How To Appeal A Denied Life Insurance Application

Life insurance is a financial safety net for your loved ones, but what happens when a claim is denied? While it's rare, there are several reasons why this might happen, including insurance fraud, policy lapse, or excluded causes of death. If your claim is denied, you can appeal the decision by contacting the insurance company, but it's important to act quickly as there is usually a time limit for appeals. Working with a lawyer who specializes in life insurance can improve your chances of a successful appeal, and they can guide you through the complex process. This includes gathering supporting documents, conducting legal research, and navigating the interplay of state and federal laws, policy provisions, and court documents.

Reasons for denial of life insurance application

There are several reasons why a life insurance application may be denied. Here are some of the most common ones:

Physical Health or Pre-existing Health Conditions:

If an applicant has a chronic illness or pre-existing health condition, such as obesity, high cholesterol, diabetes, or a history of cancer, the insurer may decline the application. The older the applicant, the more expensive it becomes to get insured, and the availability of policies that meet coverage needs decreases.

Hazardous Occupation:

Certain occupations are considered hazardous due to their inherent risks, including airline pilots, fishers, construction laborers, and police officers. People in these professions may find it challenging to obtain life insurance coverage.

Financial Reasons:

Insurers assess an applicant's financial situation to determine if the policy they are applying for aligns with their income and net worth. A poor credit history, bankruptcies, or significant personal debt may raise concerns and increase the risk of denial.

Lifestyle Choices:

Although lifestyle choices like smoking, skydiving, or speeding tickets may not always lead to rejection, they can result in higher insurance rates. Non-disclosure of such activities may lead to application rejection or increased premiums.

Criminal and Driving Records:

A criminal record or a poor driving history can negatively impact an applicant's chances of getting life insurance coverage. The nature, frequency, and recency of violations are considered, with more serious and recent offenses carrying a higher impact.

Non-disclosure or Misrepresentation of Information:

Failing to disclose relevant personal information or providing inaccurate details during the application process can lead to denial of coverage. This includes withholding information about medical conditions, income, or risky hobbies.

It is important to note that each insurance company has its own guidelines for assessing risk, and being denied by one company does not mean that all companies will reject the application. Applicants can work with independent insurance agents or brokers to understand the reasons for denial and explore alternative options for coverage.

Appealing the denial

If your life insurance application is denied, it means the company is unable to offer you coverage. However, it is important to note that each company uses its own guidelines to assess risk, so you may still be able to get coverage with another insurer. Here are some steps you can take to appeal the denial:

Contact the insurer: Speak to the insurer to understand the reason for the denial and confirm if a mistake was made. Get clarity on the specific reasons for rejection, as this will help you formulate your appeal.

Review the reasons for denial: Common reasons for denial include falling into a high-risk category due to health issues, risky hobbies, behaviours, or occupations. Non-health reasons can include a history of DUIs, speeding tickets, criminal records, financial history, or failure to disclose relevant information. Understanding the reason for the denial will help you address it effectively.

Consider appealing: If you believe the denial is based on incorrect or insufficient information, you have the right to appeal. Your chances of a successful appeal increase when you submit timely and complete information. Work with your doctor to include up-to-date medical information and submit recent and credible information about your personal history, such as your credit report, driving record, and occupation details.

Work with a financial professional: A financial professional who works with multiple insurers can help you navigate the process and determine which insurers offer the best chances of approval. They can assist with the application and appeal process and specialise in helping higher-risk individuals obtain insurance.

Apply with a different insurer: Each insurer has different criteria for approvals. Try applying with other insurers before giving up, as you may find one that better suits your profile.

Explore alternative insurance products: If you are deemed high-risk, consider alternative insurance products such as simplified issue life insurance, guaranteed issue life insurance, AD&D insurance, or group life insurance through your employer. These options may have lower coverage limits or higher costs, but they can provide a safety net until you find a more permanent solution.

Make lifestyle changes: In some cases, insurers may postpone your application and request that you make specific improvements. During this waiting period, you can work on getting any health conditions under control, improving your finances, quitting smoking, or cleaning up your driving record. Showing progress in these areas can increase your chances of approval.

Consulting a lawyer

Firstly, a lawyer can help you understand the specific reasons for the denial. Denials can occur due to various factors, such as policy delinquency, material misrepresentation by the policyholder, or death within a contestable timeframe. Understanding the exact reason for the denial is crucial for crafting a strong appeal.

