Life Insurance with COPD

Living with COPD (chronic obstructive pulmonary disease) can make the future feel uncertain, but it doesn't have to leave you and your loved ones financially vulnerable.

Getting life insurance with COPD may seem like a daunting task, but with the right approach and a little determination, it's achievable.

In this blog post, we'll cover how COPD affects life insurance, how to apply for coverage, challenges you may face, and what to do if you're declined. So let's dive in.

What is Chronic Obstructive Pulmonary Disease (COPD)?

Chronic obstructive pulmonary disease (COPD) is a long-term lung illness that causes difficulty breathing. Wheezing, coughing, and mucus production are also frequent symptoms. There is currently no cure for COPD.

Yet, with treatment, you can limit the growth of the disease and regulate the symptoms. Smoking is the leading cause of COPD, so if you smoke, stop immediately.

How COPD affects my insurance rates?

A chronic obstructive pulmonary disease (COPD) diagnosis does not automatically disqualify you for life insurance. However, any pre-existing condition, especially a severe one, will push up the cost of insurance. The same is the case with COPD. 

When you apply for a life insurance policy, the life insurance company will assign you a health rating based on your age, health, and family medical history. Your health rating, in turn, will determine your monthly premium rate. 

Every insurer has its own system for rating applicants, but typically all providers use the following five classifications. Anyone who does not fall into any of these classifications is declined coverage.

You generally don't qualify for a preferred plus, preferred, or standard plus rating with COPD. We recommend aiming for a standard rating or a tabled rating that is slightly below standard. 

Life insurers often give people with mild COPD good ratings, as long as they don't smoke or haven't smoked for at least 12 months before applying and don't take medications every day. Getting a standard premium rate for COPD is well within reach. If you have recently been diagnosed and your condition is mild, getting a good rating will be easier.

Because COPD is a progressive disease, the premium rate may increase sharply for every year you delay applying for a life insurance policy. On average, premium amounts jump up by 8–10% for every year of age, but for COPD patients, the increases tend to be higher.

With moderate COPD, a person experiences shortness of breath on moderate exertion like climbing two flights of stairs and requires an inhaler on a regular basis. A moderate COPD will result in a sub-standard rating, meaning you will pay more than the average person of the same gender and age. 

When COPD is in a later stage, simple things like getting dressed or walking a short distance can make you feel out of breath. If that describes you, you will receive a tabled rating, if you are accepted at all. 

When the COPD is severe, the patient feels breathless all the time, which severely limits everyday activities. You will not be approved for a standard policy if you have severe COPD. Your only option is a guaranteed-issue life insurance policy. 

Here are the general life insurance policy ratings (and premium rates) for different stages of COPD:

‍Factors that affect the underwriting of life insurance application

Insurance companies look at your age, smoking history, overall health, gender, lifestyle, and body mass index (BMI) while determining your eligibility and premium rate. Besides these, insurance carriers will want to know pertinent details about your COPD, including: 

• When was your condition diagnosed? 
• Have you experienced significant weight loss since your diagnosis?
• What is the severity of your symptoms (e.g. frequency of respiratory infections)?
• What is your treatment plan? What medications are you taking?
• Are you able to work despite COPD?
• Have you ever been hospitalized?
• Do you use oxygen cylinder?

If you apply for a standard life insurance plan, you will need to undergo a medical exam. The insurer will also access your medical records to better understand the severity of your condition. Based on its findings, it will decide whether to offer you a policy and, if so, your premium rate. 

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Getting the best life insurance policy for COPD

The best life insurance policies for chronic obstructive pulmonary disease (COPD) depends on whether you can qualify for a standard component, called cash value. Part of your monthly premium goes toward building cash value, while the other part covers the insurance cost and administrative fees. Your policy’s cash value is separate from the death benefit and can be accessed at any time for any purpose while you are still alive. 

Permanent life insurance is further divided into two types: whole life insurance and universal life insurance. Whole life policies offer a guaranteed rate of growth for cash value, which is set by the insurer. Your premium rate and death benefit also remain unchanged throughout. 

