3 ways depression can influence your long-term insurance cover and what you can do about it

Image: Getty
Image: Getty

According to the South African Depression and Anxiety Group (Sadag), one out of every four South African employees has been diagnosed with depression. This is increasing due to the current economic climate, job shortages and financial challenges.

Depression is a type of mental disorder that can have a negative impact on your ability to interact with others as well as perform your duties at home or at work. Many people have, at some point in their lives, suffered from depression because of events such as the death of a loved one or other tragedies. This does not necessarily mean that it is a chronic condition or that it will re-occur.

There is a common misconception that if you're diagnosed with depression, you are unable to get life cover. However, Henk Meintjes, Head of Risk Product Development at Liberty debunks this myth saying; "your insurance application won’t necessarily be declined, or your premium increased, just because you’ve been diagnosed with depression."

Depression is a significant cause of claims for critical illness, income protection and disability under its Lifestyle Protector offering. That means if you are unable to work or earn an income due to depression and you have the right cover in place, your insurer will help you cover the financial strain.

So, if you or a loved one has struggled with or continues to deal with depression, Meintjes reveals three ways depression can influence your long-term insurance cover.

Not all depression is rated equal

When insurers assess an individual's depression risk, they look at the severity of the condition, current lifestyle, the success of any treatment, management interventions, and any current or ongoing symptoms.

The reason is that mental health issues like depression range from a once-off reactive episode due to a specific event to major depression or mental illness that requires long-term treatment. If the event occurred several years ago and was successfully treated, the client would not necessarily incur a higher risk rating. 

If, however, the individual is currently experiencing depression and there is no way to ascertain the severity of the condition or if it will deteriorate, a more robust approach to assess the level of risk will be taken. 

Each mental issue is assessed and insured differently

Meintjes says, "As an insurer, Liberty will always consider the individual circumstances of applicants. Our underwriting team seeks to classify the degree of risk the applicant presents based on the information disclosed or obtained in the underwriting process."

However, in the case of a more severe mental illness where suicide is a risk, life cover would carry a higher risk rating. Unfortunately, in some cases life cover would be declined. The good news is that even if cover cannot be extended or the rating makes it unaffordable, there are alternative cover options available such as funeral and accidental death cover.

So, while an individual risk rating may not apply to life cover, it may apply to income protection cover that pays out when you cannot work due to depression. In these cases, if the condition is relatively severe, the cover may exclude depression.

The importance of full disclosure if you have depression

If you currently or previously suffered from depression, it’s important to provide the insurer much relevant information as possible. Clients may be embarrassed about the condition and avoid talking about it, but that may leave them exposed financially.

"Withholding personal facts is not worth it. With insurance, you’re trying to mitigate risks, but with non-disclosure, you’re adding another level of risk. It’s simply not worth withholding information. It puts your entire policy at risk," says Meintjes.

In the worst case scenario, an insurer could decide that the act of non-disclosure was so severe that the entire policy contract is deemed as null and void. This means that the beneficiaries of the insured will not receive any payment from the insurer.

For this reason it is vitally important to have a long term relationship with your Financial Adviser - or to seek one that you're comfortable with and can trust with your personal information.

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