Life insurance for high-risk individuals
Who do life insurance providers consider ‘high-risk individuals’?
Like other insurance products, insurers typically consider you a higher risk to insure if you’re deemed to be more likely to claim on your policy.
When it comes to life insurance, a lower life expectancy or a higher chance of sustaining a serious injury or illness may contribute to insurers deeming you a high-risk individual. This information determines your risk profile, and your insurer sets your premiums accordingly.
If you present a higher level of risk to an insurer, you may be required to pay an additional loading on top of your base premium. Alternatively, your insurer could apply an exclusion to your policy for a specific risk factor; for example, if you have a risky hobby, your insurer may exclude claims resulting from this hobby.
What is considered high-risk for life insurance?
When determining whether you’re a high risk, life insurance providers may consider the following:
- Your age. Younger Australians generally pay less for life insurance than their older counterparts, as they’re statistically less likely to claim.
- Your occupation. How you earn a living and what dangers you face at work (if any) determine your risk level. For example, a person who operates dangerous drilling equipment is likely to pay more than someone who performs clerical work.
- Your health. Insurers typically deem those with pre-existing medical conditions (e.g. heart disease, cancer, diabetes) as a higher risk for life insurance than those in good health. The same applies to anyone with unhealthy habits like smoking, excessive drinking or using drugs.
- Your lifestyle. For instance, if you’re into adventure hobbies like abseiling, skydiving or extreme skateboarding, chances are you’ll end up paying more for insurance than someone who doesn’t.
- Your claims history. If you’ve previously made a claim on your life insurance, you may be more likely to claim again in the future, which can increase your premiums.
It’s important to be honest and disclose information relating to your health, occupation, lifestyle and prior insurance history to the insurer when applying for life insurance in accordance with your Duty to take reasonable care not to make a misrepresentation. The last thing you want to happen is for your claim payment to be delayed, to investigate discrepancies in information or declined at the worst possible time.
Occupations
Your job plays a significant role when life insurance providers calculate your premiums and decide whether you’re a suitable candidate for cover. ‘Dangerous jobs’ or professions considered more dangerous than average can result in insurers deeming you a high-risk individual.
The following occupations may be considered high-risk:
- Animal trainers.
- Bricklayers.
- Bus drivers.
- Construction workers.
- Plasterers.
- Removalists.
- Security guards.
- Police officers.
People who work in professions like these may not have access to all types of cover or may pay a higher premium than people working in low-risk occupations.
For the following occupation examples where special risks apply to the occupation, it’s unlikely that insurers would consider offering Disability type cover (e.g., Income Protection or Total and Permanent Disability (TPD):
- Asbestos workers.
- Pilots.
- Divers.
- Firefighters.
- Tree loggers.
Note: Occupations in these categories may vary from provider to provider. What’s more, both these lists are not exhaustive, and other occupations may be included under the ‘high-risk’ and ‘non-insurable’ categories, depending on the type of insurance being applied for.
Activities
It’s not just a high-risk job or having an extensive family history of medical problems that can place you in a high-risk category; what you like to do in your spare time can also lead to you paying higher rates on your premiums.
Here are some common activities that life insurance companies generally deem to be high-risk:
- Scuba diving and sky diving.
- Extreme sports like martial arts, rock climbing or bungee jumping
- Car, boat, motorcycle or other vehicle racing.
- Plane and helicopter flying.
Depending on the insurer and their underwriting guidelines, claims resulting from the hazardous activity participated in may be excluded from cover and you will be unable to claim. Alternatively, the insurer may decide to apply a premium loading to the policy, which is an additional amount above the standard premium rates, to cover the higher risk of insuring you. Whatever the decision, once an assessment has been made, the insurer will offer terms before the policy is put into force; allowing you to make an informed decision as to whether to enter an insurance contract or not.
Health conditions
The following pre-existing conditions may result in higher premiums or exclusions too, as your insurer may deem you to have a health risk:
- Heart conditions and uncontrolled high blood pressure.
- Diabetes.
- Cancers.
- Mental ill health issues (e.g. depression, anxiety).
- Epilepsy/seizures.
- Sleep apnoea.
- Kidney disease and more.
Read more about pre-existing conditions for life insurance to see if your medical history could impact your access to and what you may pay for life insurance.
How can I reduce my risk for life insurance?
Some things in life are out of your control, and health issues aren’t always easily avoidable. In some cases, if your health profile is considered too much of a risk, your insurer may decline your life insurance application outright.
However, there are things within your control that can reduce your level of risk and improve your access to and what you may pay for life insurance coverage. For example, if you quit smoking and maintain a nicotine-free lifestyle for more than 12 months, you have a good shot at a cheaper premium.
The same goes for a person’s weight. Getting back in the ‘healthy’ weight range can have serious cost savings, and some insurers may reward those who make significant efforts to become healthier by offering premium discounts.
Which types of life insurance policies could be considered?
The way your risk factors will affect your life insurance will depend on the type of policy you choose. While we can’t tell you which type of life insurance is best for your personal circumstances, here are a few things to consider.
Term life insurance
This type of policy pays a lump sum death benefit to your beneficiary if you pass away. Instead, your insurance company may charge a loading on top of your base premiums, or exclude cover if you have health risk factors or work a dangerous job.
Total and Permanent Disability (TPD) cover
As the name suggests, TPD provides cover for you and your loved ones if you become permanently disabled and are unable to work. Because your payment is based on your ability to work, you may be uninsurable if you participate in dangerous activities that could affect your ability to work.
The way your job risk affects a TPD policy will depend on the definition of disability on your policy.
On an ‘own occupation’ policy, you’re covered when you can’t work in your current occupation. So, if you work a job that would be heavily affected by a disability, or has a high likelihood of causing a disability, you may not be able to be covered.
On an ‘any occupation’ policy, you’re covered when you can’t work in any job that you’re reasonably qualified for typically based on your education, training and experience.
Trauma insurance
This type of life insurance covers you if you suffer from a critical illness, such as cancer or a heart attack, as defined in the insurer’s policy.
A trauma insurance policy may have similar exclusions and loadings to term life insurance, except your underwriting is based on the risk of you suffering a critical injury or illness, instead of death.
Meet our life insurance and income protection expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.