Does life insurance cover cancer?

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Asked August 27, 2015

1 Answer

Life insurance is designed to help people provide financial benefits to their loved ones after death. An insurance company gains more from a policyholder who pays premiums over several years rather than one who is currently ill and might pass away quickly without contributing enough to offset the death benefit. As a result, many companies do not offer insurance to recently diagnosed cancer patients or new survivors. Of course, there are always exceptions. You do have options depending on the insurance company, plan selections and other factors.

The first option is to convert an existing temporary term life insurance policy into a permanent one. In this scenario, an insurance company can't hold a cancer diagnosis against you as long as you were honest when the term policy was set up. Although the premiums are higher with this option, it offers coverage plus cash value accumulation and other benefits. As long as you pay the premiums on time, the insurance carrier won't usually cancel the policy. In the event of your death, the carrier then pays the benefits to your beneficiary. One of the best ways to reduce the cost of premiums for this type of policy is rewrite the policy for a smaller death benefit amount.

Some insurance companies offer permanent policies to cancer survivors without policy conversion. In these cases, the survivor must usually finish treatment and prove that he/she is healthy for a certain number of years, as dictated by the insurance carrier. The type and grade of cancer, original date of diagnosis, type of initial treatment, future treatment plan, long-term prognosis and other factors can affect the death benefit amount and whether the cancer survivor can even get a policy. Survivors of cancers that spread into different areas of the body often have greater difficulty acquiring this life insurance. Those who do get policies often have to pay a higher premium amount than other permanent insurance policyholders. To acquire a lower rate, you must provide documentation, such as medical records and treatment plans, that proves that you have been truthful about your health.

Another option is to set up a graded death benefit whole life policy. With this type of plan, the insurance company only pays the death benefit in full to your beneficiary if you survive a predetermined number of years. If you die before you reach this number, then the insurance company pays a lesser graded death benefit amount based on the number of years between the setup of the policy and your death, or the company pays an amount that equals the total for the premiums already paid and any interest that accrued based on those premiums.

The best thing a current or former cancer patient can do is contact an independent agent or broker for assistance.  Independent brokers are more able to help you than anyone else, including direct writers who represent one specific company. An independent insurance broker that has partnerships with many local and national insurance carriers is more likely to have a wide range of knowledge about this topic and choices for finding a policy that fits your needs.

Answered August 28, 2015 by GWGLife

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