To a life insurance company, an impaired risk is a risk that has higher than normal mortality associated with it. All applicants present some degree of risk; some are standard, some are preferred, and others are known as impaired risks, but by definition, most are standard.
Actuaries develop premiums for various underwriting risks, ranging from preferred to standard to sub-standard (impaired), which are further segmented by gender and tobacco usage. While there are normally one or two preferred categories, most companies have a half a dozen or more sub-standard categories. So relatively healthy people, who make up the majority of applicants, can fall into perhaps one of five categories, while applicants with various afflictions can have double the potential categories in which to be classified. Of course each category carries its own premium.
It is important to know that all insurance companies do not view the same impaired risks the same or even similarly, so it is important to find a company that will look favorably upon your affliction. And while finding a company that looks favorably upon a particular risk is important, it is oftentimes more important to present that risk to the insurance company in the best possible light. That will almost always start with submitting “blind” information to the insurance company.
Submitting “blind” information accomplishes two things; one, you receive a general indication of how the insurance company perceives the risk, and two, that information does not become part of the MIB’s database. That is extremely important, as any negative information in the MIB could hamper future efforts at obtaining life insurance.
I find that many people believe they can’t obtain life insurance because of some ailment they currently have, but that is usually not the case. Insurance companies are in the business of putting business on the books, so if they feel they can properly price a particular risk, they will make an offer. Very few afflictions are outright declined, although any serious illness that has been recently diagnosed (within the past year) will normally be postponed until the patient’s response to the treatment plan can be observed.
I previously made the case for buying life insurance when young, and while it is certainly most efficient to do so, it isn’t always practical. Sometimes life’s changing circumstances dictate the need for life insurance not only at an older age, but also at a time when our health isn’t optimal. Although the premium will definitely be higher than when we are young and in optimum health, the good news is that, except in the most extreme cases, coverage will be available.