How Substance Abuse Affects Life Insurance Coverage

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Life insurance is an important part of securing your family’s future no matter what happens. When applying for a life insurance policy, you’ll be asked basic questions about your health and lifestyle. Therefore, it can be tricky to find affordable life insurance policies for alcoholics or those who suffer from any other kind of substance abuse.

Some life insurance companies will deny policies to anyone who has an active substance abuse problem. If a substance abuser is given a policy, it can be two to three times higher than the average rate. While it is tricky for addicts to receive sufficient yet affordable life insurance policies, it’s not entirely impossible. Let’s take a look at how substance abuse can impact life insurance coverage, as well as what to do about it.

Life Insurance Basics: Age, Health, and Policy Specifics

Like any insurance, life insurance depends on many factors, including age, health, and the specifics of a policy. Buy a life insurance policy when you’re younger because you can add anywhere from 4.5% to 9.2% to your premium every year you wait to purchase a policy. Many people know that life insurance is necessary to protect your family’s finances whenever you pass away, yet many still don’t even have a policy. It’s important to have a sufficient policy because you never know what could happen. 

Your savings can only help your family so much, especially if something happens to you before you could pay off your debt and build up your savings.

There are three main types of life insurance:

  • Term life insurance is the most affordable kind of life insurance. It’s a good choice for anyone who is looking for a lower premium. It provides added flexibility in that it allows you to choose how long your coverage is for.
  • Whole life insurance is a common type of permanent life insurance that provides lifetime coverage as long as the premiums are paid. It also includes a savings component known as a cash value, which policyholders can borrow funds from to help support any additional financial needs.
  • Universal life insurance is a kind of permanent life insurance that has the primary benefit of using the policy’s cash value to pay for premiums. The value accrues and earns interest as the monthly premiums are paid, which allows it to act as a savings account.

If you decide to go with a term life insurance policy, it’s important to determine the time frame needed for coverage. Life insurance is most affordable the younger and healthier you are. Ideally, you want to go for a time frame that can cover both current and future expenses.

Substances & Life Insurance: Casual vs. Addicted

In most cases, casual drinkers or marijuana smokers will not have an issue with getting a life insurance policy. Anyone with a history of drug or alcohol abuse, however, will need to provide more details about their history and may not be eligible for most policies.

Drug or alcohol abuse is a massive danger to both mental and physical health, and many times it leads to an untimely death, especially while driving after abusing. Therefore, it’s viewed as a high-risk behavior and in many cases, insurance companies will be unwilling to provide coverage. 

However, if you haven’t been hospitalized for your substance abuse or damaged any of your organs, you can still qualify for a standard and affordable policy. 

Depending on the insurance provider, a recovering substance user may need to be drug free or sober for three to 10 years (or more) to receive coverage. Someone who is currently still abusing substances should not lie on their life insurance application. 

Even if there are no medical records regarding your drug abuse, it is still considered fraud to lie about it.

How Insurance Companies Assess Risk: The Underwriting Process

Underwriting refers to the process or practice in which insurance companies assess the policyholder’s risk to determine their eligibility and pricing. The underwriting process is more extensive for recovering addicts since they are at a greater risk than the average applicant.

Life insurance underwriting categorizes risks into three groups:

  1. Preferred risk: This is the most favorable applicant for insurance companies because they are the most healthy and therefore least risky.
  2. Standard risk: This kind of life insurance is accepted and approved as written. The premiums for this kind of policy are greater than those who are preferred risk.
  3. Substandard risk: This is the most expensive category for life insurance because they may have the shortest life expectancy. People who may be in this category include recovering substance abusers, people with disabilities, and those needing long-term care.

If you neglect to tell your insurance provider about your substance usage and happen to die in a drug-related death within two years of obtaining your policy, the provider will probably investigate your past.

They can easily find out that you lied on your insurance application, and then they will not be obligated to pay out your policy to your loved ones.

Never Lie to Your Insurance Provider

Therefore, it’s important to be completely honest about your drug use to the insurance provider. The underwriting process typically includes a routine blood and urine test as well as a review of your medical records. 

They will also ask you more in-depth questions about your drug/alcohol use once you tell them that you’ve used these substances before. 

The life insurance company will not tell the police or your employer about your substance abuse. Your medical information is protected by HIPAA, so they can’t share that information without your permission.

Other Life Insurance Options That Offer Minimum Coverage

If you don’t qualify for a term or permanent life insurance policy, there are other options available. These options may not be your ideal life insurance policy since they typically offer minimal coverage. 

These options also allow you to bypass a medical exam and they include:

  • Group life insurance: Often offered by employers, this policy is affordable but offers less coverage than most people need.
  • Guaranteed issue life insurance: You are nearly guaranteed to be accepted for this type of plan, but it can come with high premiums, low coverage limits, and age restrictions.
  • Simplified issue life insurance: People in assisted living or those who have a critical illness may be declined. Policies come with similar restrictions to guaranteed issue coverage.

The best way to ensure that you have a satisfactory but affordable life insurance policy is to get sober and attempt life insurance applications sometime after your recovery.

Luke Williams writes and researches for the insurance comparison site, QuickQuote. His passions include best practices for insurance and helping others find the most appropriate life insurance policies.




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