Denied Life Insurance? What You Need To Know

Life insurance is a crucial aspect of financial planning, offering a safety net for loved ones in the event of an untimely demise. However, the process of obtaining life insurance can be challenging, and many applicants face the disappointment of having their applications denied. This setback can be disheartening, but it's important to remember that there are alternative paths to securing the necessary coverage. Understanding the reasons behind denials and knowing your rights and options can help you navigate this complex situation effectively.

High-Risk Occupations or Hobbies

When it comes to life insurance, high-risk occupations and hobbies can significantly impact your eligibility and premium costs. Here are some essential things to know about high-risk occupations and hobbies:

High-Risk Occupations

Certain jobs are considered high-risk due to their hazardous nature or the potential for accidents and fatalities. These occupations include:

• Fishing and hunting workers
• Loggers
• Aircraft pilots and flight engineers
• Roofers
• Construction workers
• Refuse and recyclable material collectors
• Truck and delivery drivers
• Structural iron and steel workers
• Farmers, ranchers, and agricultural managers
• Ground maintenance workers
• Active-duty military personnel
• CEOs and CFOs conducting international business
• Commercial pilots
• Underground miners
• Oil rig workers
• Offshore commercial fishermen
• Police officers (especially in special units like SWAT)
• Firefighters (especially in high-risk roles like wildfire firefighting)
• Attorneys who travel frequently outside the US

High-Risk Hobbies

In addition to occupations, certain hobbies can also be deemed high-risk by insurance providers. These hobbies often involve an element of danger or increase the likelihood of injury or death. Some examples of high-risk hobbies include:

• Scuba diving
• Flying private planes
• Skydiving
• Rock climbing
• Racing cars
• Bungee jumping
• Base jumping

Impact on Life Insurance

If you engage in a high-risk occupation or hobby, you may face challenges when applying for life insurance. Insurance companies may categorise you as a high-risk applicant, which can result in higher premiums or even a denial of coverage. The impact can vary depending on the specific occupation or hobby and the insurance provider's criteria.

It's important to note that not all insurance companies assess risk in the same way. While one company may consider you high-risk, another may not. Therefore, it's beneficial to shop around and compare different providers' criteria and rates. Additionally, working with an independent insurance agent or broker can help you navigate the process and find the best options for your situation.

Financial Considerations

Financial stability is a key aspect that insurers scrutinize when assessing life insurance applications. They want to ascertain whether you can consistently pay premiums and avoid policy lapses. A history of bankruptcy, poor credit, or delinquent payments may suggest financial instability, leading to higher premiums or outright denial of coverage. Insurers may also deny applications if they deem that the policy doesn't align with the applicant's financial situation.

If you have a history of unpaid debts, delinquent payments, or bankruptcy, insurers may view this as a red flag, indicating a higher likelihood of being unable to pay premiums regularly. Insurers need to ensure that policyholders can maintain their policies to avoid policy lapses that could leave beneficiaries without a death benefit.

Additionally, some insurers may request a bankruptcy report or run a credit check, especially for more comprehensive policies with higher coverage amounts. While they don't typically consider credit scores, they will review public records for late payments, bad debt, foreclosures, bankruptcies, and liens.

If your application is denied due to financial considerations, you can take steps to improve your financial situation. This may include improving your credit score, stabilizing your income, or paying off debts. These actions can enhance your financial stability and increase your chances of obtaining life insurance coverage.

It's also worth noting that if you're older and have substantial savings or investments, you may not need life insurance. In such cases, your investments might generate enough growth to replace your income, and you can consider self-insuring.

Age and Life Expectancy

Age is a significant factor in life insurance decisions. As people grow older, the risk of developing health issues increases, which can lead to higher premiums or denial of coverage. Insurers also consider life expectancy in specific demographic regions as part of their risk assessment.

Insurers may deny term life insurance to applicants over a certain age, such as 75. Those aged 55 and above might not be eligible for 30-year term life insurance but may qualify for a shorter term. Whole life insurance is often available to people as old as 85 or 90, although it is much more expensive than term life insurance.