Universal life policies, like whole life plans, build cash value, but the growth rate depends on the current market rates. When the market is up, the cash value can increase. When the market goes down, the cash value decreases. Depending on the insurance company, you may be able to change how much you pay for your premiums from time to time, as long as you stay within certain limits. 

Final Expense Life Insurance

A final expense policy is a small, permanent life insurance plan for people over the age of 50. Unlike other permanent policies, this one doesn't replace lost income or give you a chance to build up wealth. Instead, it gives a small death benefit to cover funeral and medical costs at the end of life.  

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What to do if you are denied coverage?

If you have chronic obstructive pulmonary disease (COPD) and are using oxygen, you will likely be ineligible for a fully-underwritten life insurance plan. Other health conditions, along with mild COPD, may also make a standard policy unattainable. But in neither situation is life insurance completely out of your reach. 

Those who cannot get standard life insurance with COPD should consider guaranteed issue. Because these policies do not involve any medical underwriting—a medical exam or health questions—you can buy coverage even with a debilitating health condition like COPD. But keep in mind that guaranteed issue plans come with the following caveats: 

1. The policy amount is typically capped at $25,000 - $50,000.

‍Limited cash benefit means guaranteed issue life insurance is suitable only for covering end-of-life expenses and leaving a small inheritance.

2. There is a small waiting period — two years on average, but some insurers have a three-year waiting period.  

If you pass from natural causes during the waiting period, the insurer will not pay the death benefit to your beneficiary. Instead, it will return all your premiums plus interest. 

3. Guaranteed issue plans are significantly more expensive than comparable standard policies.

‍This, however, is on the expected lines, as these policies involve little underwriting.  

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Conclusion

With chronic obstructive pulmonary disease (COPD), you can usually get life insurance coverage, but you will most likely have to pay more for coverage. How much more is there? This is determined by the severity of your condition and your overall health. If you apply for a fully underwritten policy, you will be denied coverage if you have severe COPD. Consider a guaranteed issue policy if you find yourself in this situation.

The bottom line is that you can buy affordable life insurance with COPD regardless of your condition. And, because Dundas Life works with top Canadian insurance companies, your premium rate will be as low as possible.

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Frequently Asked Questions

Should I disclose COPD on my life insurance application? 

The answer is an unambiguous YES. You should not lie about your health or omit a medical diagnosis on your life insurance application. Doing so amounts to material representation (or “fraud” in plain language) and is akin to courting danger. 

Sure, a COPD diagnosis will lead to an increased premium rate or, worst-case scenario, a policy denial. But lying or withholding key information on your application can have much more serious consequences down the road. 

For one, even if you omit the COP diagnosis on your application, the underwriter will likely find out the truth while looking at your  medical records. If the insurer learns the truth about your health later on, it can drop you as a policyholder on account of material misrepresentation, which may make buying a new policy elsewhere very difficult. Should you pass away within the first two years of taking out a policy, the insurer could refuse the claim.

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How does smoking affect your chances of getting life insurance with COPD?

If you have COPD and smoke, most insurers (if not all) will rate you as high-risk. Depending on the severity of your condition, you may receive a tabled rating or be declined. 

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Can seniors with COP get burial insurance?

Burial insurance, which is also called funeral insurance or final expense insurance, is a type of permanent life insurance that pays for costs related to the end of life. These policies have smaller payouts and are less expensive. Unlike guaranteed-issue life insurance, burial insurance has no waiting period; the coverage is immediate. 

As a senior with COPD, you can qualify for burial insurance, provided you are not on oxygen. While there are plenty of options for non-oxygen COPD life insurance, few insurers are willing to write a burial insurance policy for seniors who have COPD and use oxygen. In that case, you would have to settle for either a modified or graded policy. 

A modified policy provides immediate coverage but pays only a part of the stated death benefit if the insured dies during the first few years after purchasing the policy—for example, 25% (year one), 75% (year two), and then onward 100%. A graded plan comes with a 2-3 year waiting period, during which the insurer only returns the premium plus interest in the event of death.