Why Divers Get Bad Deals on Life Insurance

If you’ve had a difficult time getting a good rate on a life-insurance policy because you let on that you’re a scuba diver, you’re not alone.

Reader Bill Markley (La Canada, CA) told us that he was recently turned down for term insurance solely because he is a scuba diver. “I was 63 when I applied and in good health. I am a lawyer, and the American Bar Association offers a group plan by New York Life for ten-year term insurance. New York Life has three levels of coverage, as most life insurance companies do: Preferred, Standard and the priciest, Select. The Preferred and Standard rates for my age are substantially lower than I currently pay. I am on blood pressure and cholesterol meds, and slightly overweight according to their charts. Concerned this information would automatically put me in the Select category and thus waste my time applying, I called an underwriter at New York Life. I described my medical issues. He stated that he didn’t see any reason why I wouldn’t qualify for at least the Standard rate. We did not discuss diving.

“On my application, I disclosed that I dive. When New York Life called to go over my application, they asked me several questions about diving - - how often, how deep have I gone and the average depth I dive, what level of certification I have, and do I wreck dive. My doctor gave them a glowing report on my health, but I got a letter saying they had approved me but only at the very costly Select level ‘due to hazardous activities (scuba diving).’ I consider driving on Los Angeles freeways to be hazardous, not diving. Is this a common problem? Is there any recourse?”

Unfortunately, qualifying for the best rates involves more than getting a clean bill of health from your doctor. Insurers also try to identify people who lead “risky” lifestyles, including divers. They’re more forgiving of someone on blood-pressure medication than a healthy bungee jumper, mountain climber or diver (bike racing and helicopter skiing also make the list). Generally speaking, if you engage in activities that insurance companies believe are risky, you’re knocked out of the running for a Preferred or Preferred Plus policy. At best, you may qualify for a Standard policy but toss in a few medical conditions and you’re relegated to something below that, thereby paying more on your policy.

But your rates could change depending on what you tell the insurance company about your diving habits, says Jack Kelly, an Undercurrent reader and owner of insurance agency Vector Benefits in Bloomfield Hills, MI. “Most insurance companies use an underwriting manual that doesn’t penalize divers who stay above 100 feet. If you admit to diving down to 120 feet four times a year, the manual calls for an extra flat rate, usually an extra $2.50 to $5 per $1,000 per year. But if you admit to less than 100 feet, you usually can get the Preferred rate or better.”

What’s considered risky can vary by company. For instance, some will rate you negatively if you dive too frequently for their taste. But by shopping around, you may find a company that doesn’t penalize for diving. Jack Dolan, spokesman for the American Council of Life Insurers, says companies will often change their criteria from year to year to be competitive. If you are hanging up your fins and done with diving, you can apply for a new policy and ask the company to lower your premium. If it won’t, another insurer might.

And don’t lie about your diving habits. If you have a fatal accident, your decendents may get nothing. If the company discovers you were a diver before your signed the paperwork, it won’t pay your benefit. Or if you said you always stayed above 100 feet and they download your dive computer and see 50 technical dives below 130 feet in the past year, ditto.

But that only applies for the first two years, says Kelly. The insurance company can challenge the validity of your policy during that time on the basis that you held back information. “After that, even if you said you were a low-risk diver and they found you always dove, they have to pay your claim, even if you died during a technical dive.”

Despite this “incontestable clause,” there are exceptions in which the insurance company may contest your policy after the two-year period, such as cases of deliberate fraud. But the “incontestable clause” is the most important clause on your life insurance policy, diver or not. Make sure this clause is included in your policy and you know what the specified time limit is before it expires.

- - Vanessa Richardson