Six years ago you saw your GP a handful of times about work stress. You were given a mental health treatment plan, saw a psychologist four times, took nothing, and got on with your life. You have not thought about it since.
You apply for income protection. The offer comes back with a permanent exclusion for any claim arising directly or indirectly from a mental health condition. On an income protection policy, that removes cover for the single most common cause of long term claims in Australia.
This happens constantly, and people are rarely told what their options are. Many assume the first offer is the only offer, accept it, and never revisit it. Others conclude they are uninsurable and stop trying.
Both conclusions are usually wrong. This guide explains how underwriting handles non-standard risk, what an exclusion actually covers, what the rules require of insurers, and the practical steps that change outcomes.
Before anything else
If reading this makes you wonder whether you should avoid seeing a doctor or psychologist so it does not appear on your record, please do not.
That trade is a bad one in both directions. The health cost of not getting help is obvious. The insurance logic is also wrong: underwriters generally view a condition that was treated, resolved and has stayed resolved far more favourably than an untreated one, an unexplained gap, or a pattern of symptoms with no clinical history behind it. Evidence of recovery is the thing that most often gets an exclusion removed or avoided.
Insurance is a financial product. Your health is not a bargaining chip for it. Get the help, then deal with the insurance question properly, which is what the rest of this article is about.
The five possible outcomes of underwriting
| Outcome | What it means |
|---|---|
| Standard terms | Accepted at the normal premium with no restrictions. |
| Loading | Accepted, but at a higher premium. Usually expressed as a percentage above standard rates. |
| Exclusion | Accepted at standard rates, but claims arising from a specified cause are not covered. |
| Deferral | A decision postponed for a set period, often twelve months, after which you can reapply. |
| Decline | Cover not offered at this time. |
Two points people find useful. A decline from one insurer is not a decline from all of them, because underwriting philosophies differ substantially. And these outcomes apply per product, so someone who cannot obtain income protection may still be offered life cover on standard terms.
How mental health history is assessed
Underwriters typically look at the diagnosis, when it occurred, how long it lasted, the treatment involved, whether medication was used and for how long, whether there were multiple episodes, whether there was any time off work, and how long you have been well since.
Several things commonly work in an applicant’s favour: a single episode rather than a recurring pattern, a clear situational trigger such as bereavement or a workplace issue, a full recovery, no time off work, no hospitalisation, and a substantial symptom free period since.
The frustration people feel is understandable. A brief, situational, fully resolved episode from years ago can attract the same broad exclusion as a serious and ongoing condition, and that bluntness is exactly what successive reviews of the industry have criticised.
What a mental health exclusion actually excludes
Read the wording, because scope varies and the difference matters enormously.
A broadly drafted exclusion may remove cover for any claim arising directly or indirectly from any mental health condition. That indirect limb is wider than most people assume. A claim primarily for a physical condition can be affected where a mental health condition is part of the picture, which is common in chronic pain and recovery from serious injury.
Narrower alternatives exist and are worth asking about specifically:
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- An exclusion limited to a named condition rather than all mental health conditions
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- An exclusion that applies for a defined period rather than permanently
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- A loading instead of an exclusion, so cover remains in place at a higher premium
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- An exclusion subject to review after a stated symptom free period
If the offer in front of you is the broadest version, ask whether any of these are available. Underwriters do not always volunteer alternatives, and an adviser asking the question is a normal part of the process rather than an imposition.
What the rules already require
Consumers are usually unaware that there are constraints on this, and knowing them changes the conversation.
The Life Insurance Code of Practice
The Code contains a commitment prohibiting blanket mental health exclusions. That does not prevent all mental health exclusions, but a genuinely indiscriminate one applied without regard to your circumstances is inconsistent with the industry’s own code.
Anti-discrimination law
Section 46 of the Disability Discrimination Act permits insurers to differentiate on the basis of disability, including mental health conditions, but only within limits. The discrimination must be based on actuarial or statistical data on which it is reasonable to rely, and be reasonable having regard to that data and other relevant factors. Where no such data is available and cannot reasonably be obtained, the decision must be reasonable having regard to other relevant factors.
