Life insurance with Dementia and Alzheimer’s

Being diagnosed with dementia can be devastating, both emotionally and financially.

However, you don’t have to face it alone. More than 747,000 Canadians are living with Alzheimer’s or another dementia. This means there are still insurance options available.

Life insurance should be part of anyone's overall financial plan as it provides financial assistance when your family needs it most. Even though Alzheimer’s disease or dementia limits your options, you can still get coverage.

This guide provides you all the information you need to know about getting life insurance with Alzheimer’s or dementia. 

‍Key Takeaways: 

• Life insurance with dementia or Alzheimer’s is possible, but your options may be limited to guaranteed issue and group life insurance
• A dementia or Alzheimer’s diagnosis makes it more difficult to qualify for medically underwritten life insurance policies
• Guaranteed issue life insurance and group life insurance have smaller payouts compared to individual term and whole life policies
• Life insurance rates vary considerably among insurers, so compare quotes from multiple insurance companies

Understanding Dementia and Alzheimer's disease

The term “dementia” doesn’t refer to one, particular disease. Instead, it is an umbrella term used for describing a group of symptoms affecting thinking, memory, and social abilities. There are more than 200 subtypes of dementia, the most common being Alzheimer’s disease.

Alzheimer’s disease (and other forms of dementia) can affect an individual at any age, but it’s more common in people aged 65 or above. The most common symptoms of Alzheimer’s are: 

• Memory loss that impacts day-to-day abilities
• Problems with language
• Difficulty completing familiar tasks
• Poor judgment 
• Losing track of dates and known locations 
• Forgetting recently learned information or repeating questions
• Trouble understanding spatial relationships
• Misplacing things

The symptoms of Alzheimer’s disease (and other subtypes of dementia) get worse over time, although medications may slow their progression. As of now, there’s no cure for Alzheimer’s, and the average life expectancy of a person after receiving the diagnoses is 5.8 years.  

The exact causes for Alzheimer’s are not known, but the following factors are known to increase the risk of developing it: 

• Age: The risk of being diagnosed increases with age
• Down syndrome (DS): Down syndrome significantly increases the risk of developing Alzheimer’s. Estimates suggest 50% or more of people with DS develop Alzheimer’s disease as they grow older.
• Head injuries: Mild traumatic brain injury may increase the risk of developing dementia.
• Family history: If you have a parent or sibling with dementia, you may be at an increased risk.

Can I get life insurance with Dementia or Alzheimer’s Disease?

Yes, you can get life insurance with dementia or Alzheimer’s disease, but your options will be limited.

Dementia is one of those conditions that make it hard to qualify for a medically underwritten term life or whole life policy. Nor will you qualify for simplified issue insurance — which does not require a medical exam but does require you to answer some health questions. That means, outside of group life insurance, guaranteed issue life insurance is your only option for securing life insurance coverage. 

Guaranteed issue plans don’t involve any medical underwriting — no medical exam or health questions — so you can get an approval despite serious health issues. However, these policies have smaller death benefits and higher premiums than standard plans. They also include a two-year waiting period, but even so having such a policy can be beneficial. 

It can help you pay for your end-of-life expenses and even leave a small inheritance to your children or grandchildren. 

Types of life insurance with Dementia or Alzheimer’s and Pre-existing conditions

People with dementia or Alzheimer’s cannot always qualify for traditional life insurance or simplified (no-medical) life insurance. Their safest options are guaranteed issue life insurance and group life insurance.

Guaranteed Issue Life Insurance 

Guaranteed issue life insurance is a small permanent life insurance policy. Unlike traditional plans, it doesn’t require a medical exam or ask any health questions. Acceptance is guaranteed as long as you are not older than 85 years, the cut-off age for guaranteed issue life insurance.  

While traditional policies can cover you for more than $5 million, guaranteed issue plans have limited death benefits, up to $25,000 or $50,000. In addition, these policies have a waiting period, typically two years, though sometimes it can be of three years. If you die from a natural cause while the policy is in its waiting period, the insurer will not pay the death benefit. Instead, it will return the premiums paid into the policy up till then plus interest. 

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Group Life Insurance 

Group life insurance is a term life or permanent life insurance policy that is available only through an employer. Typically, employers offer it to their workers for free or at reduced rates. Since these policies do not involve much medical underwriting, you can get coverage with a pre-existing condition. While the coverage amount is limited — one or two times than the annual salary — it is far more than what guaranteed issue life insurance offers. 

The chart below shows the life insurance options available to dementia patients. 

Why do insurers care if I have Alzheimer’s disease? 

An Alzheimer’s diagnosis impacts your insurability in two ways. First, it is a progressive disease that affects parts of the brain that control thought, language, and memory. Over time Alzheimer’s disease impairs a person’s basic daily living skills, including dressing, eating, bathing, and using the toilet. 

