Life Insurance: Declined, Now What?

Life insurance is a crucial financial safety net for your family or dependents in the event of your untimely death. However, getting rejected is not uncommon, and there are several reasons why your application may be declined. Understanding these reasons and knowing your options are essential steps towards securing the coverage you need.

Firstly, it is important to identify why your application was rejected. Common reasons include specific health conditions, hazardous occupations or extracurricular activities, income limitations, and previous declines. Other factors include risky hobbies, behaviours, and a history of criminal or driving offences.

If you have been denied coverage, there are still options available. You can consider applying to a different insurer, as each company uses its own guidelines to assess risk. Working with a financial professional or an independent agent can help you navigate the process and find a suitable insurer. Alternatively, you may want to explore alternative policy types, such as term life, simplified issue, or guaranteed issue life insurance, which may offer more flexibility in terms of eligibility.

While getting rejected for life insurance can be challenging, it is important to remember that you have options to explore and steps to take to improve your chances of securing the coverage you need.

What to do if declined life insurance

What to do if you're declined life insurance

Being declined life insurance can be disappointing, but it's important to remember that it doesn't mean you're uninsurable. Here are some steps you can take to get the coverage you need:

Understand the reason for the decline

Find out why your application was declined. Common reasons include health issues, risky hobbies or behaviours, financial history, and misleading or incomplete information on your application. Knowing the specific reason will help you address it effectively.

Consult an expert

Speak to an independent life insurance agent, broker, or financial advisor. They can help you understand why your application was rejected and suggest improvements to increase your chances of approval. They can also assist you in shopping around for a different insurer or policy that better suits your needs and circumstances.

Make necessary changes

If your application was declined due to factors within your control, consider making lifestyle changes. For example, if you were denied due to a health issue, work with your doctor to make improvements. If it was due to a risky hobby, consider giving it up. Addressing these issues may improve your chances of getting approved.

Explore alternative policies

If you've been declined for traditional life insurance, there are still other policy options available. These include final expense insurance, accidental death insurance, and group life insurance through your employer. These policies may have lower coverage amounts or higher premiums, but they can provide some peace of mind and protection for your loved ones.

Appeal the decision

If you believe the denial was based on incorrect or insufficient information, you have the right to appeal the decision. Gather all the necessary evidence, such as medical records, doctor's notes, and financial or driving history, to support your case. Submit your appeal within the insurer's specified timeframe, and don't forget to follow up.

Remember, being declined life insurance by one insurer doesn't mean you can't get coverage elsewhere. Take the time to understand the reason for the decline, seek expert advice, and explore alternative options to find the right coverage for your needs.

Reasons for life insurance rejection

Being denied life insurance can be a scary experience, but it's important to remember that you're not alone and there are options available to you. People are typically rejected because they fall into a high-risk category, often due to health issues, but there are also non-health reasons for rejection. Here are some common reasons why your life insurance application may be declined:

Health Conditions and Chronic Illnesses

If you have a pre-existing health condition or are suffering from a chronic illness, your application may be rejected. This includes issues such as kidney disease, high cholesterol, diabetes, obesity, or a history of cancer. However, if you can show that your illness is being managed through consistent treatment, your chances of acceptance may increase.

Hazardous Occupation or Extra-Curricular Activities

Certain occupations and extracurricular activities are considered hazardous and carry a higher risk of injury or premature death. These include jobs like airline pilots, fishers, construction labourers, electrical power-line installers, and roofers. Similarly, participating in risky hobbies and behaviours, such as skydiving, base jumping, or rock climbing, may also lead to a rejection.

Financial Reasons

Life insurance is a financial decision, and insurers will assess your current income, total net worth, and credit history to determine if the policy you're applying for aligns with your financial situation. A poor credit history, previous bankruptcies, or significant personal debt may be concerning to insurers, as they want to ensure you can afford the premium payments.

Lifestyle Choices and Criminal Record

Lifestyle choices such as smoking, reckless driving, or a criminal record can also lead to a rejection. Insurers consider these factors when assessing your risk profile, and they may view them as increasing your mortality risk.

Previous Declines and Inconclusive Test Results

Previous declines on life insurance applications can also impact your chances of being accepted. Insurers subscribe to a national database called the Medical Information Bureau (MIB), which contains information about your previous applications and approvals/denials. Additionally, inconclusive test results or lab errors can sometimes lead to a rejection, so it's important to follow up with your doctor to get conclusive results.

Next steps after life insurance rejection

Don't panic if your life insurance application is rejected. It doesn't mean you're uninsurable, and you still have options. Here are the steps you can take to get the coverage you need:

Understand the reason for rejection:

Contact the insurer to understand why your application was denied. This will help you address the issue and increase your chances of approval in the future. Common reasons for rejection include health issues, risky hobbies, age, financial history, and misleading information on the application.

Consult an independent agent or broker:

Connect with an independent life insurance agent or broker who can help you navigate the process. They can review your application, explain the reason for rejection, and suggest alternative options. Agents have access to multiple insurers and can help you shop around for a company that better suits your needs.