The Federal Court has made clear that an insurer cannot simply fall back on “other relevant factors” without first seeking out relevant actuarial and statistical data, and cannot pick and choose which material it considers. The Australian Human Rights Commission publishes guidelines for insurers on how to comply.
The practical consequence is that an insurer needs to be able to justify the decision. You can ask for the reasons and the basis on which the decision was made. A clear, individualised explanation is a good sign. An unwillingness to explain is itself relevant if you decide to take the matter further.
What is changing
Two developments are worth knowing about.
The Life Insurance Code of Practice review. An independent review of the Code reported in 2026. Among its recommendations was that a complete exclusion of mental health cover in a standard form contract be prohibited under the Code, while features that merely limit mental health cover would remain permissible provided they comply with anti-discrimination law, are supported by documented actuarial or statistical evidence, and are reviewed on a cycle of at least three years. These are recommendations rather than current obligations, so check where the Code has landed before relying on them.
Genetic testing. Legislation passed in April 2026 bans life insurers from using genetic test results in underwriting, with the ban commencing on 8 October 2026. It does not prevent insurers from considering diagnosed conditions, signs or symptoms, and you may still volunteer a favourable result with written consent. The reasoning behind it applies equally to mental health: people should not be deterred from looking after their health by fear of the insurance consequences.
Medical loadings
Loadings are the other common outcome for a non-standard risk, and they apply across a wide range of health factors including weight, blood pressure, cholesterol, diabetes, cardiac history, cancer history, musculoskeletal conditions, family history, smoking and alcohol use.
A loading is usually expressed as a percentage above the standard premium. A 50 per cent loading means one and a half times the standard rate, permanently, unless it is reviewed.
That last clause is where most of the money sits. Loadings can often be reviewed and reduced or removed if the underlying reason improves, and almost nobody asks. If you were loaded for weight and have since lost it, loaded for blood pressure now well controlled, loaded as a smoker and have not smoked for years, or loaded for a condition that has been stable for a long period, a review is worth requesting.
Insurers do not conduct these reviews automatically. The onus is on you or your adviser to ask, and to provide the evidence. Our guide on how lifestyle choices affect premiums covers the factors involved.
What you can actually do
Use a pre-assessment before applying formally
This is the most valuable step in the article. An adviser can put your circumstances to several insurers on a no-names basis and ask how they would view it, before any formal application is lodged.
It matters because a formal application that is declined becomes part of your insurance history and has to be disclosed to other insurers afterwards, which makes the next application harder. A pre-assessment avoids that entirely and lets you approach the insurer most likely to offer acceptable terms first.
Provide evidence rather than just answers
Underwriters work from what is in front of them. A short letter from your GP or treating psychologist confirming the nature of the episode, that it was situational, that treatment concluded on a stated date, that you have had no recurrence, and that you are functioning well, can materially change an outcome.
Supplying that up front is far more effective than supplying it after an unfavourable decision, though it is worth doing then too.
Be completely accurate
Answer every question fully and honestly. Your duty to take reasonable care when applying is a legal obligation, and non-disclosure is a far worse outcome than an exclusion, because it puts the entire policy at risk at claim time when your family can least afford it. Our guide on your duty to take reasonable care explains how claims are lost this way.
An exclusion you know about can be planned around. A policy that fails at claim time cannot.
Ask about review after a period
Some insurers will reconsider an exclusion after a defined symptom free period, commonly two or three years. Ask at the time the exclusion is applied whether that is available and what evidence would be required, then diarise it. Very few people go back.
Compare insurers
Underwriting philosophies differ genuinely, not marginally. The same history can produce an exclusion with one insurer, a time limited exclusion with another, and standard terms with a third. This is one of the clearest cases for not simply accepting the first answer.
Consider cover through superannuation
Default cover in a super fund is often provided without individual underwriting up to a set level. For someone who cannot obtain retail cover on acceptable terms, that is a genuine route to some protection.
Two cautions. Group policies have their own terms and can contain their own limitations, so read them rather than assuming. And this cover can switch off automatically, as our guide on insurance cancelled on inactive super accounts explains. The broader trade offs are in our guide on life insurance inside or outside super.
If you think a decision is unjustified
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- Ask the insurer, in writing, for the reasons for the decision and the basis on which it was made.
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- Provide any further medical evidence and ask for the decision to be reconsidered.
