Life Insurance After Declination: Is There Hope?

Getting declined for life insurance can be a frustrating experience, especially if you have a family that relies on your income. However, it's important to remember that there are still options available to you. Each life insurance company has its own underwriting policies and guidelines for assessing risk, so a rejection from one insurer doesn't necessarily mean that all others will follow suit. Understanding the reason behind the denial is crucial, as it can help you improve your chances of getting approved in the future.

Medical and non-medical factors play a significant role in the approval process. Medical reasons for rejection can include pre-existing conditions, high-risk occupations, hazardous hobbies, and unhealthy lifestyle choices. Non-medical factors can include financial instability, a criminal record, or a poor driving history. If you've been declined due to incorrect or insufficient information, you have the right to appeal and provide updated details.

To increase your chances of obtaining life insurance, consider making lifestyle changes, such as improving your health, quitting smoking, or addressing financial issues. Additionally, you can explore alternative life insurance options, such as simplified issue, guaranteed issue, or final expense policies, which may have different requirements and acceptance criteria. Working with an independent life insurance agent or broker can also be beneficial, as they can guide you through the process and help you navigate the complex world of life insurance.

Reasons for being declined: health, lifestyle, age, finances, and previous denials

There are many reasons why someone might be declined life insurance coverage, and it's important to understand these reasons in order to improve your chances of being approved in the future. Here are some key factors that insurance companies consider when evaluating your application:

Health

Your physical health is a significant factor in the approval process. If you are suffering from a chronic illness, such as Parkinson's disease or Alzheimer's, your application may be declined due to the increased risk you pose to the insurer. Similarly, if you have a history of cancer, this will raise a red flag for insurance carriers, especially if it was a serious form of cancer. They will consider the type of cancer, how far it progressed, and how long you've been in remission. High cholesterol, high blood sugar levels, and obesity can also lead to a denial of coverage as they are often precursors to more serious health issues.

Lifestyle

Certain lifestyle choices and habits can impact your application. If you work in a hazardous occupation, such as deep-sea fishing or being a pilot, insurers may view you as a higher risk. Additionally, if you have high liver functions, it could indicate a potential issue with alcoholism, which may increase your risk of denial. Smoking, skydiving, and speeding tickets may not lead to a direct rejection, but they can result in higher premium rates.

Age

Age is a crucial factor in the approval process. As you get older, it becomes more challenging to obtain coverage, and the premiums tend to be much more expensive. This is because older age often brings more health issues, making you a higher risk for the insurance company. Some products may no longer be available to you after a certain age, so it's essential to apply for coverage while you're younger and healthier.

Finances

Your financial situation plays a role in the approval process. Insurers will consider your current income, net worth, and credit history when evaluating your application. They want to ensure that the policy you're applying for aligns with your financial situation and that you can afford the premium payments. Previous bankruptcies or significant personal debt may also be concerning for insurance companies.

Previous denials

If you have been previously denied life insurance coverage, it can increase your risk of being denied again. Insurance carriers subscribe to a database called the Medical Information Bureau (MIB), which contains information about your previous life insurance applications and approvals/denials. However, this does not automatically mean you will be denied a second time, as each insurance company has its own underwriting policies and guidelines.

What to do if declined: ask for more information and talk to your agent

If your life insurance application has been declined, don't panic. There are still options available to you. Here are some steps you can take to understand the reason for the rejection and explore alternative paths to getting coverage:

Ask for More Information

Firstly, contact the insurance company or your agent to find out why your application was denied. Insurance companies consider both medical and non-medical risks when evaluating your application, and the reason for the rejection could range from a serious medical condition to non-medical reasons such as bankruptcy, a criminal record, or even a dangerous hobby. Understanding the specific reason for the denial will help you determine your next steps.

Talk to Your Agent

If you don't already have an independent life insurance agent, now is the time to call one. These agents are experts in the field and know the ins and outs of the life insurance underwriting process. They can help you navigate the often complex process and find alternative options for coverage. Remember, just because one company has denied your application, it doesn't mean all insurance companies will. Agents can search across a wider market and suggest insurers that are more flexible for your specific circumstances. They can also advise you on any red flags in your application and suggest improvements or corrections.

Make Lifestyle Changes

In some cases, you may need to make lifestyle changes to improve your chances of getting approved. For example, if your application was denied due to health issues, you can work on improving your health by following your doctor's advice, taking medication, or adopting healthier habits. If the denial was due to non-medical reasons, such as a poor driving record or financial issues, take steps to address those concerns. This may include improving your driving habits, clearing up your credit report, or reducing debt.

Explore Alternative Policies

If you are unable to get approved for a standard life insurance policy, consider exploring alternative policy options. These may include:

• Simplified life insurance: This option requires no medical exam, but you'll need to fill out a medical questionnaire. It typically has higher premiums due to the increased risk for the insurer.
• Guaranteed life insurance: This option offers a small death benefit, usually up to $50,000, and no medical exam or health questions are required. However, the premiums are much higher, and there is an exclusion period when claims are not accepted.
• Group life insurance: If you can get coverage through your employer or a professional association, take advantage of it. The death benefit may not be as high as you'd like, but it's better than no coverage.
• Mortgage life insurance: This type of insurance covers your mortgage balance in the event of your death. It doesn't require a medical exam, and most people qualify for it.

Remember, even if your application has been declined by one insurer, it doesn't mean you are uninsurable. By asking for more information, consulting with an agent, and exploring alternative options, you can still find a way to get the coverage you need.

