Life Insurance Denial: What Does It Mean?

Being denied life insurance can be a disheartening experience, but it's important to remember that a rejection doesn't mean you're uninsurable. There are numerous reasons why life insurance applications are denied, and understanding these reasons can help you navigate the path forward.

Life insurance companies assess applications based on various factors, including health, lifestyle, occupation, and financial stability. The process, known as underwriting, helps determine the level of risk the insurer would undertake by offering coverage. Here are some key factors that can influence the insurance application process and potentially lead to a denial:

- Health conditions: Certain health issues, such as obesity, high cholesterol, diabetes, chronic illnesses, or pre-existing conditions, can increase your risk profile and lead to higher premiums or denial.

- High-risk occupations or hobbies: Engaging in high-risk activities through work or leisure can categorize you as a high-risk applicant. Such activities include hazardous jobs like construction work or first responding, and risky hobbies like skydiving or base jumping.

- Lifestyle choices: Smoking, excessive alcohol consumption, or participation in dangerous sports can negatively impact your application due to their associated health risks.

- Financial considerations: A history of bankruptcy, poor credit, or significant personal debt can indicate financial instability, which may lead insurers to question your ability to pay premiums consistently.

- Age and life expectancy: As people age, the risk of health issues increases, which can result in higher premiums or denial. Insurers may also consider life expectancy in specific demographic regions.

It's important to remember that each insurance company has its own underwriting guidelines and criteria. If one company denies your application, another might approve it. Exploring different insurers and making necessary improvements to your health, lifestyle, or financial situation can enhance your chances of securing coverage.

Health issues

Being denied life insurance due to health issues can be a disheartening experience, but it's important to remember that a denial doesn't mean you're uninsurable. Here are some factors to consider and steps you can take to address the situation:

Understanding Health-Related Reasons for Denial

• Chronic illnesses: Insurance companies may deny coverage if you are suffering from a chronic illness, especially if it is not being managed through consistent treatment. Examples include diabetes, heart disease, cancer, Parkinson's disease, and Alzheimer's disease.
• Obesity: Obesity rates are high in America, and this can be a factor in life insurance underwriting. Each company has different requirements regarding height-to-weight ratios, so it's important to understand their guidelines.
• High-risk medical conditions: Conditions such as high cholesterol, high blood sugar or glucose levels, kidney disease, and high liver functions can increase your risk profile and lead to denial.
• Age: As people age, health issues become more prevalent, increasing the risk for insurance companies. Older applicants may face higher premiums or limited product options.
• Family medical history: A family history of cancer or other serious illnesses can also reflect poorly on your application.

Steps to Take After Denial

If you've been denied life insurance due to health issues, here are some steps you can take:

• Contact your physician: Confirm with your doctor whether there is indeed a cause for concern. Ensure that your medical file is up to date and includes information about any improvements or successful treatments.
• Appeal the decision: If the denial is based on incorrect or insufficient medical information, you have the right to appeal. Provide the insurance company with the most recent and credible information about your health status.
• Consider alternative policies: Explore alternative life insurance policies designed for high-risk individuals. These may include simplified issue life insurance, guaranteed issue life insurance, final expense life insurance, or AD&D insurance. While these policies may have lower coverage limits or higher premiums, they can still provide some financial protection.
• Improve your health: If possible, take time to focus on improving your health. Make healthy lifestyle changes, manage any chronic conditions, quit smoking, and address any other health-related factors that contributed to the denial.
• Reapply with a different insurer: Every insurance company has its own underwriting criteria and guidelines. What may be a deal-breaker for one company might not be an issue for another. Shop around and consider applying with a different insurer after making improvements to your health.
• Work with an independent insurance agent: An agent can provide valuable insights into the application process and help you identify ways to enhance your chances of approval. They can guide you toward insurers that may be more likely to accept your application.

High-risk jobs or hobbies

Life insurance companies constantly quantify risk when insuring their customers. They use all the available information to establish premium rates and determine whether they can offer you a life insurance policy. While some companies may allow low-risk factors to balance out a high-risk occupation, others may require higher premiums to offset their risk.

