There are many reasons why someone might be uninsurable for health insurance. The variation in these conditions is wide enough that it’s impossible to give a definitive list of what will make you uninsurable. However, if you have any of these conditions or are worried about getting one, it’s best to talk to an expert who can help you find a solution that works best for your situation. In order to do this, visit HealthPocket today!
In this guide, we find out What Makes A Person Uninsurable For Health Insurance, factors affecting insurability of risk, pure risk in insurance, and elements of insurable risk.
What Makes A Person Uninsurable For Health Insurance
The health insurance industry is a complicated one. It’s difficult to navigate, and there are all sorts of things that can go wrong. For example, you might be denied coverage for something that isn’t your fault—like your age or the state you live in—but it makes sense for insurers to want you to be as healthy as possible before insuring you against illness and injury. This is why some people are considered uninsurable: they have certain conditions that make it more likely that they’ll need expensive medical care in the future. If you’re not sure whether or not your health status makes you uninsurable, then this article will help answer some questions about what counts as being “uninsurable” by explaining what types of illnesses make people uninsurable and why those conditions matter so much when determining whether someone will get coverage from an insurer or not!
1. HIV/AIDS
- HIV/AIDS
HIV/AIDS is a serious condition that can be expensive to treat, and it’s incurable. It also requires constant care. Because of this, the Affordable Care Act does not allow insurers to charge more for health insurance for those with HIV/AIDS than for healthy people who don’t have the condition.
2. Cancer
If you have been diagnosed with cancer, it may be difficult to get health insurance. Cancer is the leading cause of death in the United States and it affects the body’s cells. Cancer can be caused by genetic factors, environmental factors or a combination of both. The National Cancer Institute estimates that 1 out of every 4 men will be diagnosed with cancer during their lifetime.
Cancer insurance can help cover expenses such as treatment costs, travel expenses to and from doctor’s appointments, medication usage and more so that you don’t have to worry about how you will pay for these costs on your own
3. Heart Disease
Heart disease is one of the leading causes of death in the United States, and it can affect anyone at any age. Heart disease is a broad term that refers to several different conditions. For example, hypertensive heart disease (high blood pressure) and coronary artery disease are both types of heart disease caused by high blood pressure or atherosclerosis (a buildup of plaque on artery walls).
If you have had open-heart surgery or a heart attack, you may be uninsurable for health insurance coverage. That’s because people with these conditions are more likely to incur expensive medical bills than those without them–and insurers don’t want to pay out too much money each year on claims from an individual.
People who receive transplants are also considered uninsurable; this includes artificial hearts and kidneys as well as corneas and bone marrow transplants.
4. Stroke
Stroke is one of the most serious and potentially debilitating illnesses. It occurs when a blood vessel that transports oxygen-rich blood to the brain is blocked or ruptured. If you suffer from stroke, you may be unable to move your limbs or speak properly, which can make it difficult for you to function normally.
The cause of a stroke can vary depending on the person who suffered from it. Some common causes include:
- Hardening of the arteries
- High blood pressure
- Heart disease
- Diabetes
5. Mental health issues
Mental health issues—including depression and anxiety, bipolar disorder, schizophrenia, eating disorders, post-traumatic stress disorder (PTSD), substance abuse, suicidal ideation or self-harm—are the fifth most common reason for being uninsurable. If you have a history of mental health problems that include any of these conditions and you’re looking for an affordable health plan on your own or with your family through [INSURER NAME], we want to help you understand how it might affect your ability to get coverage.
These conditions can make you uninsurable for health insurance
You can still be eligible for health insurance if you have any of these conditions:
- HIV/AIDS
- Cancer
- Heart Disease
- Stroke
- Mental health issues (if they’re related to the above)
factors affecting insurability of risk
Not every risk is insurable. And while insurance is designed to help protect against the many risks of loss associated with running a business, it has never been intended to cover everything.
First, let’s take a moment to define “risk.” There are many definitions, but for our insurance purposes, risk predominantly means two things: uncertainty arising from the possible occurrence of an event(s) and the potential for injury or damage to persons or property to which an insurance policy relates.
