Life Insurance Denial: What You Need To Know

Life insurance is a crucial aspect of financial planning, offering a safety net for your loved ones in the event of your demise. However, getting denied life insurance can be a disheartening and worrying experience. Understanding the reasons behind denial and knowing your options can help you navigate this challenging situation effectively.

There are several factors that can lead to a life insurance application being denied. These include health conditions, such as obesity, high cholesterol, diabetes, or a history of serious illnesses like cancer; engagement in high-risk activities or occupations; lifestyle choices like smoking or excessive alcohol consumption; financial considerations, including credit history and income; and age or life expectancy.

It's important to remember that a denial doesn't mean the end of the road. You have the right to request an explanation for the denial and appeal the decision by providing additional information or evidence. Consulting a licensed insurance agent, exploring alternative policies, and considering lifestyle changes to improve your health and reduce risk factors can all enhance your chances of obtaining coverage.

Health History

The older you get, the more expensive it becomes to get insured, and the policies available may not meet all your coverage needs or may be very costly. Your occupation can also impact your ability to get life insurance coverage, especially if your job is considered hazardous, such as active-duty military or firefighting.

If you have a history of poor health, it is advisable to consult with a doctor to confirm if there is a cause for concern and to get updated information about your medical condition. Making healthy lifestyle changes, such as improving your diet, quitting smoking, and exercising regularly, can also increase your chances of approval.

Additionally, prescription history is another factor that insurance companies consider when assessing your application. They will look at the specific drugs prescribed, the dosages, and the type of medical professional who wrote the prescription. Certain medications linked to more serious health conditions can impact your premiums or policy options. For example, immunosuppressants, blood thinners, antipsychotics, and drugs used to treat narcotic dependence can affect your life insurance rates or eligibility.

In summary, your health history plays a significant role in the life insurance application process, and it's important to take proactive measures to improve your overall health and manage any pre-existing conditions to increase your chances of approval.

Lifestyle Choices

Substance Use:

Heavy alcohol consumption and drug use are red flags for insurers. These behaviours are linked to various health issues, including liver and kidney problems and an increased risk of certain cancers. If your drug test results are positive for illegal substances, your application will likely be denied. Marijuana use may be an exception, depending on the insurer's policies and the laws of your state.

Smoking:

Smoking is a significant risk factor for various health conditions, including heart disease and lung cancer. Insurers often view smokers as high-risk applicants and may deny coverage or charge significantly higher premiums.

Hazardous Occupations and Risky Hobbies:

Engaging in high-risk activities, whether through your job or leisure pursuits, can increase your chances of being denied life insurance. Occupations like military service, firefighting, and roofing are considered hazardous. Similarly, risky hobbies such as skydiving, auto racing, rock climbing, and scuba diving can also lead to a denial. Insurers view these activities as increasing the likelihood of accidents and premature death.

Financial Stability:

Insurers assess your financial history and stability when reviewing your application. A history of bankruptcy, delinquent payments, or poor credit can indicate financial instability and a higher risk of being unable to pay premiums consistently. This may result in a denial or higher premiums.

Driving Record:

Your motor vehicle record plays a role in the underwriting process. A history of accidents, reckless driving, or multiple speeding tickets could be a concern for insurers. While a single DUI or DWI may not result in a denial, a pattern of such offences could increase your risk profile.

Criminal Record:

A criminal record can negatively impact your life insurance application. The nature, recency, and frequency of your offences will be considered. Non-violent and less frequent offences may have a lesser impact, but more serious and frequent violations will likely result in higher premiums or a denial.

International Travel:

Frequent international travel, especially to high-risk areas, can be viewed as a risk factor by insurers. This is particularly true for travel to regions with political instability, high crime rates, or known health hazards.

It is important to note that the impact of these lifestyle choices can vary between insurers, as each company uses its own guidelines to assess risk. Being denied by one insurer does not mean you are uninsurable. You may find that another insurer is more accommodating of your lifestyle choices, although you may have to pay higher premiums.

Age

In addition to age limits, a person's age can also affect the amount of coverage they are eligible for. The older the applicant, the more expensive it tends to be to get insured. While there are life insurance options for seniors, the policies available may not meet all their coverage needs or may be very costly. The options for getting life insurance start to become limited once an individual reaches the age of 80, but some insurers will still offer coverage up to the age of 85.

Insurers also take into account life expectancy in specific demographic regions as part of their risk assessment. This means that age-related considerations may vary depending on where the applicant lives.

Financial History

Insurers want to ensure policyholders can consistently pay premiums to keep the policy in force. Therefore, they may deny applications if they perceive a risk of financial instability. This risk assessment includes evaluating an applicant's income, non-traditional income sources, and credit history. Insurers do not typically consider credit scores but will review public records for late payments, bad debt, foreclosures, bankruptcies, and liens.

A poor credit history, previous bankruptcies, or significant personal debt can be concerning for insurers and may lead to a denial of coverage. Insurers may also deny applications if they believe the applicant cannot afford the premiums. This decision is often based on factors such as low income, a history of bankruptcy, or substantial outstanding debt.

Financial considerations are a critical aspect of the life insurance underwriting process, which involves a detailed assessment of an applicant's health, lifestyle, occupation, and financial stability. This process aims to determine the level of risk for the insurer, and applications may be denied if the perceived risk is too high.

If denied life insurance due to financial history, individuals can take steps to improve their financial situation and reapply. They can work on improving their credit score, reducing debt, and stabilising their income. Consulting a financial advisor or insurance professional can provide personalised advice and enhance their chances of approval.

Lying on Application

Lying on a life insurance application is considered insurance fraud and can have serious consequences. While it may be tempting to misrepresent certain details to secure a better rate, doing so can ultimately result in denied applications or leave your loved ones without the financial support they need.

Insurance companies conduct thorough investigations to verify the information provided in applications. They may review medical records, conduct personal interviews, and utilise databases such as the Medical Information Bureau (MIB) to identify any discrepancies. If they uncover inconsistencies during the application process or after a claim is made, it could lead to serious repercussions.

The consequences of lying on a life insurance application can vary depending on the severity of the lie and the timing of its discovery. In some cases, the application may be denied or the policy may be cancelled. If the lie is discovered after the insured person's death, the insurer may decrease or deny the death benefit altogether. Additionally, intentional fraud can result in legal repercussions, including fines, restitution, or even jail time.

Some common areas where people may be tempted to lie include age, weight, family and personal medical history, tobacco and drug use, hobbies, income, and occupation. However, it is crucial to be truthful in all aspects of the application to avoid complications and ensure that your loved ones receive the intended financial protection.

While minor oversights or unintentional mistakes on the application are generally not treated as fraud, intentional misrepresentations can have significant consequences. Therefore, it is always best to be honest and provide accurate information when applying for life insurance.

Frequently asked questions