I was contacted today by a woman who was pretty distressed by the fact that Gerber Life wouldn’t approve her 17 year old daughter for life insurance. The young lady has type 1 diabetes and I want to touch on a couple of subjects with this particular situation.
First let’s talk about children’s life insurance. Companies like Gerber underwrite healthy children because they know that the risk of a healthy child dying as a child is very low. I think there’s a tendency for all of us as parents to avoid the subject of the possible death of children, but that tendency becomes dissolves a bit when we have a child who has serious health issues. We, which includes me, don’t get why an adult can be approved for life insurance with a serious impaired risk, but not a child who honestly, because of parents, probably is more compliant with treatment and followup than adults, won’t even be considered.
Life insurance is theoretically all based on actuarial data and mortality risk for different ages and different health conditions. I’ve been told by experts at life insurance companies that the reason they will only issue policies to healthy children is that they don’t know the actuarial and mortality data for ages 1-20 with impaired risk health issues. If they don’t know it I would presume it’s because they don’t want to, because the facts are certainly available. And the only reason they would claim to not know it and refuse to entertain the idea of underwriting impaired risk in children is that there’s not enough profit in the idea. That isn’t to say that it couldn’t be priced to be profitable, but not profitable enough for their board of directors. Ok, so the conclusion is that life insurance companies really don’t care about our kids unless they are healthy and obscenely profitable.
So back to type 1 diabetes life insurance underwriting. The bad news for the mother of the 17 year old is that she can’t currently get underwritten for life insurance no matter how well controlled her diabetes may be. The good news is that with good control and compliance with treatment, 10 years down the road she will be a prime candidate for great underwriting at prices that us more seasoned impaired risk life insurance clients can only dream of. Her advantage at that point won’t be that she is suddenly less impaired or a better risk, but that she will only be 27 years old and life insurance is amazingly inexpensive at that age.
Let me throw out some of the other type 1 diabetes sweet spots that life insurance underwriters are actually competing for. It won’t go without being said that the scenarios following all assume great compliance with treatment and follow up and good to great control preferably with an A1c under 7. If you are in your 30’s or 40’s and were diagnosed as an adult it’s kind of like the old Uncle Sam recruiting poster. They’re pointing at you and saying “I want you”. If you’re over 30 and the onset of your diabetes was in your teens they want you too, a lot. And understand that locking in 30 year term rates or even permanent insurance at that age is, well, budget-able. Not far behind on the life insurance underwriter most wanted list would be those mid 20’s to 40 or so whose diabetes diagnosis came as a child after age 5. The clients I’ve worked with that fall into this group are well aware that life insurance in the past for their situation has been non existent or very expensive and they are pleasantly surprised to be able to buy adequate amounts of life insurance for their family or business needs at good prices.
The last group that still seems to be a little beat up, but no where near like it used to be (automatic decline) is those over age 25 diagnosed at age 3 or 4. Most underwriters still don’t trust that medical care for those diagnosed that early has evolved just as much as medical care for any other person with type 1 diabetes.
Bottom line. Life insurance underwriting lags behind medical advances and, while frustrating, when you consider the law of large numbers that rates are figured with it’s fair to note that the best medical advances aren’t available to the large numbers. That isn’t to say that an occasional out of the box underwriter won’t see their way to a better than average approval. If you have questions about how your medical condition and all the variables that make it yours alone would be viewed in underwriting, call or email me directly. My name is Ed Hinerman. Let’s talk.