Symptoms of Alzheimer’s include difficulty thinking, concentrating, and understanding, mental decline, agitation, aggression, jumbled speech, mood swings, loss of appetite, depression, and more. Although medications may slow down memory loss and temporary reduce some symptoms, there is no cure for Alzheimer’s. 

Because Alzheimer’s is a chronic condition, most life insurers (if not all) do not offer medically-underwritten policies to those diagnosed with it. 

The second reason why securing traditional coverage with Alzheimer’s is almost impossible is that it severely reduces life expectancy. The average life expectancy of a person diagnosed with Alzheimer’s is roughly 6 years. 

Can life insurance help me if I’m still alive?

If you have a whole life or universal life insurance policy from before you were diagnosed with Alzheimer’s disease, you can use it while you’re still alive. These policies accumulate cash value, which you can access while living. As the policy owner, you can take out a policy loan or withdraw the cash value partially or fully at any time. 

A policy loan is basically borrowing money against the cash value. It has a lower interest rate than a bank or credit card loan, and paying back the loan is optional. However, if you choose to not repay, the insurer will deduct the outstanding amount from the death benefit, meaning your beneficiaries will receive a lower payout. 

Another option for accessing the cash value is to make a partial or full withdrawal. If you withdraw part of the cash value, your death benefit is reduced on a dollar-for-dollar basis. Whether you will receive a tax bill or not depends on how much you withdraw. Any amount that exceeds the policy’s adjusted cost basis (ABC) is taxable. 

Withdrawing all of the cash value at once will terminate the coverage. Consider this option if you no longer need life insurance coverage. Upon policy surrender, the insurer will return the accumulated cash value less any surrender fees and other charges. 

Depending on the terms of your contract, you may also be able to access a portion of the death benefit while you’re still alive. Most life insurance policies include a living benefit rider by default. It allows the policyholder to receive an advanced payment on the death benefit if the insured is diagnosed with a terminal or critical illness and have a life expectancy of less than two years. 

Conclusion

You can get life insurance with dementia or Alzheimer’s disease. However, your options for coverage will be limited. Insurance companies generally do not offer medically underwritten policies to people who are living with dementia. Therefore, other than group life insurance, guaranteed issue life insurance is your only means to secure a death benefit for your family. 

Premium rates for guaranteed issue plans may vary considerably from insurer to another.

Your best chance of securing low rates is to shop your application to multiple insurance companies, which Dundas Life takes care of behind the scenes. We have worked with many clients with dementia and Alzheimer’s, and we can help you, too. Schedule a call today to have our advisor walk you through your options and help you secure the right coverage at the lowest-possible price. 

Frequently Asked Questions

How do pre-existing conditions like dementia or Alzheimer's disease affect life insurance eligibility and premiums?

Pre-existing conditions can impact your insurability and by extension limit your life insurance options and increase your insurance payments. The kind of impact a pre-existing illness or disease has on your insurability depends on many factors, including, but not limited to, the following:

• The exact pre-existing condition you have
• Its severity
• Your overall health

In most cases, having a pre-existing illness won’t prevent you from qualifying for traditional life insurance. You may even receive a standard or preferred rate if your condition is not severe and your overall health good. However, some pre-existing illnesses, like dementia, can make it impossible for you to buy a traditional term or whole life insurance.

The good news is that you can still qualify for group life insurance (if available through work) and guaranteed issue life insurance. 

What are some alternatives to traditional life insurance for individuals with dementia or Alzheimer's disease?

People with dementia or Alzheimer’s are not eligible for traditional life insurance, but there are other alternatives. If you or a loved one has been diagnosed with dementia and you are looking for life insurance, consider guaranteed issue life insurance or group life insurance. 

Why does an Alzheimer’s diagnosis make it difficult to qualify for life insurance? 

Alzheimer’s is one of the conditions that can severely impair your daily function and reduce your life expectancy. Because of these reasons, life insurance companies rate dementia patients as high risk and refuse to write them a traditional term or whole life policy. 

How life insurance can help people with dementia or Alzheimer’s disease?

People with dementia or Alzheimer’s can buy guaranteed issue life insurance. It is a small permanent life insurance plan designed to help your loved ones pay for your funeral and end-of-life expenses. Depending on the death benefit for which you qualify, you may even be able to leave a small inheritance to your loved ones.  

Does life insurance pay out for Alzheimer’s? 

If you have a life insurance policy from before you were diagnosed with Alzheimer’s disease, your policy will pay out, as long as you were honest about your condition when you applied. Life insurance policies have an all-cause death benefit, unless stated otherwise in the contract. Therefore, no natural cause of death, including complications arising from dementia or Alzheimer’s, should prevent your beneficiary from collecting the death benefit.    

Is Alzheimer’s disease a critical illness?

Some critical illness insurance plans cover Alzheimer’s disease while others don’t. Read the policy document to find out if your plan cover it or not.