Insurance and Mental Health
When people apply for insurance, their perceptions are that they are protecting themselves in case they suffer physical injury or impairment; from things as small as broken bones, to serious illnesses such as being diagnosed with cancer.
What most don’t realise is that implementing insurance to protect your income will usually also cover you in the event of mental illness. Income protection insurance provides a monthly income payment if you are unable to work due to an illness or injury. The payments commence after a specified waiting period (usually between 30 and 90 days) and cease at the end of the specified benefit period (often to age 65, though a great number will only have a 2 year benefit).
Studies show that one in five Australians will experience a mental health or substance-use disorder in any 12 month period, and 45% will experience a mental health or substance-use disorder in their lifetime1. Though these figures include issues that will not be severe enough to require time away from work, many will, and the cost of this is shared between employers, the government and the insurance industry.
In recent years, insurance companies have reported an increase in the incidence of mental illness claims for both males and females2. Based on recent claim statistics, mental health issues including conditions such as stress, depression and anxiety have accounted for approximately 14% of all Income Protection claims3.
Does having a history of mental health disorder affect your ability to claim or get insurance?
To gain insurance, you must first negotiate the underwriting and application process. This mainly relates to getting information on your medical history.
Once you’ve applied, insurers are permitted to offer applicants for insurance different terms based on the risks that they present.
Depending on the severity and length of your condition, the insurer may issue a loading (an increase in premium to offset their increased risk) or an exclusion (which means they will cover all injuries and illnesses other than those caused by mental illness) or outright decline to offer cover.
Each insurer has their own claims and underwriting philosophies, so if you do not obtain cover with one insurer, there are always other options.
The best way to get your insurance offered at standard rates is to put your cover in place as early as possible. If you have a clean medical history, which is usually the case the younger you are, the vast majority of insurers will offer you cover at standard rates.
Having Income Protection cover in place will ensure that financial pressures are not an issue for you, and will allow you to focus solely and most importantly on your health and family.
1 Australian Bureau of Statistics 2008 National Survey of Mental Health and Wellbeing: Summary of Results 2007, ABS, Canberra.
2 IFSA Mental Health Working Group Claims Survey, 2006
3 TAL – Protecting Life, We are here when it matter, 2001. OnePath – It Pays to be Insured, 2011. Asteron Life – Facts of Life, 2012.
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