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Life insurance for people with dementia

An estimated 50 million people have dementia, a syndrome that encompasses several different conditions that affect the brain and cognitive ability. Along with related physical and psychological challenges, dementia can affect your ability to work -- and your ability to get life insurance.

Before you go through the application process, here's what you need to know about how dementia might affect whether you can get life insurance.

 

Can you get life insurance when you have dementia?

A pre-existing condition, which is a health condition that you had before getting insured, can affect your rates and whether an insurer approves you for a policy.

Along with diabetes, high blood pressure, heart disease and cancer, insurance companies consider dementia a pre-existing condition.

Katherine Adams, founder of the insurance brokerage Creative Legacy Group, says it's possible to get life insurance if you have dementia. However, your options will be limited. Adams said insurers may allow guaranteed issue. Guaranteed issue just means they accept everyone. You will pay a higher rate and have to wait for two years, though.

Nancy Butler, a licensed insurance agent for over 30 years, says traditional term or permanent life insurance likely aren't options for someone with dementia. 

"Guaranteed insurance is typically limited to a death benefit of $25,000 or less and has a minimum age requirement of 50 years old or so. It does not matter how mild or severe the cognition loss, because it covers age-qualified individuals with no health questions asked. They do not require an exam, medical records or a phone interview," Butler says.

In addition to guaranteed life insurance, second to die life insurance is another alternative, she says.

"Since a second to die policy insures two people but only pays after the second insured dies, it is typically easier to qualify for as long as one of the two people are healthy and the other has moderate health issues," she adds.

 

Dementia's impact on rates and approvals

Insurer underwriters consider several factors when deciding on a policy for someone with a pre-existing condition, such as dementia. 

These factors include family history, the age of onset, how long you've had the condition, how it’s progressing and other health issues that may affect your current condition.

With guaranteed issue life insurance, most people are generally approved as long as they aren't over the age requirement. Typically, that’s no more than 80 years old. However, your premium will depend on your rating. 

Insurers use different ratings to assess their risk of insuring you:

  • Super Preferred (or Preferred Plus)
  • Preferred
  • Standard (or Regular)
  • Substandard

Most people who apply for guaranteed issue life insurance probably are in the substandard category since an insurer likely denied them for a traditional life insurance policy. A guaranteed issue policy means you'll have to pay a higher premium for a lower benefit. 

Considering the expense of a guaranteed issue policy, some family members may look into other insurance approaches to provide financial protection for a loved one with dementia. Those options are limited, though. It's illegal to take out a policy on an individual without their knowledge or consent, Adams says. In these cases, especially if you're concerned about a spouse’s welfare, a second to die policy may be the best option in addition to a guaranteed issue policy.

 

Instant approval and pre-existing conditions

You likely won’t be eligible for instant approval if you have dementia. 

Instant approval is common in term life insurance. With this process, there's no medical exam or extensive paperwork. You simply give the insurance company information, such as your age, height, weight and medical history. 

They use this information to predict your life expectancy and risk. The company quickly decides on approval. 

"It's not possible for someone with dementia to get instant approval," Adams says. "On most applications, there's always a knockout question, which is a group of questions normally asked first to eliminate clients who have certain health issues."

 

Permanent vs. term life insurance

There are significant differences in costs and benefits between permanent life insurance and term life insurance.

Permanent life insurance, such as a whole life policy, offers benefits that never expire. The trade-off is that you'll have to pay a higher premium. With term life, coverage can last for a period of anywhere between five to 30 years. Because there's a termination date, term life insurance is more affordable than permanent life insurance.

It's tough for people with dementia to qualify for traditional life insurance. That said, if your condition isn't progressive and an insurer approves a policy, Adams suggests going with a whole life policy.

"Whole life is definitely the only option I would recommend because the client will have to be on a waiting period. Once they have lived through that period, then the policy will pay out full benefits," she says. "You would not want to put them into a plan with a termination date. Whole life will last them until they terminate -- not when the policy terminates."

 

Final expenses and burial insurance

Families grappling with dementia may seek insurance because they worry about how they’re going to pay for their loved one's funeral costs. Though traditional life insurance may not be an affordable or viable option, final expense insurance might provide the coverage you need.

Final expense insurance, which is also called burial insurance, provides a cash benefit your beneficiaries can use to pay for funeral costs and other expenses you may leave behind. Final expense insurance can be either a guaranteed issue policy or a simplified issue policy where you have to answer a few medical questions.

Just keep in mind that final expense insurance’s benefits and coverage amounts are lower than traditional life insurance. These policies typically are best suited for consumers with lower insurance ratings who may not be able to get a term or whole life policy.

 

Life insurance riders for people with dementia

Riders are add-ons to an insurance policy that provide additional coverage. Guaranteed issue policies typically don't include riders.

Butler says someone with dementia has few if any rider options. If you get approved though, a rider of interest is a waiver of premium rider. This rider waives the premium payments in the event the insured becomes critically ill, seriously injured or disabled. 

“That is probably when you will most want to be assured the policy doesn't lapse," she says. "Also, many policies today offer an accelerated death benefit. This enables you to access the death benefit prior to death after meeting certain triggering criteria. Check to see if this feature is available in the policy you are applying for."

Understanding your life insurance options

Though life insurance options are limited for people with dementia, guaranteed issue or second to die policies may help to fill some of your coverage gaps and provide additional money your family can use during an already stressful time.

But do your homework before signing up for one of these policies and work with a qualified professional, Adams says.

"I always recommend working with a broker who can look at different carriers for you. It's important to have a couple of options," she says.

Butler also suggests reading the fine print on any potential guaranteed issue policy.

"Before applying for coverage, ask for a specimen policy. A specimen policy is a blank copy of the policy you are applying for. Be sure to read the entire policy, including any small print," Bulter says. "By reading this before you apply, you will know exactly how your policy works and any features that may be a problem for you."

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