Secondly, a lawyer can assist in gathering the necessary documentation to support your appeal. This may include bank statements, receipts, financial records, medical documents, and official documents that confirm personal details or correct discrepancies in application information. They can also help in obtaining supplementary documents, such as police reports, autopsy reports, or letters from physicians, which may be required in complex cases.

Additionally, a lawyer can guide you in drafting a clear and concise appeal letter. They will ensure that your letter includes all the necessary elements, such as stating the reason for the denial, presenting your argument, and including supporting documentation. A well-crafted appeal letter increases your chances of a successful outcome.

Moreover, a lawyer can provide valuable guidance on understanding the details of your policy and the appeals process. They can also represent your interests effectively and take legal action on your behalf if needed. Some law firms work on a contingency fee arrangement, which means you only pay attorney fees if they successfully recover money on your behalf.

When choosing a lawyer, look for those with experience in handling life insurance claims and denials. They should have a strong track record of helping clients navigate the complex laws surrounding individual and group life insurance policies. It is also beneficial to seek a lawyer who is well-versed in insurance law, insurance policies, and insurance applications to strengthen your case.

Contestability period

The contestability period is a clause included in all life insurance policies that allows the insurer to review your application for incorrect information, usually within the first two years of the policy. This period gives the insurer the right to investigate any aspect of a policyholder's health that could have been misrepresented on their application. If the insurer finds that information was withheld or falsified by the applicant, it can deny coverage or void the contract entirely. The purpose of the contestability period is to deter fraud and help insurers spot any misrepresentation, thereby controlling the cost of insurance due to misrepresented claims.

During the contestability period, the life insurance company can be exempt from paying out the death benefit if it finds intentional misrepresentations in your application. For example, if you purposefully concealed a health condition, the company could deny or reduce the amount your beneficiary receives. The misrepresentations do not have to be related to your cause of death. For instance, if you die in a car accident but failed to disclose a history of alcohol abuse, the life insurance company can deny your death claim.

The contestability period exists to penalize people who hid or lied about critical information that helped them take advantage of lower premiums meant for less risky applicants. It is not meant to provide loopholes for insurers to avoid offering the financial protection they agreed to provide if you pass away.

If you get a new policy or reinstate your policy after a lapse, the period of contestability restarts.

Denial based on health or financial reasons

Denial of a life insurance application based on health or financial reasons can be a tricky situation, but there are steps you can take to address it. Here are some important considerations:

Understanding the Reasons: Start by understanding the specific reasons for the denial. Health-related reasons could include chronic illnesses, pre-existing health conditions, age, or even certain lifestyle choices. Financial reasons, on the other hand, might be related to your income, credit history, debt, or ability to afford premium payments.

Gathering Information: Contact the insurance company or your agent to get detailed information about why your application was denied. This will help you identify the specific factors that led to the denial and give you a clearer idea of your next steps.

Correcting Misinformation: If you believe the insurance company has incorrect or outdated information, you can appeal their decision. For example, if your health condition has improved or you no longer engage in certain risky activities, provide updated medical information or explain the changes in your circumstances.

Improving Your Profile: In some cases, you may need to work on improving your health or financial situation before reapplying. This could involve making healthy lifestyle changes, addressing specific medical issues, improving your credit score, or reducing debt.

Exploring Alternative Options: Consider alternative types of life insurance products that are designed for individuals with higher risks. These may include final expense life insurance, guaranteed issue life insurance, AD&D insurance, or group life insurance through your employer. While these options may have lower death benefit payouts or higher prices, they can provide coverage when traditional policies are not available to you.

Seeking Professional Help: Consult an independent life insurance agent or broker who can guide you through the process. They can help you identify red flags in your application, suggest improvements, and shop around for insurers who may be more likely to accept your application. Additionally, consider seeking legal counsel, especially if you believe the denial was unjustified or unlawful.

Remember, each insurance company has its own guidelines for assessing risk, so a denial from one company doesn't mean you are uninsurable. By taking proactive steps, making necessary improvements, and seeking professional guidance, you can increase your chances of obtaining life insurance coverage despite initial denials based on health or financial reasons.

Frequently asked questions