Securing your future

Emma Lunn looks at insurance for people with HIV.

Over the past 20 years the outlook for people with HIV has changed. Improvements in medication and the introduction of highly active antiretroviral therapy (HAART) mean that people diagnosed HIV positive can expect to live longer than they might have expected to back in the 1980s.

This is good news, but it means that HIV-positive people need to think about their financial situation, not just on a day-to-day basis but in the longer-term too.

Life insurance

Life insurance (or ‘assurance’) is a policy that pays out a lump sum when the policyholder dies. The aim is to prevent the dead person’s partner or family from struggling financially. The ‘sum assured’ is the amount of cover you have or the amount the policy will pay out when you die.

When you take out a life insurance policy you will pay a regular premium, usually monthly. How much this is depends on several factors including how much cover you want, how long you want it for, your gender, occupation, health and medical history.

Most people only consider life insurance if they are married or in a civil partnership, or have children or other responsibilities such as a joint mortgage with someone else. The idea is the payout will support your partner or family financially if you die at a time when they are relying on your salary. It could be used to cover things such as mortgage repayments, replace the deceased person’s salary, or to pay childcare or education expenses.

In the past it was impossible to get life insurance if you had tested positive for HIV as insurers simply deemed the risk of a policyholder dying too high. However, in 2005 the Association of British Insurers (ABI) set up the ABI Expert Working Group on HIV and Insurance to tackle these issues. The group, which was composed of clinicians, HIV interest groups and insurers, worked to ensure that the insurance industry treated the subject of HIV risk with sensitivity and fairness. It also looked at HIV statistics and claims data and researched ways that life insurance could be offered to people with HIV.^1,2

Since then treatment and knowledge of HIV has improved and so has the attitude of the insurance industry, albeit slowly.

The introduction of highly active antiretroviral therapy (HAART) over the past few years has prolonged the lives of many people who are infected with HIV (see How long have I got, doc?). Meanwhile insurance companies, underwriters and intermediaries have worked together to design specialist life insurance policies for people who have tested HIV-positive.

Life insurance and gay men

In the past it was not just having HIV that prevented some people from finding life cover. Life insurers asked applicants if they were gay and some sent gay men for HIV testing. Regardless of the result, gay men were often charged ‘loaded’ premiums (i.e. they were more expensive).

Since 2005 there have been significant changes to the way gay men are treated by insurance companies. The ABI HIV and Insurance guidelines removed the so-called ‘gay questions’ from application forms and started to underwrite policies on the basis of sexual behaviour instead of a person’s sexuality.

Further to this, it is no longer acceptable to ask if an applicant is gay and insurers will not ask questions about your sexuality. Even if you inadvertently disclose such information, it will not be used in assessing your application and gay men will not be asked to take an HIV test simply because of their sexuality.

Neither can insurers make assumptions about an applicant's sexuality from the details of his or her living arrangements, occupation or medical history. Instead, they must assess each applicant on a case-by-case basis, using the best available relevant evidence.

Insurers can now ask applicants, regardless of their sexuality, only a general HIV-risk question, such as: “Within the past five years, have you been exposed to the risk of HIV infection?” Insurers sometimes include examples of increased risk of HIV in their question: “This can be caught through unsafe sex, injecting drug use, or blood transfusions or surgery undertaken outside the EU.”

If the answer is ‘yes’, insurers may require an HIV test before granting life cover. However, applicants will not be penalised by insurers simply on the basis of having taken an HIV test in the past, and do not need to declare negative HIV test results.

Life insurance and immigrants

Not being born in the UK or not having citizenship does not in itself preclude you from getting life insurance, but almost all insurers ask separately about travel and residence abroad. The ABI’s agreed form of question in this case is to ask people whether they have lived, worked or travelled abroad in the last five years or intend to in the near future.

If someone has lived or worked for any length of time in a country with high HIV prevalence they will be asked to take an HIV test as a condition of obtaining life cover. ‘High prevalence’ has no numerical definition but is likely to mean east, south and west Africa, parts of the former Soviet Union and some countries in Latin America and the Caribbean. If you test HIV-positive, or disclose positive status, your position is the same as anyone else in the UK.

Non-disclosure

In insurance terms ‘non-disclosure’ is basically lying on your application form. This includes both making false statements and, just as importantly, omitting information that would affect your eligibility for cover. Each year hundreds of insurance claims are turned down for non-disclosure, even if the claim was unrelated to the condition concerned, and often because the applicant has inadvertently missed out information they might not have thought relevant.

For this reason you need to answer all the questions in the application carefully, accurately and to the best of your knowledge and belief.