Final expense insurance is another option for individuals up to 85 years old, and sometimes older, depending on the provider. This type of policy is designed to cover funeral and burial costs.

Additionally, older adults can explore term life insurance as a more cost-effective option, especially if they only require coverage for a specific period. Some insurance companies offer policies tailored for older adults, although these policies typically come with higher premiums and lower coverage amounts.

It is important to note that each insurance company has its own underwriting guidelines and criteria. Therefore, even if one company denies coverage due to age, another insurer may be willing to offer a policy.

Appealing the Decision

If your life insurance application has been denied, you can take steps to appeal the decision. Here's what you can do:

Contact the Insurer

Get in touch with the insurance company or your insurance agent to understand the reason for the denial. This could be due to medical history, driving record, financial situation, or the results of your life insurance medical exam. Understanding the reason for the denial will help you decide on the next steps and whether you have grounds for an appeal.

Confirm the Results

If poor health or other medical reasons are cited, consult your physician to ensure there is a valid cause for concern. If the denial is not health-related, review the reason provided to ensure it is valid and based on accurate information.

Appeal the Decision

If the denial is based on incorrect or insufficient information, you have the right to appeal. Submit up-to-date and complete information to support your appeal. This includes providing detailed information from your medical file, as well as recent and credible information about your personal history, such as your credit report, driving record, and occupation details.

Work with a Financial Professional

Consider seeking assistance from a financial professional or an independent insurance agent. They can help you navigate the appeal process and apply to insurers that offer better chances of approval. Some financial professionals even specialise in helping higher-risk individuals obtain life insurance.

Apply with a Different Insurer

Different insurers have varying criteria for life insurance approvals. Try applying with another insurer or multiple insurers before giving up. An independent insurance agent can help you with this process by searching across a wider market for policies that may work for you.

Try Again Later

Use a waiting period to address any health, financial, or other issues that led to the denial. Improve your health, quit smoking, clean up your driving record, or enhance your finances. Showing progress in these areas can increase your chances of getting approved by insurers.

Alternative Insurance Options

If you've been denied life insurance, there are alternative options to consider. Here are some possibilities:

• No-Exam Life Insurance: This type of life insurance doesn't require a medical exam. There are several varieties, including simplified issue life insurance, instant life insurance, and guaranteed issue life insurance. Simplified issue life insurance involves answering questions about your medical history and health status, and typically offers death benefits ranging from $25,000 to $300,000. Instant life insurance involves applying online and answering health questions, with decisions usually made within 48 hours and death benefits capped at $1 million. Guaranteed issue life insurance is designed for those denied coverage due to health issues and typically guarantees coverage for individuals within a certain age range, but it is more expensive.
• Group Term Life Insurance: Some employers offer group term life insurance plans to their employees, sometimes even covering the premiums. These plans often don't require a medical exam, making them accessible to people with health issues. However, the coverage is usually limited and ends if you leave your job.
• Whole Life Insurance: If you were denied term life insurance due to age, whole life insurance could be an alternative. While it is more expensive, it is often available to individuals up to 85 or 90 years old and offers permanent coverage.
• Final Expense Insurance: This type of insurance is designed to cover funeral and burial costs and is available to individuals up to 85 years old or older, depending on the provider.
• Disabled Veterans Life Insurance: Veterans with service-related disabilities may be eligible for Veterans Affairs Life Insurance (VALife), which offers whole life insurance with death benefits up to $40,000 and starts accruing cash value after two years.
• Self-Funding: Instead of purchasing life insurance, you can choose to build up a substantial savings account for your family to use after your passing. This option provides control over the funds but requires discipline and a significant amount of savings.
• Annuities with Long-Term Care Riders: These are investment products that provide a stream of income during retirement and include long-term care benefits. They can also provide death benefits to dependents, but they tend to be complex and require a large upfront investment.

Frequently asked questions