If you suffer from a mental health problem, or have done so in the past, you may find it hard to obtain certain forms of protection insurance, regardless of when you were ill.

While insurers disregard some medical health problems after a set period of time, a history of mental illness will, in most cases, have to be disclosed. This is despite an estimated one in four people in the UK suffering from a mental health condition within any one year - with stress being one of the most common reasons why people are long-term absentees from work.

Insurers claim that while they do often ask questions about previous mental health problems, the majority of people who have a history of mental illness will have no problem when they apply for life insurance or for critical-illness cover, except in cases of severe depression or schizophrenia.

Mental health problems do become an issue, however, when applying for income protection insurance, with one in ten who have, or have had, a mental illness unable to obtain cover without either paying a much higher premium or excluding the condition.Declaring a mental illness adds at least an extra 50 per cent to the cost. For example, a non-smoking 35-year-old male would pay about £12 a month for £150,000 of life cover over 25 years, but the premium could rise to more than £18 a month if he has a long history of stress or depression.

But Toni Borneo, of Rethink, the mental health charity, believes that the problem extends to more than income protection cover. She says: “We have known for a long time that insurance can be a real problem for people affected by mental illness.”

Ms Borneo also argues that the difficulties experienced by mental health sufferers are being played down. “Some types of insurance, such as life insurance, can be near impossible to obtain for someone who has experienced a severe mental illness,” she says. “Some people tell us that they have been refused because of their mental illness history, even if they have since recovered or found ways to manage their condition. This becomes even more problematic if they are buying a home, because of the requirements of mortgage lenders.”

Unsurprisingly, the insurance industry defends its position and argues that insurance is all about balancing risks. An abundance of statistical evidence that suggests that people with mental health conditions could be more at risk of self-harm or accident makes its stance all the more understandable, says Roger Edwards, products director at Bright Grey, the protection insurer. “While some people claim that this is discrimination, the foundation principles of insurance are based on the idea that you have to charge a fair price for a risk. The consequence of not doing so would spread the cost across the pool of business, and this would attract a higher price for all.”

Knowing whether a certain type of condition is high-risk is not straightforward. Several factors need to be considered, including the number of episodes experienced, the type of treatment used, when it happened, what caused the problem, the duration of the illness and time off work.

Insurers also look for “positive signs of stability” in the life of the applicant, such as his or her ability to hold down a job and form personal relationships, says Paul Sandilands, of Pulse, the high-risk specialist. He adds that most life insurers require prospective policyholders to be symptom-free for at least 12 months.

However, while recognising that the industry needs to measure risks, Ms Borneo says that it often errs on the side of caution when making an assessment. “We understand that insurers have to balance risks,” she says, “but sometimes the loading is higher than it should be. People with mental illnesses are not always uninsurable, and we know there are companies that offer reasonable rates to those with mental illness.

“The calls to our advice line suggest that many insurance providers have a long way to go in their understanding of mental health.”

If you are looking for insurance but are unsure where to go, it is often worth avoiding the cheaper insurers, says Kevin Carr, of LifeSearch, the independent insurance specialist. He says: “We have known for several years that the cheaper companies tend to cherry-pick the lowest risks. While the initial premium is higher with other companies, the real premium that the customer pays after being underwritten is often lower.”

The rights of people with a mental impairment, in addition to anyone with a disability, improved in 1995 with the introduction of the Disability Discrimination Act (DDA). It states that it is illegal to provide goods, facilities and services to a disabled person on terms that are justifiably different from those given to other people.

Since 1996 the Act has also made it illegal for insurers to refuse cover, or charge higher premiums, unless they can demonstrate statistically higher risks as a direct result of a specific mental health condition. This means that if someone's mental illness has a substantial, adverse and long-term effect on their ability to carry out day-to-day activities, then he or she is likely to be covered by the DDA.

Stress-related issues, including depression and anxiety, have become the main reason for policyholders claiming on their income protection policies. However, consumers need

to be aware that there is no real provision for mental illness under critical-illness cover.

CASE STUDY - I wasn't treated as an individual

Steve Walter, of Tunbridge Wells, Kent, tried to buy a life insurance policy when remortgaging his house three years ago. After approaching an insurance company for a quote, he found that he would have to pay a hefty loading because of his past mental health history.

The 47-year-old father of two, left, had bipolar disorder diagnosed after two episodes, in 1997 and early 2002. Since then, however, he says that he has fully recovered, with the help of medication, a view supported by his GP. He tried to explain this to the company, to no avail.

Mr Walter says: “These were discreet, isolated experiences and my condition has been effectively managed. However, the insurer increased the premium substantially so I decided not to bother. My doctor even wrote a letter outlining my improvements, but the company disregarded it - I wasn't treated as an individual, it only considered the label.”

Mr Walter is a health, safety and environmental adviser and is also a member of Stand to Reason, an organisation that fights against discrimination, stigma and stereotyping of people who suffer from mental ill-health.

Top tips

Seek specialist advice. Independent brokers will be able to tell you which insurance companies offer the best cover available.

Try smaller companies that specialise in placing high-risk insurance.

Be honest with your insurer. Disclose as much information as possible about your condition to ensure that you obtain the right cover for you.