Some people will have taken out a life insurance policy at a time before they tested positive for HIV. In this situation it is not necessary to inform the insurer that your health status has changed. Even if you do, your insurer cannot change the policy retrospectively, nor increase your premiums.

On all applications for life insurance, critical illness cover and income protection insurance, you will be asked if you have tested positive for HIV. If the answer is ‘yes’, you must say so. The wording that appears on application forms is:

“Have you ever tested positive for HIV, hepatitis B or C, or are you awaiting the results of such a test? If the result is negative, the fact of having an HIV test will not, of itself, have any effect on your acceptance terms for insurance.”

If you have HIV and omit the truth about your HIV status it could result in your policy not paying out when you die and your dependents being left without financial help.

People who have a pre-existing medical condition may find their life insurance premium is ‘loaded’. This means it’s more expensive than a standard premium to reflect the extra risk to the insurer. And some pre-existing conditions – including HIV – will mean an applicant is rejected by some or most insurance companies.

Specialist policies

Essentially an HIV-positive person will still be turned down for life insurance by most mainstream life insurers. However there are currently two specialist policies for people with HIV, but applicants will have to meet certain criteria to be accepted.

PruProtect

In April 2009 the Prudential extended its existing PruProtect life cover product to include people living with HIV. The product provides up to £250,000 life cover over a maximum period of ten years.

Applicants need to meet the following qualifying criteria:

• Aged between 25 and 50.
• Have not contracted HIV from intravenous drug use.
• Must be receiving highly active antiretroviral therapy (HAART) in the UK, have commenced treatment in the past five years and have been receiving treatment for at least six months.
• Treatment should result in an increased CD4 cell count, and viral load should be suppressed to near undetectable level.
• Must be hepatitis B and C negative.

Experts say the main drawback to the policy is that it only covers a limited range of people living with HIV, but the aim is to broaden the qualifying criteria to cover more people as time progresses. Cover is only available through UK brokers and intermediaries so applicants need to obtain advice before submitting their application.

Premiums are underwritten on individual circumstances and will generally be higher than traditional life insurance policies. For example, in one known case an applicant was charged £68.79 a month for £100,000 worth of cover compared to £6.16 on a standard premium.

For more information, see www.vitality.co.uk/life-insurance.

Pulse

Pulse has a product specifically designed for individuals who are HIV-positive, but do not have AIDS. This product, the ‘Harbour’ policy, provides a modest amount of life cover for death from natural causes only – up to £10,000 – with a substantial amount of personal accident cover, up to £200,000, as well. The advantage of this cover is that it can be obtained without medical evidence and can therefore be put in place quickly.

However experts say the product is little more than an accident policy with £10,000 life insurance bolted on and applicants can expect to pay up to 30 times the normal premium for the cover provided by the policy.

For more information, see www.pulse-insurance.co.uk.

Both the PruProtect and Pulse products are offered by a number of different brokers and financial advisers.

Life insurance policies taken out before an HIV-positive diagnosis

Some people will have taken out a life insurance policy at a time before they tested positive for HIV. In this situation it is not necessary to inform the insurer that your health status has changed and even if you do, they cannot change the policy retrospectively, nor increase your premiums.

In the event of your death, through HIV, AIDS or any related illness, the life insurance policy would pay out as normal unless the policy specifically says that HIV diagnosis invalidates it.

Anyone who took out a life insurance policy before a positive HIV diagnosis should think very carefully – and seek professional advice – before they cash it in or surrender it. Once you have been diagnosed with HIV it becomes very difficult, and more expensive, to obtain life cover so if you have an existing policy it’s generally a good idea to hang on to it.

Private medical insurance, critical illness cover, income protection and accident, sickness & unemployment (ASU) cover are other types of insurance against health-related problems. Unfortunately these are not available to people with HIV at present. If you are diagnosed after taking out one of these types of insurance, it should still provide cover in the case of illness – but again, check your policy carefully in case there is a clause withdrawing cover in the case of HIV diagnosis.

Employee benefits

Many employers offer life insurance, a company pension, private medical insurance or other protection policies as an employee benefit.

This can create a tricky issue for someone who is HIV-positive as they may not want to tell their employer about their health status, but know that a positive diagnosis excludes them from most protection policies. In this situation it is advisable to request to see the application form. If the employer has a group policy, in some cases there won’t be any questions about pre-existing conditions.

However, if there are questions about pre-existing conditions then it’s advisable to go back to your employer and simply state that you have a pre-existing medical condition that you know will exclude you from the cover. You’re under no obligation to say what the condition is.

Mortgages

A mortgage is a loan to buy your home. You borrow money and pay it back with interest over a period of time (the ‘mortgage term’) that you agree with the lender – usually a bank or building society. The loan is secured against your home so if for any reason you can’t repay it, the bank or building society can sell your home to get back its money.