Appeal the decision: provide evidence of healthy habits and lifestyle changes

If your life insurance application is declined, don't panic. You have options to appeal the decision and provide evidence of healthy habits and lifestyle changes. Here are the steps you can take:

Understand the Reasons for Denial: Review the denial letter from the insurance company to identify the specific reasons for the rejection. Common reasons include physical health issues, pre-existing conditions, age, financial circumstances, lifestyle choices, criminal or driving records, and withheld information. Understanding the grounds for denial is crucial for effectively appealing the decision.

Contact the Insurance Company: Get in touch with the insurance company to discuss the denial and gather additional information. This step helps you understand their perspective and address any misunderstandings or discrepancies. Remember to document all communication, including dates, times, and the names of individuals you speak with.

Promote Healthy Habits and Lifestyle Changes: If your denial is related to health issues, take concrete steps to improve your health and lower your risk profile. This could include following your doctor's advice, taking prescribed medication, adopting a healthier diet, quitting smoking, or increasing your physical activity. Demonstrating that your health conditions are under control and managed effectively can strengthen your appeal.

Gather Supporting Documentation: Collect all relevant documentation to support your appeal. This includes medical records, expert opinions, witness statements, proof of premium payments, correspondence with the insurance company, and any other evidence that strengthens your case. Organize and present this documentation in a clear and concise manner.

Write an Appeal Letter: Craft a professional and persuasive appeal letter. Address the specific reasons for the denial, provide additional information or documentation, and explain why you believe the denial is unjust. Highlight any lifestyle changes or improvements in your health that support your case. Request a prompt response from the insurance company and provide contact information for further communication.

Submit the Appeal: Follow the insurance company's instructions for submitting your appeal. Include all necessary documents, use the appropriate addressing and formatting, and choose the preferred submission method. Keep records of all correspondence and follow up with the insurance company to confirm receipt and track the progress of your appeal.

Seek Legal Assistance if Needed: If your internal appeal is unsuccessful, consider consulting an attorney specializing in life insurance claims. They can guide you through the legal process, protect your rights, and explore alternative dispute resolution methods or litigation if necessary.

Remember, each insurance company has its own underwriting policies, so a rejection from one company doesn't mean you can't get coverage elsewhere. Stay persistent, provide evidence of your healthy habits and lifestyle changes, and don't be afraid to reach out for professional help if needed.

Apply for a different policy: consider term life, simplified issue, or guaranteed issue insurance

If your application for life insurance has been declined, don't panic. You still have options available to you, including applying for a different policy, such as term life, simplified issue, or guaranteed issue insurance.

Term Life Insurance

Term life insurance is the most conventional type of policy. It provides coverage for a specific period, typically ranging from 10 to 30 years. If you pass away during the term, your beneficiaries will receive a death benefit. However, term life insurance does not build cash value over time, and your premiums may increase when the term ends and you renew your coverage.

Simplified Issue Insurance

Simplified issue insurance is a type of life insurance that does not require a medical exam. Instead, it asks a few health questions to determine eligibility. This option may be suitable for individuals with minor health issues or those who prefer not to undergo a medical exam. Simplified issue insurance may have higher premiums than traditional life insurance policies, and the death benefit may be lower.

Guaranteed Issue Insurance

Guaranteed issue insurance is a type of life insurance that, as the name suggests, guarantees approval for applicants. This option is ideal for individuals with pre-existing health conditions or those who have been denied coverage in the past. Guaranteed issue insurance typically has higher premiums and lower death benefit payouts, usually covering final expenses such as funeral and burial costs. There may also be a graded death benefit, meaning there is a waiting period before the full death benefit is issued.

When considering these alternative policy options, it's important to weigh the pros and cons of each and ensure you understand the eligibility requirements, coverage limits, and potential costs. Remember, being declined by one insurer does not mean you are uninsurable. You can explore different insurers and policies to find the coverage that best suits your unique circumstances.

Explore alternative options: accidental death insurance, mortgage life insurance, and group life insurance

If you've been declined life insurance, there are alternative options to consider. These include accidental death insurance, mortgage life insurance, and group life insurance.

Accidental Death Insurance

Accidental death insurance, or AD&D insurance, is very different from other life insurance policies. It pays out only if the death or injury is caused by an accident and not if it occurs due to illness or disease. The chances of dying from an accident are lower than those of dying from an illness. AD&D insurance is typically less expensive than life insurance because its coverage is more limited. It can be a good option if you have trouble qualifying for traditional life insurance. However, it may not be worth the money, and it's important to carefully consider whether it meets your needs.

Mortgage Life Insurance

Mortgage life insurance, also known as mortgage protection insurance, is designed to pay off your outstanding mortgage balance if you die. It ensures that your family can stay in their home and won't have to worry about mortgage payments. The lender is the beneficiary of this policy, not your spouse or chosen beneficiary. Mortgage life insurance doesn't require a medical exam, making it a good alternative if you have pre-existing medical conditions that prevent you from getting traditional life insurance. However, it tends to be more expensive for healthy homeowners, as the rates are assumed to be higher-risk. Additionally, the death benefit is paid directly to the mortgage lender, and your family may not receive any extra money if the coverage amount exceeds the outstanding mortgage balance.

Group Life Insurance

Group life insurance is available to most full-time workers through their employer and usually doesn't require a medical exam. It can be a desirable option for people with medical issues. While it typically doesn't provide a large payout, it can offer some level of coverage until you find a more comprehensive plan. Keep in mind that if you leave your job, you will lose this type of coverage.

Frequently asked questions