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One in 10 Canadians has diabetes, and that number rises to three in 10 when including those with undiagnosed Type 2 diabetes and pre-diabetics, according to Diabetes Canada.

Sun Life launched a diabetes-specific term life insurance in May, which the insurer said was the first in Canada. The new product has a higher approval rate for diabetic applicants than conventional life insurance, the insurer said in a release.

The higher approval rate is the result of an updated underwriting process for diabetic applicants, and can include premium discounts, compared to conventionally underwritten policies, Sun Life said in an email.

Fearing rejection, clients with diabetes might not apply for insurance, said Darren Devine, a financial planner with Sun Life and president of Devine and Associates Financial Services in Guelph, Ont. “Will I be declined? Is this even worth doing? [Having diabetes] creates a little bit of trepidation around even attempting to secure insurance.”

Clients may also be hesitant to share their health situations with their advisors, he said, but it’s important to have open conversations with clients, so they get the coverage they need.

Devine recommends applying for traditional products and, if approval is denied or premiums are high, moving on to products such as Sun Life’s diabetes term life.

Advisors can shop around for the lowest premium, as some insurers provide more favourable rates on certain illnesses than others, said Frank Gasper, owner of CSR Wealth Management in Brampton, Ont.

Once, when Gasper helped a diabetic client apply for life insurance with multiple carriers, one insurer offered a rated policy, and another offered a standard policy with savings.

“For a person who’s 55 years old getting a million dollars of life insurance, [the savings can be] pretty significant,” he said. “It could be a hundred dollars a month.”

Life insurance applications include questions about diabetes and pre-diabetes. Advisors should ask the client for details such as their current medication, the last time they saw a doctor, their testing regimen and diet, said Karen Cutler, head of underwriting and claims with Manulife in Toronto.

The advisor should let the underwriter know how invested the client is in the management of their condition, she said. “That makes a huge difference in how we underwrite the file.”

Manulife’s approval rate for diabetic applicants of its life insurance products is around 80%, including standard and rated policies.

“I think there’s a lot of misunderstanding about how insurable people are,” Cutler said. “There’s not a lot of mortality issue [with diabetes] especially if you’ve got good cardiovascular [cholesterol and blood pressure] control.”

Manulife updated its guidelines for underwriting diabetes this year, Cutler said. The firm found that improved mortality came from factors such as lifestyle interventions and hypertension and cholesterol treatment. With the new guidelines, 50% of people from a sample of 200 files were moved from rated to standard.

Policyholders who were assessed a long time ago can apply to Manulife for rating reconsiderations, she said.

Manulife doesn’t plan to offer a diabetes-specific product, Cutler said. Rather, based on research, “let’s move … as many people towards that standard approval rating as possible.”

Converting group life insurance can be attractive for those with pre-existing conditions like diabetes since coverage is guaranteed and has no individual underwriting, Devine said. Those transitioning to jobs without benefits or to self-employment could convert a group life policy to a self-funded individual one.

However, group programs typically offer smaller coverage amounts, and people will likely need more coverage than the conversion amount, Cutler said.

The conversion premium could be higher than taking out a new policy, as insurers factor for adverse selection — the increased chance a client with health issues will convert a policy, she said.

Most Canadian insurers allow departing employees to convert their group plans, up to $200,000 of coverage ($400,000 in Quebec), into individual coverage within 31 days of leaving the plan. Advisors can help clients apply for a new policy with any insurer before the conversion period ends and leave conversion available as a backstop, Cutler said.

Clients may also qualify for the disability tax credit (DTC). In 2022, the federal government expanded eligibility for the DTC to those with Type 1 diabetes.

Clients often focus on the financial aspect of planning, so advisors may want to expand the conversation and ask about their health, Gasper said. He once discovered a client was on dialysis because the client couldn’t meet on particular days of the week.

“My antennas went up,” he said. “You’re eligible for the DTC … Let’s book a meeting.”

Gasper helped the client apply.

DTC eligibility comes with eligibility for a registered disability savings plan (RDSP) and the Canada disability savings grant. The grant matches up to $70,000 in an RDSP account over the account owner’s lifetime.

“That grant money could be a supercharger,” Devine said. Not only does the RDSP defer tax on invesment income, but the client can withdraw funds for any purpose. Family members can also contribute to the plan with the client’s consent.

“The dollars offered by the government [can] drastically change the outcome of what’s available in the bucket when we get into the later years,” he said.

If the client’s employer offers RRSP matching and the client has a tight budget, Gasper recommends maximizing the RRSP matching before maximizing the government’s RDSP matching. While an employer’s RRSP matching is use-it-or-lose-it, the disability savings grant can be carried forward to future years.