Just like your business, insurance companies need to turn a profit in order to survive. That’s why they only agree to cover risks that they deem to be insurable—risks that allow them to yield a profit. In the most basic terms, an insurer will deem a risk insurable only if it is able to charge a premium that covers possible claims and operating expenses while making a profit.
Big Risks for Small Businesses Report
Is the Current Approach to Business Insurance a Match for Today’s Modern Risks?
That said, the risks that a business can transfer to an insurance company or more appropriately, chooses to transfer, are generally those that could result in significant loss to the business. Now, let’s take a closer look at how those risks are considered and classified.
Pure Risk vs. Speculative Risk
Insurance companies typically cover pure risks. Pure risks are risks that have no possibility of a positive outcome—something bad will happen or nothing at all will occur. The most common examples are key property damage risks, such as floods, fires, earthquakes, and hurricanes. Litigation is the most common example of pure risk in liability. These risks are generally insurable.
Speculative risk has a chance of loss, profit, or a possibility that nothing happens. Gambling and investments are the most typical examples of speculative risk. The traditional insurance market does not consider speculative risks to be insurable.
In addition, other types of business risks are deemed uninsurable based on the potential that a loss will occur outweighing the potential that it won’t. For example, deterioration of property caused by wear and tear (because a decision was made to not maintain the property in question) or income loss due to market changes are typically not insurable. Risk of loss here may be avoided, or at least mitigated, with proper “controls” in place.
Defining Insurable Risks for Businesses
How do insurers make the distinction when deciding which risks they are willing to assume and which they would rather avoid? Here’s a look at some of the key characteristics that define an insurable risk:
Not Catastrophic
Losses need to be deemed “reasonable” by the insurer. What does that mean? Remember that insurers need to turn a profit to stay in business. Therefore, the level of what each insurer believes is catastrophic will differ. In short, a catastrophic risk for an insurance company is any type of loss that is so pervasive, expensive, or unpredictable that it would not be reasonable to offer coverage for it.
Don’t confuse this for catastrophe perils, however. Those larger risks can still be insurable, but by insurers who believe that they can appropriately quantify its potential for loss and charge appropriate premiums to do so. Catastrophe perils may include such natural disasters as earthquakes, hurricanes, and acts of war.
Predictability
If an insurer cannot predict expected losses, then they cannot properly quantify potential losses. Insurers, their actuaries, really, prefer a predictable loss in order to be able to determine premiums. If a loss rate is not predictable, it’s less likely to be in that insurer’s “appetite,” meaning they won’t want to take on that type of risk.
How, then, do insurers come up with a predictable loss rate? Back to their actuaries, professionals that mathematically, statistically, and financially analyze financial risk by running a plethora of statistical models and analysis. Some of those calculations ultimately boil down to the “law of large numbers,” which is the use of an extensive database used to forecast anticipated losses. Others are far more complex in their modeling.
Simply stated, insurers need to be able to estimate how often particular losses might occur and what the expected severity of these losses could be. Naturally, losses that occur more frequently and tend to be more severe will drive higher premiums.
“Chance” and Random Losses
Loss must be the result of an unintentional act or one that occurred by chance in order to be insurable. In essence, it must be beyond the control or influence of the business. Losses also need to be random, meaning that the potential for adverse selection does not exist.
Adverse selection describes situations in which buyers and sellers have access to different information and market participation is affected as a result of this so-called state of asymmetric information.
Defined and Measurable Losses
Losses need to be definite and measurable. The effective and expiration dates on a policy “define” the duration that is then “measured” as to the amount of premium dollars needed to offset projected losses.
Insurable Risks for Startups
When choosing an insurance program for your startup, it’s important to understand that even the most comprehensive insurance policies do not provide a guarantee that all risks associated with your business are going to be covered.
There will always be uninsurable risks—risks that cannot be covered because they are either too probable, too catastrophic and costly, or too easily manipulated.
Here’s an example of a hypothetical situation that many IT startups could experience:
The startup purchased E&O (professional liability) insurance to protect the business from claims related to malpractice, errors, omissions, or negligence while providing its professional service to a third party. If the startup makes a mistake in the course of providing its services and those mistakes result in a third party financial loss, the startup would expect the insurance to respond —a scenario likely covered by the E&O policy.