You can get a mortgage if you have HIV (though not an endowment mortgage – see below). Fundamentally, mortgages are underwritten based on your financial situation rather than health status.

How much you can borrow depends on your personal circumstances, such as your income, your outgoings and whether you’re buying alone or with a partner. There are two main ways to repay your mortgage:

• Repayment – your monthly payment is split between paying off the loan and paying off the interest you owe on the loan.
• Interest-only – your monthly payment pays only the interest charges on your loan, and you must arrange some other way to repay the loan.

Health is not part of the underwriting process for a mortgage. Instead mortgage companies look to assess affordability and check there is adequate security (i.e. your home is worth the amount of the loan). So they will check out things like your income, employment situation and credit history.

The main problem you’ll have with mortgages if you are HIV-positive is getting life insurance to cover the loan.

Life insurance is not a requirement for mortgages in general, but you may find that mortgage lenders try to sell you a life insurance policy alongside the mortgage. You could be frank or you could say you have a pre-existing medical condition their insurance would not cover: there are many medical conditions that preclude life cover. In the unlikely event they ask you what it is, you do not have to tell them.

Alternatively you could say you prefer to make your own arrangements, or that you intend to shop around.

Endowment mortgages

Endowment mortgages were popular in the 1980s and ‘90s but are not offered now. With an endowment mortgage, you do not repay any of the capital you borrow during the term of the loan. Instead, your monthly payments are made up of interest on your mortgage loan and the premium for the endowment. The endowment policy should grow to produce a lump sum large enough to repay the loan in full at the end of the pre-agreed period, normally 25 years. Within the package you also pay for life insurance, which will repay the loan if you die.

In some cases an endowment will have been taken out before a positive HIV diagnosis. In this situation the same rules apply as to other life insurance policies: once the policy has been taken out and underwritten based on the information available at the time, the policy still stands unless there is an HIV-specific exception. If you have an existing policy it’s generally a good idea to hang on to it, so you should think very carefully – and seek professional advice – before you cash it in or surrender it.

Who to get advice from

Anyone looking for a mortgage should consider using a mortgage broker or independent financial adviser. This will mean you get access to a wide variety of mortgage products on the market, not just those offered by a particular bank or building society.

Mortgage brokers won’t ask you questions about your health when you apply for a mortgage but they will ask you questions about your job, income and credit history. They might try to sell you life insurance, or other type of protection policy, alongside the mortgage, but the same rules apply as to lenders in general: you’re under no obligation to take out insurance.

Some people may be eligible for shared-ownership or key-worker schemes, or council right-to-buy schemes. Although mortgages for these schemes may be structured in a different way to standard mortgages, they are still underwritten based on your financial situation rather than health status, so an HIV-positive status is not an issue. However some shared ownership schemes may require life insurance to be taken out to protect the loan.

What to do if your income drops because of ill-health

If you don’t have any protection for your mortgage such as income protection or accident, sickness & unemployment cover (ASU), you might struggle to repay your mortgage if your income drops due to ill-health or unemployment. There are several things you can do to prepare for or deal with this situation.

• Self-insurance: This is when you save for a rainy day. It takes time to build up a substantial sum so the sooner you start the better. Cash ISAs provide tax-free interest on your savings and other savings and investment vehicles can also deliver decent returns.

• Flexible mortgages: Flexible mortgages allow overpayments and subsequent underpayments. Therefore you could overpay on your mortgage when things are going well and underpay or take a payment holiday if your income drops.
• Interest-only:If you are on a repayment mortgage you can save money each month by switching to an interest-only mortgage. It’s best to only do this as a short-term measure though as otherwise you will still owe the outstanding capital when you get to the end of the mortgage term.
• Rent-a-Room: If you have a spare room in your property the Government’s Rent-a-Room scheme allows you to earn up to £4250 tax-free each year from taking in a lodger.

For more information

In most cases concerning insurance products it’s a good idea to get advice from an independent financial adviser (IFA) with experience in this area.

Personal recommendation is a good way to find an IFA, but you should check their authority with the Financial Services Authority (0300 500 5000) or at www.fsa.gov.uk/register/home.do). Otherwise, there are professional organisations whose members will meet certain criteria: The Personal Finance Society (www.thepfs.org) or the Institute of Financial Planning (www.financialplanning.org.uk).

Compass Mortgage and Insurance Services

www.compassindependent.co.uk

0845 474 3075

Isis Financial Planners

www.isis-financial-planners.co.uk

08000 1960 69

Emma Lunn is a freelance personal finance journalist. (www.emmalunn.com).