Make necessary lifestyle changes:

If the rejection is due to a factor within your control, consider making lifestyle changes to improve your chances of approval. For example, if you were denied due to a health issue, work with your doctor to manage the condition and provide updated medical information with your next application. If it's related to risky hobbies or alcohol consumption, consider reducing these activities before reapplying.

Explore alternative life insurance products:

Even if you are deemed high-risk by one insurer, other companies may be willing to offer you coverage. Consider applying for a different type of policy, such as term life insurance, guaranteed issue life insurance, or final expense life insurance. These policies may have lower coverage amounts or higher premiums, but they can still provide valuable protection.

Apply with a different insurer:

Remember that each life insurance company has its own underwriting policies and guidelines for assessing risk. Shop around and compare rates from multiple insurers, as you may find one that is more accommodating to your specific situation.

Consider workplace life insurance:

Look into your employer's group life insurance plan. These plans often don't require a medical exam and can provide basic coverage. While it may not offer the desired coverage limit, it's still a valuable option to consider.

Improve your profile:

If possible, use a waiting period to make positive changes. Get any health conditions under control, improve your financial situation, and address any other factors that may have contributed to the rejection. This will increase your chances of approval when you reapply.

Don't give up:

Remember that life insurance is crucial for securing your family's financial future. Stay persistent and explore all available options. Work with a financial professional or insurance broker to navigate the process effectively and find the coverage you need.

Types of life insurance

There are five main types of life insurance: term life insurance, whole life insurance, universal life insurance, variable life insurance, and final expense life insurance. Each type is designed to meet specific coverage needs.

Term Life Insurance

Term life insurance is a simple, low-cost policy that replaces your income when you die. It is typically sold in lengths of one, five, ten, fifteen, twenty, twenty-five, or thirty years. Coverage amounts vary depending on the policy but can go into the millions. Most people buy term life insurance for a length long enough to cover their prime working years. That way, if they die early, they can help a surviving spouse or other beneficiary meet short-term financial needs like paying off a mortgage or supporting their kids through college. Term life insurance is often the cheapest option, but if you outlive your policy, your beneficiaries won't receive a payout.

Whole Life Insurance

Whole life insurance typically lasts your entire life, as long as you keep up with premiums. It includes a savings component that a portion of your premium will pay into. The savings component has a fixed interest rate that builds cash value over time, which is part of the reason whole life policies typically cost more than term life policies with similar coverage. Whole life insurance is relatively simple compared to other permanent life insurance options, but it is usually more expensive than term life insurance.

Universal Life Insurance

Universal life insurance is another permanent life insurance option, providing coverage for your entire life as long as you pay the premiums. It allows you to adjust your premiums (within limits) and has a cash value component that grows based on market interest rates. Universal life insurance is less expensive than whole life insurance and can adapt to your needs as life changes, but the death benefit and cash value growth are not guaranteed.

Variable Life Insurance

Variable life insurance is a type of cash value life insurance tied to investment accounts, such as bonds and mutual funds. Variable life insurance premiums are typically fixed, and the death benefit is guaranteed, regardless of how the market fares. There is potential for considerable gains if your investment choices do well, but it requires you to be hands-on in managing your policy because the cash value can change daily based on the market.

Final Expense Life Insurance

Final expense life insurance, also known as funeral or burial insurance, is a type of whole life insurance that offers a smaller and more affordable death benefit designed to cover end-of-life expenses like funeral costs, medical bills, or outstanding debt. Final expense policies can be easier for older or less healthy individuals to qualify for.

How to avoid life insurance rejection

Being denied life insurance can be challenging, especially if you require financial assistance. However, there are several steps you can take to avoid life insurance rejection.

Accurate disclosure

It is essential to provide complete and accurate information about your health, lifestyle, and medical history during the application process. Insurance companies assess risk based on this information, and failure to disclose pre-existing conditions or other relevant details can be a reason for rejection.

Regular updates

Keep your policy updated with any changes in personal details, such as address, occupation, or health status, to maintain its validity and ensure smooth claims processing.

Understand your policy

Get to know the terms and conditions of your policy to ensure compliance with all requirements. Understand the coverage details, exclusions, and policy limits.

Timely premium payments

Pay your premiums on time to maintain an active and valid policy. Failure to pay on time can lead to lapses in coverage, resulting in potential claim denials during the lapsed period.

Avoid non-disclosure

Non-disclosure of relevant information during the application process can result in claim denial and policy cancellation if discovered later by the insurer. It can also lead to legal consequences for the policyholder.

Regular health check-ups

Keep detailed records of check-ups, treatments, and prescriptions to support proactive health management and ensure precise information for insurance purposes.

Shop around

If you have been rejected by one insurer, don't give up. Each insurance company uses its own guidelines to assess risk, so you may be able to get coverage with another provider. An independent insurance agent or broker can help you understand why your application was rejected and suggest alternative insurers.

Make lifestyle changes

If your application is postponed, the insurance company will tell you what they need in order to approve you in the future. This could include making healthy lifestyle changes, such as improving your health, quitting smoking, or improving your finances.

Frequently asked questions