09 May Insurance for older folks with health problems

Q. What is good health, and how useful are term policies for older relatives? If a person had a heart attack or cancer 25 years ago and the current term policy will end in a few years, is the cost of a new policy sky high?
— Analyzing options

A. This requires a look at how insurance companies view risk.

How you define good health is different from good health from an underwriting perspective, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

He said how recent a negative health episode has happened will play a role in an underwriter’s decision to approve someone for life insurance.

“Typically, a major health issue 25 years ago would not disqualify someone from getting coverage, however so many factors are considered such as current health, medications, build and smoking status,” Gaelick said. “One severe issue or a combination of several minor can result in an underwriting decline.”

That means “good health” is relative.

Gaelick said a good agent or broker will do some field underwriting and pre-screen the prospective insured. This will avoid the wasted effort and disappointment of being turned down for a policy.

He said underwriters can approve someone at preferred rates or decline then, but there are also rates in between.

The cost will be based on risk. This higher the risk, the higher the premium. So without knowing more, it’s impossible to say if a premium would be “sky high.”

“Comparing an existing policy’s premium to a new policy may be a shock depending on how old the existing policy is and how it was rated compared to an applicant’s current age and health,” Gaelick said. “As for the usefulness of term policies for older relatives, all types of policies should be considered, not just term.”

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This story was first published in May 2017.