Insurers may choose to cover you at an extra cost or exclude certain conditions.
Some insurers can decline cover if they think an individual is too likely to make a claim.
You must disclose your mental illness just like you would any other pre-existing condition.
If you have a mental illness, you're not alone. Around 45% of Australians will be affected by mental illness at some stage in their life and a 2021 Finder survey found that more than 1 in 3 Australian workers (36%) took sick leave for their mental health in the previous year.
If you're considering a new life insurance policy and have a history of mental health issues, the good news is life insurance can still cover you.
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Finder Score - Income Protection
Income Protection is a little complicated and a lot overwhelming. That's why we made the Finder Score, to make it easier to compare Life Insurance products against each other. Our experts analysed over 12 products and gave each one a score between 1 and 10.
But a higher score doesn't always mean a product is better for you. Your situation is unique, so your policy choice will be too. Don't think of Finder Score as the final word, but as a good place to start your life insurance comparison.
The short answer is, yes, you may be able to get coverage if you have a mental illness or suffer from one in the future. While there are still some misconceptions when it comes to mental illness and life insurance, industry analysis shows that mental disorders make up 11% of disability income claims.
What do I need to do to be covered? You should disclose your condition at the time of application and will need to satisfy health and lifestyle criteria.
Are there any waiting periods? Of the insurers we considered, all have a waiting period of 6 months for mental health claims, usually referred to as a qualifying period.
How long can I be covered? Insurers tend to limit the time you can be on income protection to 2 years over the life of your policy.
How does mental health affect your premiums?
Your premiums are affected by the perceived risk you pose to make a claim. High-risk factors such as an existing mental health issue, are viewed by insurers as more likely to make a claim and can be subjected to higher premiums.
Every insurer is different but you can expect your premiums to be affected in one of the following ways:
Cover at no extra cost: Your mental health might not be seen as an added risk and you'll be covered at no extra cost. You are more likely to get this if you can demonstrate that your condition is being managed and that you haven't had any recent issues.
Cover at extra cost: If your insurer feels that your condition represents an increased level of risk, but not an unreasonable one, they may offer cover but at an additional cost.
Cover with exclusions: Your insurer might offer you cover at no extra cost, but exclude cover for certain mental health conditions or offer lower benefit limits. This may be their course of action if you sought treatment or had a mental health episode several years ago but not recently.
Deny cover: Sometimes insurers can decline to cover people they feel are too risky. If they feel that your condition will almost certainly result in a claim or extra costs, they may be more likely to opt for this.
From a legal perspective, insurers must have reasonable and relevant information to back up their decision.
Will I need to disclose my mental illness?
You are required to disclose mental health illnesses the same as you would any other condition.
Disclosure can help your insurer tailor your cover. Remember, your insurer cannot provide effective cover if it doesn't know your needs, and it's generally advisable to provide as much information as possible.
What is my duty of disclosure? You are required to inform your insurer of anything that may impact the type of insurance policy or level of cover you receive.
What happens if I don't disclose everything? If a customer fails in their duty of disclosure, the insurer reserves the right to cancel their policy without refund or refuse to pay a claim.
Key steps to take if you're looking for cover
Go through the policy document. You need to understand what your policy offers and the best way to do this is to read through the policy disclosure statement (PDS). This document contains information about how your insurer defines mental illness and if there are any exemptions or exclusions.
If in doubt, speak with an expert. Because of the confusing nature of insurance products, it's always best to speak with someone in the know. If you're having trouble understanding where an insurer stands when it comes to mental illness, get in touch with a financial adviser or the insurer.
Get specific definitions. If you do contact an insurer, ask them specifically how mental illness is defined. Some insurers use mental illness as a blanket term that covers everything from bipolar to anxiety disorders.
Ask if it's covered as a pre-existing condition. While some insurers will cover you if you have an existing mental illness, others will only provide you with cover if the illness presents itself after you start the policy.
Double-check before you switch. If you have cover through your super and you change providers, make sure you check the conditions related to mental illness as they differ between funds.
Ask about waiting periods. Some policies may have waiting or non-claims periods for a specified amount of time. Make sure you know what these are before you apply for cover.
What if I experienced mental health issues in the past but no longer do?
If you have previously experienced or sought treatment for a mental health issue, then it is likely to qualify as a pre-existing condition and the insurer may impose additional loadings or exclusions. The insurer may also decide that the condition poses little risk and cover you as normal.
A mental health issue could be identified as a pre-existing condition if it meets 1 or more of the following criteria:
A doctor or relevant medical specialist diagnosed it at a prior date
You have experienced prior symptoms that would cause a reasonable person to seek treatment
It's identified as the symptom of a genetic condition present from birth
You are currently taking medication for the purposes of managing the condition
These criteria may be interpreted differently depending on the insurer and the policy. Check the exclusions and pre-existing conditions sections of your policy's product disclosure statement (PDS) for more details.
