I have a serious medical condition – can I still get life cover for a mortgage?
It is important to know that insurers assess each application for life cover individually.
When consumers are taking out a life assurance policy, companies will have to take the existence or potential of medical conditions into consideration and assess each case individually. Decisions on the cost and availability of these products depend on the individual circumstances of the applicant, such as age and health at application as well as past history.
Insurance is what is called a pooled product – that means the cost of providing it is spread across all policyholders. However, in order to be fair, those who present a higher level of risk will usually pay a higher premium – that reflects the fact they are more likely to make a claim. If someone is more likely to be in ill-health or have/has a medical condition which medical data tells us is likely to have an impact on future health, their premium will be higher than someone who does not. The important thing here is any decision an insurer might take on this basis is informed by up to date medical and actuarial information.
Insurers are permitted to apply what is called risk based pricing under the Equal Status Act 2000, where insurers can differentiate between applicants based on actuarial or statistical data or other relevant underwriting or commercial factors. It really comes down to the management of risk. It is vital to the fairness of insurance that insurance companies are able to assess each application on its own terms. This is because two people who are both diagnosed with the same medical condition will not necessarily present the same level of risk and are likely to receive different feedback from the same insurer. It is also the case that two insurers might come to different conclusions when assessing the same risk profile given their ability to insure individual risks differs.
The outcome of a full assessment will determine if an insurer can offer cover to an individual person and whether this will involve any additional premium. Where there is an additional premium component which reflects the risk of a previous diagnosis, the application may only last for a specific period as risks evolve over time, e.g., the probability of developing ill health, a related conditions or death may reduce.
What if I am undergoing medical tests?
If an applicant is currently undergoing tests for a medical condition or to assess the severity of a diagnosed condition, a decision on an application for life cover is likely to be postponed until the results of the tests are clear. This is because until the tests are completed, the risk associated with that particular application is not known and it is difficult for an insurer to make a decision.
Specialised financial advice is important when an applicant has a medical condition that may increase the risk. Brokers Ireland has established a register of advisors/brokers who specialise in sourcing cover for those who have difficulty in obtaining life cover due to a pre-existing illness. These brokers are experienced in working with insurers to understand the risk appetite for various medical conditions.
What if I am declined cover, is there another option?
Unfortunately, in some instances the risk presented by the applicant outweighs the risk appetite of any insurer and the application may be declined. This is not the end of the process however, there are still options to obtain a mortgage. The lender can grant the applicant a waiver from the requirement to have life cover under the provisions of the Consumer Credit Act 1995.
The requirement to take out mortgage protection is set out in Section 126 of the Consumer Credit Act 1995, but this section also includes a provision making it clear if an individual cannot obtain mortgage protection or can only do so at a cost that is unreasonably high, an exemption from the requirement can be granted. Information can be found this on Citizens Information. Applicants should request this waiver from their lender.
