Depression is often misunderstood but it can be a serious illness, affecting twice as many women as men. It can affect the cost and availability of life insurance, but it doesn’t have to.
What is depression?
Depression is a very misunderstood illness. Most of us have bad days but severe depression can last for months and leave you unable to function – and certainly unable to work. Just as depression is misunderstood, so are its effects on your ability to get insurance.
Does depression mean you’ll pay more for insurance?
Sometimes insurance companies will either not cover depression or they will ask you to pay more for your policy. However, there are other situations where your premiums and cover may not be affected at all.
If you read other sections of this site you’ll know that while I think it’s important to shop around for a good deal, the cheapest policy may not be the best, and advice from an expert can be invaluable. If you’ve suffered from depression it’s definitely a good idea to take advice from a specialist insurance broker before you buy as:
- Some insurers cherry pick the lowest risk customers. An adviser will know which companies are less likely to increase the premiums (called ‘loading’ in the jargon).
- Insurers can assess applicants differently. Insurers decide whether or not they will offer someone a policy through their underwriting process, but two different companies may look at the same information and reach a different conclusion.
SAVVY TIP: If you want to find a broker who specialises in this type of insurance, ask them how long they have been specialising in this market for and whether they can recommend a policy from the whole insurance market or only from a handful. Try the Unbiased.co.uk website. Click on ‘insurance and protection’ to find a financial adviser who covers this area and I’d also select financial advisers who have qualifications in protection so they have some expertise in this area.
What insurers look for if you have depression
When you apply for certain types of insurance, you’ll be asked on the application form whether you’ve suffered from a mental illness in the past. If you have, the insurer will normally ask your GP for a report.
The insurer will assess:
1. The severity of your depression.
2. If it was an isolated incident or if you have a history of depression.
3. How long ago you suffered from depression.
SAVVY TIP: You may have suffered from severe depression in the past, but if it was five or more years ago and was an isolated incident it should have little or no impact on your insurance policy premiums or cover. One leading underwriter I spoke to said an insurer should not impose an exclusion on someone who had been successfully treated for depression five or more years ago.
4. Whether it was triggered by a specific event, such as the birth of your child, a bereavement or a relationship breakdown.
SAVVY TIP: If an insurer knows that your depression began following a specific event it’s more likely to impose a smaller increase in premiums or to limit the increase to the first few years.
5. The impact it’s had on your life — whether you had the odd day off work, several weeks or longer.
SAVVY TIP: This is particularly important for an income protection policy that is designed to pay out if you cannot work due to illness.
Depression and life insurance
If you’ve suffered from depression, you may find you have to pay more for a life insurance policy or that the policy wouldn’t pay out if you committed suicide. Contrary to popular belief, life insurance policies normally pay out if you take your own life and an insurance company will want to assess how much of an increased risk of suicide there might be.
SAVVY TIP: Most insurers have a standard clause on their policies saying that they will not pay out you were to commit suicide within the first 12 months of the policy. If you’ve suffered from depression, you may charged the same as everyone else or a higher premium depending on how severe the depression was and whether it was ongoing or related to a specific incident. There’s information on life insurance in my short video entitled: VIDEO: What is life insurance?
Depression and income protection or critical illness insurance
Income protection and critical illness policies pay you an income or a lump sum respectively if you fall ill. If you’ve had depression you may have to pay more for your insurance, alternatively, depression might not be covered by your policy. According to specialist brokers LifeSearch stress and depression are two of the most common reasons for a claim (along with muscular issues like a bad back) so an insurer will ask about ongoing medication.
SAVVY TIP: The approach will vary from insurer to insurer, but you might have to pay an extra 5% for your policy if you’ve had depression. If the depression was an isolated incident some time in the past (several years ago) it may not affect the policy at all.
Depression and payment protection insurance (PPI)
Payment protection insurance (sometimes called Accident, Sickness and Unemployment Insurance), including mortgage payment protection insurance, doesn’t normally pay out if you can’t work due to depression.
What you can do
If you’ve applied directly to a company for insurance and you think you’re being penalised unfairly, you may be able to get them to think again:
- Get in touch with your GP. Ask them to write to the insurer on your behalf to explain your circumstances and how you’ve been treated.
SAVVY TIP: Most companies will always take notice of your GP’s assessment of your health.
- Give as much information as you can. Insurers can only assess how much of a risk you are on the basis of the information you provide. The fuller the picture, the easier it is to work out how much of a risk you present.
SAVVY TIP: If you use a broker, they should contact the insurer on your behalf.
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