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- Make a complaint through the insurer’s internal dispute resolution process.
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- Take it to the Australian Financial Complaints Authority, which is free and does not require a lawyer.
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- Consider a complaint to the Australian Human Rights Commission, which handles disability discrimination complaints including in insurance.
These paths are not mutually exclusive, and using them costs you nothing but time.
Where Professional Advice Adds Value
Underwriting with a health history is one of the few areas where working with an adviser has a concrete, measurable effect on the outcome rather than just on the paperwork.
At Money Path that means running pre-assessments with several insurers before any formal application exists, so a difficult history never becomes a declined application on your record. It means presenting the history properly, with the supporting medical evidence attached rather than left for the underwriter to request. It means negotiating scope, since a time limited or condition specific exclusion is a different product from a blanket one. And it means going back later, because loadings and exclusions are reviewable and almost nobody revisits them.
We also think it is worth saying plainly that being offered an exclusion is not a judgement about you, and it is not the end of the process. It is one insurer’s first position on one application. Our guides on choosing the right policy and common mistakes when taking out cover cover the wider decisions, and our guide on occupation classes explains the other major driver of what you are offered.
Frequently asked questions
Can I be refused life insurance because of a mental health condition?
An insurer can decline, load or exclude on the basis of a mental health condition, but not without justification. Section 46 of the Disability Discrimination Act requires the decision to be based on actuarial or statistical data on which it is reasonable to rely and to be reasonable in the circumstances, and the Life Insurance Code of Practice prohibits blanket mental health exclusions. You can ask for the reasons for the decision.
What does a mental health exclusion actually cover?
It depends on the wording. A broad version excludes claims arising directly or indirectly from any mental health condition, which can affect claims that are mostly about a physical condition. Narrower options may be available, including exclusions limited to a named condition, exclusions that apply for a set period, or a loading instead. Ask what alternatives exist.
Should I avoid seeing a doctor so it does not affect my insurance?
No. The health cost is serious and the insurance logic does not hold. Underwriters generally view a condition that was treated and resolved more favourably than one that is untreated or undocumented, and evidence of recovery is often what removes an exclusion. Get the help you need and address the insurance question separately.
Can an exclusion or loading be removed later?
Often, but only if you ask. Some insurers will reconsider after a defined symptom free period, and loadings applied for weight, blood pressure, smoking or a stable condition can frequently be reviewed when circumstances improve. Insurers do not do this automatically, so the request and the supporting evidence have to come from you or your adviser.
Does one insurer declining me mean I cannot get cover anywhere?
No. Underwriting philosophies differ substantially between insurers, and the same history can produce different outcomes. Outcomes also differ by product, so someone unable to obtain income protection may still be offered life cover on standard terms. Where cover is difficult, a pre-assessment through an adviser avoids adding a declined application to your record.
What is a medical loading?
A premium increase applied because of an assessed health risk, usually expressed as a percentage above standard rates. A 50 per cent loading means one and a half times the standard premium. It generally continues for the life of the policy unless it is reviewed and reduced or removed.
What can I do if I think the decision is unfair?
Ask the insurer in writing for the reasons and the basis for its decision, supply further medical evidence and request reconsideration, then use the insurer’s internal complaints process. If that does not resolve it, the Australian Financial Complaints Authority is free to use, and the Australian Human Rights Commission handles disability discrimination complaints including in insurance.
Taking the next step
If you have been offered cover with an exclusion or a loading, treat it as a starting position rather than a verdict. Ask what the exclusion covers, ask what alternatives exist, ask what evidence would change the answer, and ask whether it can be reviewed later. If you already hold a policy with a loading applied years ago, that is worth revisiting now.
And if you have been putting off getting help because of what it might do to your insurance, the answer is to get the help. Support is available through your GP, Beyond Blue on 1300 22 4636, and Lifeline on 13 11 14.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not legal or medical advice. Underwriting practices, policy wordings and available terms differ between insurers and change over time, and the industry commitments and reform proposals described here may have changed since publication. Nothing in this article should be taken as encouragement to withhold or understate information from an insurer, which puts your policy at risk. Read the relevant product disclosure statement and policy wording, and seek personal advice from a licensed financial adviser before taking out, changing or cancelling insurance.