Jobs

• Fishing and hunting workers
• Loggers
• Pilots and flight engineers
• Roofers
• Construction workers
• Refuse and recyclable material collectors
• Drivers and truck drivers
• Structural iron and steel workers
• Farmers, ranchers, and agricultural managers
• Grounds maintenance workers
• Police officers
• Firefighters
• Miscellaneous extraction workers (e.g., those working on oil rigs, mines, platforms, and construction demo cleanup)
• Electrical power-line installers and repairers

Hobbies

• Skydiving
• BASE jumping
• Rock climbing and mountain climbing
• Drag racing
• Motocross and supercross
• Recreational aviation
• Hang gliding and paragliding
• Scuba diving
• Big wave surfing
• Drug use

If you have a high-risk job or hobby, it's important to be honest with your insurance company. Leaving out details about your position or hobby could result in your family being left without financial security. While you may face higher premiums or additional exclusions, there are still options available for life insurance coverage.

Lifestyle choices

Smoking and Tobacco Use

Smoking and tobacco use are often considered significant risk factors by insurance companies. These habits are associated with various health issues, including heart disease and cancer, which can lead to higher insurance premiums or even denial of coverage. Some insurance companies have strict policies and may deny coverage to tobacco users altogether. However, other insurers may offer coverage but charge substantially higher premiums, reflecting the increased health risks associated with smoking.

Hazardous Activities and High-Risk Hobbies

Engaging in hazardous activities or high-risk hobbies, such as skydiving, racing, or extreme sports, can negatively affect your life insurance application. Insurance companies view these activities as increasing the likelihood of accidents and premature death. In some cases, you may be able to obtain coverage by paying extra for a rider that provides additional coverage for deaths caused by these dangerous activities. Alternatively, some insurers may approve coverage but include a policy exclusion, refusing to pay out if death occurs during the pursuit of these activities.

Alcohol Consumption

Excessive alcohol consumption can also impact your life insurance application negatively. Alcohol abuse is linked to various health risks and may be considered a contributing factor to certain health conditions. Therefore, insurance companies may view it unfavourably and consider it a lifestyle choice that increases their risk of providing coverage.

International Travel

Frequent international travel, especially to high-risk areas or regions with political instability, can be seen as a lifestyle choice that increases the chances of accidents, injuries, or health risks. This may lead to higher premiums or, in some cases, denial of coverage.

Criminal and Driving Records

A criminal record or a poor driving history can also influence your life insurance application. The nature, recency, and frequency of any violations or offences will be considered. Multiple speeding tickets may result in higher insurance rates, while more serious offences, such as reckless driving or DUI convictions, could lead to a denial of coverage. A criminal record may indicate a higher-risk lifestyle, and insurance companies will assess the circumstances and severity of any crimes before offering coverage.

It is important to note that lifestyle choices are not the sole factor in determining life insurance approval. Other factors, such as health, age, occupation, and financial stability, also play a significant role. However, making positive lifestyle changes and reducing risk factors can improve your chances of obtaining life insurance coverage.

Financial instability

Insurers evaluate an applicant's financial situation to ensure they can meet the financial commitments associated with the policy. A history of financial instability raises concerns about the applicant's capacity to maintain policy payments. This evaluation is crucial as it helps insurers manage their own financial risks.

To improve your chances of obtaining life insurance, it is essential to address financial instability. This can be achieved by improving your credit score, stabilising your income, and demonstrating financial responsibility. Consulting with a financial advisor or insurance professional can provide personalised advice and strategies to enhance your financial stability and increase your chances of securing life insurance coverage.

It is worth noting that financial instability is not the only factor considered by insurers. Health conditions, high-risk occupations or hobbies, lifestyle factors, and age can also contribute to life insurance denial. However, by addressing financial concerns and improving financial stability, individuals can take a proactive step towards obtaining the necessary coverage to protect their loved ones' financial future.

Age or life expectancy

Age is a significant factor in the life insurance application process. The older you are, the more likely you are to become ill or die while under coverage, and the more expensive your premiums will be. Life insurance companies use actuarial tables to estimate life expectancy and mortality rates, which, along with other factors, determine how much you'll pay for coverage.

The premium amount increases by about 8% to 10% for every year of age, and this can be as high as 12% annually if you're over 50. The older you get, the more stringent the qualifying medical exams become.

Most life insurance products have age limits, with term life insurance policies typically capping at around 75 years old, and whole life insurance policies having a higher age limit of around 80 to 85 years old.

The likelihood of developing health problems increases with age, making older adults more likely to be denied life insurance or offered policies with unaffordable premiums. As a result, it is generally recommended to apply for life insurance when younger and healthier, as the risk is lower, resulting in lower premiums.

While age is a crucial factor, it is not the only consideration. Other factors, such as health, lifestyle choices, financial history, and driving record, also play a role in the application process.

Frequently asked questions