Insurance for Pre-existing Conditions

What’s the use of getting health and life insurance if my pre-existing condition won’t be covered?

I’m sure many of us who are looking into health and life insurance plans (#adulting) have thought about this or have heard friends talk about it. Why are insurance companies so strict about pre-existing conditions? If the point of insurance is to make sure I am covered, shouldn’t they cover this? Or why are their exclusions so wide?

Those are all reasonable and valid concerns. For this post, I’d like to share with you some of the reasoning behind exclusions and give you some tips on how to get the best policy possible. 

Quick note: health and life insurance is a broad term that covers plans such as hospitalisation insurance, critical illness, disability insurance, etc. 

Why are health and life insurance so strict when it comes to pre-existing conditions?

At its core, insurance is about transferring risks you cannot bear over to an entity that can. This is done by what we call risk-pooling. We pay premiums to the company, which gathers the funds together and uses that to pay out to people who make claims. And while insurance is a product that protects you and your family, insurance companies are still profit-driven, which means that they tend to avoid taking on excess risk if they can help it. 

This is why pre-existing conditions are tricky. Apart from the regular unknown risks that the insurance companies are taking on for each customer, they are taking on additional, known risks that they would prefer to avoid. The thinking behind this is that the chance for this customer to claim is much higher (statistically) than someone that does not have any known conditions.

So, while we might think that they are high, the premiums the customer pays is peanuts compared to the claims that might arise, especially if the insurance company covers many customers with pre-existing conditions. This could result in the insurance company going bust or selling off their business because of how unsustainable the business is. (This has happened before and in fact, an insurer just sold their business a month ago from the date of writing this article.) When this happens, it could affect all the existing policyholders negatively.

Now that we know why Insurance Companies are hesitant to cover pre-existing conditions, here are 7 potential outcomes that you could get if you negotiate with the Insurance Company

1. Normal Terms - No changes to the original insurance cover. The pre-existing condition is probably nothing too serious or the applicant has fully recovered from it
2. An Offer of Cover with Exclusions - The insurer would issue the coverage for everything in the contract except for certain conditions. (Often would be illnesses related to the pre-existing conditions or specific body parts that the pre-existing condition affects.)
3. An Offer of Cover with Premium Loading - All the coverage remains intact, just that the customer would be required to pay more for it.
4. An Offer of Cover with both Exclusions and Premium Loading - Combining both outcomes 2&3.
5. Request for Medical Check or Supporting Medical Documents - This happens when the info provided to the insurer lacks clarity or if the insurer is unsure of the severity of the pre-existing condition. More documentation/reports would need to be furnished to the insurer.
6. Put on Hold - The insurer is not willing to make a decision at the present moment. It usually is because the customer has some pending checkups or scan results from the doctors. The insurer would make a decision when the results are out.
7. Rejected - The risk that comes along with the acquisition of the new customer is too much for the insurer to bear and has no choice but to reject the application.

Three Tips about Getting Insurance With a Pre-Existing Condition

Is all hope lost when if you have a pre-existing condition? Of course not! Here my top three tips:

1) Do not delay getting your insurance even if there are some extra conditions offered to you. Rather get yourself covered immediately than to risk the worsening of your condition. You might then ask,

"What if my condition improves and I have already signed and agreed to the extra conditions?"

If you already have insurance but have gotten better or the doctor has certified that you have fully recovered from the illness, you can re-negotiate the terms of the insurance. (The extra conditions can be removed if the doctor is able to justify and prove that you have recovered or if your condition has improved significantly.)

2) If you’re about to get insurance, get your doctor to write you a memo clearly stating the condition that you have as well as the severity of it. It can be a tedious process bouncing back and forth with the insurer and your doctor when reports or memos do not clearly state your condition. Also, as you wait for your report or memo from the doctor, do not stress about the deadline to accept an offer from the insurer - let your advisor know and the company can rescind the current offer and re-offer the terms once the medical report is out. 

3) There are some plans that are in the market that are designed and purposed to protect customers with some pre-existing conditions. Speak to your advisor and find out more!

Bottom line (TL;DR):

Getting insurance when you are young and healthy is crucial! If you’re expecting a child, do consider getting policies that would protect your baby even before he/she is born. But even if you have pre-existing conditions, please do not neglect this just because there is a possibility of loading or exclusions. It is not When you look at the big picture, there are still many other illnesses, potential injuries, problems apart from your pre-existing conditions that may arise in the future which you can get covered. No point sulking at the 5% exclusion and end up letting go that 95% cover. Even 1% is better than 0%.

If you would like to talk to someone about the specific type of health and life insurance you should be getting, please feel free to contact me! I’m here to help if you’re looking for insurance coverage or if you have any questions about what I’ve just shared.