Search for an IFA using Unbiased.co.uk

  • Able to provide a wide range of quotes
  • Should be willing to contact all insurers to obtain estimates of final premium
  • Should be able to advise on amount and type of cover
  • Maybe unwilling to undertake a full market research
  • Possibly charge an additional fee for the extra workload
  • Unlikely they will have the expertise to direct you to an insurer sympathetic to your condition unless it is a common problem they have dealt with before.
  • Suitable if they have recent past experience with clients with your condition (ask them!)
  • Suitable if they are willing to ring a wide range if insurers (suggest 6-10) to research your particular condition.

Specialist Brokers – that ONLY deal with medical conditions

5/5
  • They will have in depth knowledge of most illnesses and which insurers are best for which illness
  • They will have direct lines to all the insurance companies underwriters to discuss individual cases
  • They should be able to provide an estimate of the final premium without the need for medicals or writing to your GP
  • Should be able to advise on amount and type of cover.
  • This should lead to a very competitive policy
  • Due to the extra research and knowledge the premiums are unlikely to be discounted.
  • Suitable for all pre existing medical conditions
  • The best route if you have a moderate to severe condition.
  • Not the cheapest option if you are in perfect health.

Discount brokers that provide advice

4/5
  • Able to provide a wide range of quotes
  • Should be willing to contact all insurers to obtain estimates of final premium
  • Should be able to advise on amount and type of cover
  • Premiums should be discounted
  • Maybe unwilling to undertake a full market research
  • Possibly charge an additional fee for the extra workload
  • Unlikely they will have the expertise to direct you to an insurer sympathetic to your condition unless it is a common problem they have dealt with before.
  • Suitable if they have recent past experience with clients with your condition (ask them!)
  • Suitable if they are willing to ring a wide range if insurers (suggest 6-10) to research your particular condition.

What else should I know?

Taxation

The lump sum received on death forms part of the deceased’s estate and is therefore potentially liable for Inheritance Tax.

If your Advisor offers advice you should speak to them about putting the policy ‘In Trust’. This has two advantages

  • It allows you to specify where you want the proceeds of the policy to go and
  • It effectively removes the money from your estate so that it is no longer liable for Inheritance Tax.

If you have chosen a non advised route then we would suggest speaking to the Insurance Company and ask them for a guide to Trusts, most companies are able to provide a simple guide and the necessary forms to place the policy in trust.

QUICK QUOTE

The Quick Quote button is there for visitors who do not feel they have the time or motivation to read the whole article on a particular subject. They just want to be put in touch with a company that offers the product and won’t rip them off! We would always recommend reading the whole article on the subject you are interested in as there may be a more suitable provider for your particular circumstances, however we are also confident that in most cases the Quick Quote provider will offer good value for money.