Example: How insurers work with pre-existing conditions
Jason was looking for life insurance but was finding it difficult to get cover because of an incident several years ago where he had experienced a period of severe anxiety and depression but never sought treatment. To find cover, he started looking at how different insurers defined pre-existing conditions.
The first insurer's PDS defined having a pre-existing condition as "previously experiencing symptoms that would have caused a reasonable person to seek treatment". Under this definition, Jason's former anxiety and depression would count as a pre-existing condition.
The second insurer's PDS defined pre-existing conditions as ones that were "previously diagnosed by a relevant medical specialist". Under this definition, Jason's anxiety and depression would not count as a pre-existing condition.
Realising that he might be able to get lower premiums with the second insurance company, Jason got a quote to compare alongside other options.
* This is a fictional, but realistic, example.
Speak to an expert to get tailored income protection cover
What are my options if I'm rejected for cover?
If you're refused cover, you can contact the Australian Financial Complaints Authority (AFCA) as they handle complaints about insurers that refuse to provide general insurance. However, you can only contact FOS after you have gone through the insurer's dispute resolution process.
If you believe an insurer treated you in a discriminatory fashion because of your mental illness, there are options available to you including:
Contacting the insurers chief underwriters and explaining to them your issue
Contacting your insurers internal dispute resolution team
Getting in touch with the Mental Health Council of Australia (MHCA)
In most other circumstances this would be a clear case of illegal discrimination on the basis of mental illness, but insurers are legally allowed to do this as long as they can prove that it is reasonable and based on factual data.
No. If you develop a serious mental illness after taking out a policy it will be covered according to the terms of the policy. As long as you have followed the terms and conditions of the policy and kept up to date with premium payments, insurers cannot cancel it, except at specific times or under specific circumstances that will be laid out in the PDS.
Yes. There is very little rhyme or reason as to why this is and it does depend on the insurer, the policy, the nature of your condition and maybe even the mood of the insurance agent at the time. People have been denied a policy because they once sought treatment for stress more than a decade ago, while others have been accepted with far more serious and ongoing mental health issues.
Yes. If your application or claim has been denied, you can ask your insurer why. They should be willing and able to provide a satisfactory explanation.
The Australian Financial Complaints Authority (AFCA). If you've already approached your insurer and explained your concerns in line with the terms and conditions laid out in the policy document, but were left unsatisfied by their response, you can take it up with the AFCA. They can act as an impartial third party adjudicator.
Income protection will cover you for a short period of time if you have to stop work temporarily due to mental illness. However, you'll need medical proof that mental illness is the cause. This may vary between insurers and some will even require confirmation from an approved doctor. Some income protection insurance policies may exclude mental illness altogether, so be sure to check.
Beyond Blue. Beyond Blue provides people with 24 hour a day information and support for a range of mental health issues. Phone: 1300 224 636 Website:beyondblue.org.au
Mental Health Australia. Mental Health Australia is an organisation that strives to affect reform in Australia by providing people with a better understanding of the effects of mental illness. Phone: (02) 6285 3100 Website:mhaustralia.org/
Head to Health. Head to Health is a mental health resource that provides users with information about mental health issues and online programs. Website:headtohealth.gov.au
SANE Australia. SANE is a charity designed to help young people who have been affected by mental illness. Website:sane.org
ReachOut. ReachOut provides information about mental health for young people and their parents. Website:au.reachout.com
Black Dog Institute. Black Dog Institute provides information about bipolar disorder and depression. Website: blackdoginstitute.org.au
e-couch. e-couch is a self-help interactive mental health program. Website:ecouch.anu.edu.au
Headspace. Headspace provides young people specifically with advice, information and support about health and mental health problems. Website: headspace.org.au
Mental health online. Mental health online offers information about anxiety issues, auto-psychological assessment that are free of charge and treatment programs. Website: mentalhealthonline.org.au
MoodGYM. MoodGYM provides behavioural therapy through an interactive program. Website: moodgym.com.au
Partners in Depression. Partners in Depression offers support and info to those who are helping someone who is currently experiencing a mental health issue. Website:everymind.org.au/programs/partners-in-depression
Richard Laycock is Finder’s insights editor after spending the last five years writing and editing articles about insurance. His musings can be found across the web including on MoneyMag, Yahoo Finance and Travel Weekly. Richard studied Media at Macquarie University and The Missouri School of Journalism and has a Tier 1 Certification in General Advice for Life Insurance. See full bio
Find out what cover is on offer from Zurich Life Insurance and receive a secure quote for cover. Zurich offers a Life, Income, TPD, Trauma, and Child Cover with additional options to tailor cover further.
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