Help with Life Insurance Policy for Son with Autism

Question: Our son has autism. Recently we attempted to obtain a life insurance policy for him. The application was rejected based on the autism diagnosis. What can I do?

Response provided by AAoM Legal Consultant John Brower, Attorney

Parents desire to buy insurance on their child’s life for many reasons. One of the more frequent ones is to provide funds for the funeral and related expenses in case the child does not survive the parents. The life insurance industry has multiple types of polices that are available. The list is long and includes such products as whole life, term life or term life for a set number of years. However, they all share a common element that life insurance, by its nature, discriminates between different classes of people based on life expectancy factors. Their underwriters examine the various risks that affect how long someone may live (i.e. how soon the policy will need to be paid off) and place each set of risks into different “risk pools”.

It is generally well settled law that the decision the underwriters made can be based on health factors. While there are laws that prohibit discrimination in some areas of insurance, such as health insurance or basing the decision on genetic testing, in general life insurance is not one of the where the issuance of a policy is controlled by anti-discrimination laws. Additionally the McCarran-Ferguson Act [“MFA”] leaves the regulation of the insurance industry to the states. In Michigan there is some protection in MCL §500.2403 but the protection appears limited to the rates charged, rather than the issuing of a policy.

To address the issue when an insurance company rejects the application, first if you are working with an agent, ask the agent to “shop” your application with multiple carriers. Each carrier sets the criteria for the medical conditions they use to reject applicants. For example, some insurance companies will take the risk and insure an applicant with Type II diabetes, while other will not. The same holds true for disabilities like autism.

It is also likely that the degree of concern on the part of the insurance company and therefore the underwriting standards are influenced by the face value of a policy. A policy for $20,000 creates much less risk for an insurance company to manage than one for $200,000.

If there are repeated rejections, it also may make sense to look carefully at your son’s medical records to see if they contain information that would trigger concerns on the part of the insurance underwriters. Co-morbid conditions in addition to autism are always of concern. If the medical records contain such items of concern, you may want to consider have the physician write an explanation into your child’s medical record to minimize any concerns.

Once you locate a company willing to insure your son, you may want to consider a whole-life policy. While the premiums are higher, this type of policy generally is not subject to cancellation if your child’s medical condition deteriorates. There are other types of policies that an insurance company may offer rather than denying coverage outright. A “graded” life benefit policy is a possibility. Such a policy rather than paying the face value of the policy on death, adjusts the amount based on the number of years the insured survived. For example if the insured dies in the first year of the policy, only the premium is returned, but if it is the second year it pays out 25% of the value of the policy. That continues until a defined future date when a 100% payout is reached. However, at any time if the death is due to an accident, 100% is paid. Other companies issue policies based on the level of functioning of the insured. Therefore the amount of coverage available to a person with high functioning autism may be higher than one whose autism causes more severe impairments.

Hopefully, by working with your agent or insurance companies you will find one that has a better understanding of what autism is (and is not) and will issue a life an insurance policy that meets your needs.

NOTE: What is being provided above is the opinion of Attorney John Brower. It should not be considered legal advice as such advice can only be provided after a detailed review of a student’s records and all the relevant facts.