What Is Impaired Risk Life Insurance?

The good news is, while insurance rates could be more expensive based on someone's health or lifestyle choices, it doesn't mean it's impossible to find coverage. Impaired risk life insurance, also known as high-risk life insurance, is a possibility for those who think they're impossible to insure.

Insurance providers base everything on risk, from whether someone has been approved as an applicant to how much the applicant pays in premiums. To determine someone's risk level, providers use medical and lifestyle questions, such as occupation, driving history, prescriptions, and diagnoses, to assess someone's risk category. 

Each provider has its guidelines, but high-risk behaviors and conditions could include:

• Alcohol use
• Anxiety and depression
• Cancer
• Drug use, including recreational
• DUI convictions
• Family health history
• Heart disease and cardiac health
• Occupation
• Tobacco use
• Weight

These factors can bump an applicant into a higher risk category. When someone has one (or more) lifestyle qualities or higher-risk conditions, it can impact the ability to obtain a policy and the price of premiums. 

Impaired risk is the actual health or lifestyle condition, and impaired risk life insurance is a life insurance policy designed for someone whose risk level is above average. This analysis is performed using formulas, calculations, and guidelines, known as the underwriting process. 

Impaired risk life insurance underwriting means the applicant will likely be paying higher premiums. While life insurance with a pre-existing condition isn't impossible to find, there may be additional challenges.

How impaired risk impacts life insurance rates

Underwriting for life insurance involves putting applicants into different categories based on their risk. Each insurance provider has its classification, but usually, the five categories are:

• Super-preferred: People with excellent mental and physical health, no weight issues, or family history of disease. A small percentage of people qualify for this. 
• Preferred: Overall good physical and mental health but may have slight risk, such as being slightly overweight.
• Standard Plus: Overall good physical and mental health but more risk factors than someone in the Preferred category. 
• Standard: This is someone with an average amount of risk.
• Substandard: You have multiple or complex medical issues. 

Very few people qualify for the super-preferred category, but falling into the super-preferred and preferred categories means you'll pay the best rates for life insurance. 

If someone has more risk factors that push them out of the standard and into the substandard category, then an insurance company will use a table rating. The table rating sets the premium percentage increase over the standard rates. Each insurance company uses its own rates for a table rating, so it's essential to shop around and compare multiple providers, if possible. 

Options for high-risk life insurance

The first step in obtaining a high-risk life insurance policy is to answer the questions as honestly as possible. The best approach is to be upfront about any risk factors. Whether you have medical or non-medical high-risk factors, you still likely have options. 

Another approach when applying for life insurance is to apply sooner versus later. Presumably, the younger you are, the fewer high-risk factors you may have. It typically benefits you to apply when you're younger. However, if you're in the process of quitting smoking or losing weight, it could be worth waiting until you've reached your health goals to apply. 

Ethos offers life insurance options to people who are often denied due to pre-existing conditions or high-risk factors. For example, Ethos offers a Guaranteed Issue (GI) whole life insurance with a guaranteed death benefit for your beneficiaries, regardless of risk factors, like medical conditions or travel risk. With a GI policy, most applicants are offered guaranteed coverage and don't have to participate in a lengthy medical exam. 

Another option from Ethos is Simplified Issue (SI), coverage designed for people who have age or health issues or prefer a straightforward method to apply for insurance. With any Ethos policy, you answer a few medical questions, and no medical exam is required.

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