However, in a separate scenario, the startup could suffer losses from customers leaving because they were unhappy with the service. Such a loss wouldn’t be insurable. That’s just the risk of being in business, a speculative one.
The takeaway: when you are buying business insurance, you need to be very aware of the risks to your company, the limitations of your coverage that apply, and how you manage risk that may or may not be insured.
It’s important to work with a broker who will help you identify those risks, both insurable and uninsurable—which can or should be transferred versus managed in a different way—and then negotiate the best coverage to fit your needs.
To learn more about identifying, managing and transferring your business’s risks, reach out to our team of expert brokers.
pure risk in insurance
Pure risk refers to risks that are beyond human control and result in a loss or no loss with no possibility of financial gain. Fires, floods and other natural disasters are categorized as pure risk, as are unforeseen incidents, such as acts of terrorism or untimely deaths.
Risk managers deal with risk in four basic ways: They reduce it, avoid it, accept it or transfer it. Many types of pure risk are dealt with by purchasing insurance coverage for the potential loss, which transfers the risk to an insurance company.
What are examples of pure risk?
Pure risk, also referred to as absolute risk, is usually divided into three categories:
Pure risk vs. speculative risk
Whereas pure risk is beyond human control and can only result in a loss if it occurs, speculative risk is risk that is taken on voluntarily and can result in either a profit or loss. Speculative risks are thus considered controllable risks. Almost all financial investment activities, for example, are considered speculative risk because they are chosen risks and can result in loss or gain.
Betting on sports is considered a speculative, controllable risk. A person betting on a National Football League game could see either a financial gain or loss from the bet, depending on whether the team that’s chosen wins or loses. Unlike pure risk, which is generally handled by insurance, speculative risk is traditionally handled by the capital markets. But, as Baranoff et al. noted, “the boundary between how these two industries manage risk is increasingly blurred, as capital market approaches expand into traditionally insurance domains, and insurance products increasingly use capital markets to hedge the pure risks they assume.”
Download this entire guide for FREE now!
Static risk vs. dynamic risk
Static risk is a type of pure risk that is predictable, measurable and doesn’t change. It is a type of pure risk because it is not chosen and no financial gain can come from static risk.
Insuranceopedia, an online repository of financial information and insurance definitions, defines static risk as “risks that involve losses brought about by acts of nature or by malicious and criminal acts by another person. These losses refer to damage or loss to property or entity that is not caused by the economy.” A flood is an example of static risk. According to Insuranceopedia, static risks “are more easily taken care of by insurance coverage because of their relative predictability.”
Dynamic risk, in contrast to static risk, is a “risk brought on by sudden and unpredictable changes in the economy,” according to Insuranceopedia. This type of risk is difficult to measure, sometimes resulting in sizable losses for individuals and businesses. Insuranceopedia pointed to the COVID-19 pandemic as an example of dynamic risk, not only due its unpredictability, but also its impact on many lines of insurance coverage, including business interruption, trade credit and cyber liability insurance. A recession is another example of a dynamic risk, as well as a fundamental risk.
elements of insurable risk
Not every risk is insurable. And while insurance is designed to help protect against the many risks of loss associated with running a business, it has never been intended to cover everything.
First, let’s take a moment to define “risk.” There are many definitions, but for our insurance purposes, risk predominantly means two things: uncertainty arising from the possible occurrence of an event(s) and the potential for injury or damage to persons or property to which an insurance policy relates.
Just like your business, insurance companies need to turn a profit in order to survive. That’s why they only agree to cover risks that they deem to be insurable—risks that allow them to yield a profit. In the most basic terms, an insurer will deem a risk insurable only if it is able to charge a premium that covers possible claims and operating expenses while making a profit.
Big Risks for Small Businesses Report
Is the Current Approach to Business Insurance a Match for Today’s Modern Risks?
That said, the risks that a business can transfer to an insurance company or more appropriately, chooses to transfer, are generally those that could result in significant loss to the business. Now, let’s take a closer look at how those risks are considered and classified.
