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I’m working with a new client who ran head long into an all too common source of being declined for life insurance, company sponsored group life insurance. Her issue? Arguably one of the mildest cases of bipolar disorder I’ve worked on.

To be sure, almost all group insurance is weighed down by the KISS, Keep It Simple Stupid, method of underwriting. Not unlike simplified issue insurance it seems like it ought to be bombproof, that just like the high rates seem that they should allow most anyone to get simplified issue, the high volume spread of risk seems that it should allow most anyone to get group coverage. But, just like simplified issue, that logic holds with group insurance as long as you fall, based on your health question answers, within a standard rate class for that company.

I’ve long been an advocate of carrying personal life insurance outside the workplace even if you get offered a good policy with the group. One of the awful truths about group life insurance is that it’s about as portable as a 3 ton boulder if you happen to get laid off or quit and move to another job or retire. You will almost always be able to take the insurance with you in some form. But consider these two scenarios. You own a term insurance policy at a great rate. You decide you want a new one but your health has changed dramatically. You can 1. Buy a new term insurance policy at a much higher rate or 2. You can change your policy to a permanent policy at a much higher rate through the conversion option.

You have essentially those same two options with group coverage. You can just leave it behind and apply for a new personal (or a new group policy) subject to your increased age and any health changes, or you can convert your group policy to some amazingly high priced permanent product, a whole life or universal life policy that would then become a personal policy.

Got a little off the subject there but it was worth that review of some serious downsides to having all of your eggs in a group life basket. Back to my client though. She certainly meets all of the criteria for a good approval for a personal life insurance policy.

1. Someone who has not been hospitalized for bipolar disorder other than for diagnosis?
2. Someone who has not attempted suicide or had bouts with suicidal ideations?
3. Someone who is compliant with their treatment, both medications and regular followups?
4. Someone who is leading a stable family life or social life?
5. Someone who is exhibiting a stable work life?
6. Someone who is not on disability for bipolar and does not have issues with drinking or drugs? If there’s a problem here, then the answers to 3, 4 and 5 are no.
7. Someone who is not being treated with anti psychotic drugs.

We should have no problem getting her coverage at a very favorable rate, yet she would be declined by most group policies.

Bottom line. Underwriting for personal coverage allows for flexibility in approved rates. It allows for perceived morality risk to lie outside of a one size fits all rate class box. It allows for approvals when virtually all group policies would look at the same information and stamp it declined.