Pure Risk vs. Speculative Risk
Insurance companies typically cover pure risks. Pure risks are risks that have no possibility of a positive outcome—something bad will happen or nothing at all will occur. The most common examples are key property damage risks, such as floods, fires, earthquakes, and hurricanes. Litigation is the most common example of pure risk in liability. These risks are generally insurable.
Speculative risk has a chance of loss, profit, or a possibility that nothing happens. Gambling and investments are the most typical examples of speculative risk. The traditional insurance market does not consider speculative risks to be insurable.
In addition, other types of business risks are deemed uninsurable based on the potential that a loss will occur outweighing the potential that it won’t. For example, deterioration of property caused by wear and tear (because a decision was made to not maintain the property in question) or income loss due to market changes are typically not insurable. Risk of loss here may be avoided, or at least mitigated, with proper “controls” in place.
Defining Insurable Risks for Businesses
How do insurers make the distinction when deciding which risks they are willing to assume and which they would rather avoid? Here’s a look at some of the key characteristics that define an insurable risk:
Not Catastrophic
Losses need to be deemed “reasonable” by the insurer. What does that mean? Remember that insurers need to turn a profit to stay in business. Therefore, the level of what each insurer believes is catastrophic will differ. In short, a catastrophic risk for an insurance company is any type of loss that is so pervasive, expensive, or unpredictable that it would not be reasonable to offer coverage for it.
Don’t confuse this for catastrophe perils, however. Those larger risks can still be insurable, but by insurers who believe that they can appropriately quantify its potential for loss and charge appropriate premiums to do so. Catastrophe perils may include such natural disasters as earthquakes, hurricanes, and acts of war.
Predictability
If an insurer cannot predict expected losses, then they cannot properly quantify potential losses. Insurers, their actuaries, really, prefer a predictable loss in order to be able to determine premiums. If a loss rate is not predictable, it’s less likely to be in that insurer’s “appetite,” meaning they won’t want to take on that type of risk.
How, then, do insurers come up with a predictable loss rate? Back to their actuaries, professionals that mathematically, statistically, and financially analyze financial risk by running a plethora of statistical models and analysis. Some of those calculations ultimately boil down to the “law of large numbers,” which is the use of an extensive database used to forecast anticipated losses. Others are far more complex in their modeling.
Simply stated, insurers need to be able to estimate how often particular losses might occur and what the expected severity of these losses could be. Naturally, losses that occur more frequently and tend to be more severe will drive higher premiums.
“Chance” and Random Losses
Loss must be the result of an unintentional act or one that occurred by chance in order to be insurable. In essence, it must be beyond the control or influence of the business. Losses also need to be random, meaning that the potential for adverse selection does not exist.
Adverse selection describes situations in which buyers and sellers have access to different information and market participation is affected as a result of this so-called state of asymmetric information.
Defined and Measurable Losses
Losses need to be definite and measurable. The effective and expiration dates on a policy “define” the duration that is then “measured” as to the amount of premium dollars needed to offset projected losses.
Insurable Risks for Startups
When choosing an insurance program for your startup, it’s important to understand that even the most comprehensive insurance policies do not provide a guarantee that all risks associated with your business are going to be covered.
There will always be uninsurable risks—risks that cannot be covered because they are either too probable, too catastrophic and costly, or too easily manipulated.
Here’s an example of a hypothetical situation that many IT startups could experience:
The startup purchased E&O (professional liability) insurance to protect the business from claims related to malpractice, errors, omissions, or negligence while providing its professional service to a third party. If the startup makes a mistake in the course of providing its services and those mistakes result in a third party financial loss, the startup would expect the insurance to respond —a scenario likely covered by the E&O policy.
However, in a separate scenario, the startup could suffer losses from customers leaving because they were unhappy with the service. Such a loss wouldn’t be insurable. That’s just the risk of being in business, a speculative one.
The takeaway: when you are buying business insurance, you need to be very aware of the risks to your company, the limitations of your coverage that apply, and how you manage risk that may or may not be insured.
It’s important to work with a broker who will help you identify those risks, both insurable and uninsurable—which can or should be transferred versus managed in a different way—and then negotiate the best coverage to fit your needs.
To learn more about identifying, managing and transferring your business’s risks, reach out to our team of expert brokers.