Jeffrey Wade
Life insurance is a financial safety net for those who depend on you, but it can be challenging to obtain. There are many reasons why an insurer might deny you coverage, from health-related issues to high-risk hobbies. If you're denied, don't panic—you have options. You can appeal the decision, work with a financial professional, or apply with a different insurer. Understanding the reasons for denial can help you navigate the process and increase your chances of obtaining coverage. Being denied life insurance is not uncommon, and there are steps you can take to improve your chances of securing this important financial protection.
| Characteristics | Values |
|---|---|
| Health challenges | Diabetes, obesity, high blood pressure, high cholesterol, high blood glucose/sugar levels, chronic illness, kidney disease, previous serious disease diagnosis |
| Income and net worth | Insufficient income, e.g. below $20,000 per year |
| Lifestyle choices | Smoking, drug use, risky hobbies (e.g. skydiving, base jumping), dangerous job (e.g. roofing) |
| Criminal record | Felony, DUIs, speeding tickets |
| Financial history | Poor credit report, insufficient funds for premiums |
| Age | Older individuals with sufficient savings may not need life insurance |
| Application process | Misrepresenting or providing inaccurate information, non-disclosure of relevant information, failure to pay premiums, applying with multiple insurers |
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What You'll Learn
High-risk health conditions
People are typically denied life insurance because they fall into a high-risk category, often due to health challenges. Certain high-risk health conditions can make it difficult to obtain life insurance. For example, high blood glucose/sugar levels are a common reason for denial, as they are usually a precursor to diabetes, which is a much bigger risk for insurance carriers. Similarly, if you have high cholesterol, your application may be rejected. If you are suffering from a chronic illness, many companies may deny your application as it is considered a large risk. Obesity is also a reason for denial, and you may be asked to lose weight before reapplying.
If you have previously suffered from a serious disease, you may be denied life insurance. For example, if you have had a heart attack, this could be considered a high-risk condition. Alzheimer's disease is another example of a serious health condition that could lead to denial. If blood or protein is found in your test results, this could also be a problem, as it may indicate kidney disease. In such cases, it is important to follow up with your doctor to determine the cause and provide any follow-up results to the insurance carrier.
High-risk behaviours can also lead to denial of life insurance. For example, if you have a history of driving under the influence (DUI) or speeding tickets, you may be considered a high-risk applicant. Similarly, if you engage in risky hobbies such as skydiving or base jumping, your application may be rejected. If you have a dangerous job, such as roofing, this could also increase your risk category.
It is important to note that each insurance carrier is different, and some may be more lenient than others. If you are denied life insurance, you can consider working with an independent agent or broker who can help you find a carrier that is more likely to accept your application. You may also have the right to appeal the decision if you believe it is based on incorrect or insufficient medical information.
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High-risk hobbies
Life insurance companies are betting on your longevity. The longer you live, the less likely they will have to pay a death claim. This is why they reward young, healthy people with the best rates. So, carriers worry that risky behaviour equates to gambling with your life—resulting in them having to make a death payout prematurely.
Hobbies that are deemed "high-risk" may not be covered by life insurance policies, as the participant is deemed more likely to die and, therefore, more likely to prompt a payout. Life insurance premiums largely depend on underwriters' perception of risk. Typically, this is determined based on a variety of factors, including age, current health status, family history, and career.
Some high-risk hobbies that can affect your life insurance include:
- Skydiving: Research from the U.S. Parachute Association suggests that 15 skydiving fatalities occurred in the United States in 2019, out of an estimated 3.3 million jumps. Insurance premiums and flat fees can increase considerably for skydivers, especially those who jump more than 50 times per year.
- BASE jumping: Some life insurance companies are willing to cover skydiving under certain conditions but will not consider BASE jumping. As a result, many BASE jumpers are forced to exclude this activity from their policies. However, select life insurance plans do offer BASE jumping coverage, provided that enthusiasts pay higher premiums.
- Rock climbing: Not all forms of rock climbing will increase life insurance rates. For example, a certified rock climber who occasionally climbs at a maximum height of 50 feet may not have to pay extra for a policy.
- Motocross: Motocross tracks include jumps and other extreme obstacles, resulting in higher injury and fatality rates than general dirt biking. Therefore, life insurance rates tend to be higher for motocross riders.
- Recreational aviation: Working as a pilot can impact life insurance, and flying for fun can also be problematic in terms of coverage.
- Mountain climbing: This adventurous hobby is considered a hazardous avocation by life insurance companies, which can put your life at risk and become a financial liability for them.
- Helicopter skiing: Similar to mountain climbing, this activity can be classified as a hazardous avocation, impacting your life insurance rates.
- Power racing: This high-thrill activity can result in higher life insurance rates, as it is considered a hazardous avocation.
It's important to note that not all insurance companies have the same guidelines on risk factors. An experienced life agent will know the different carriers' tolerance levels and leniency for these conditions. If you rarely participate in these activities and have the necessary certifications or training, you may still qualify for standard insurance rates. Additionally, occasional participation in high-risk hobbies may not impact your coverage.
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High-risk job
Life insurance companies will likely give you an insurance class based on various risk factors, anywhere from "preferred plus" to "preferred" to "standard plus" to "standard". While your job is not the only factor that determines your life insurance coverage, certain occupations are considered high-risk due to their proximity to live ammunition, dangerous wilderness areas, and bodies of water, hazardous materials, heavy machinery, and great heights. These professions include logging workers, construction workers, farmers, police officers, firefighters, military personnel, pilots, refinery workers, truck drivers, and delivery drivers.
If you work in one of these high-risk occupations, you may have difficulty obtaining life insurance coverage. However, it's important to note that not all life insurance companies underwrite policies in the same way, and some may be more accommodating than others. Working with a financial professional or an independent broker who has access to multiple insurers can increase your chances of finding coverage. They can help you navigate the application and appeal processes and may even specialize in assisting high-risk individuals.
Additionally, guaranteed acceptance life insurance or guaranteed issue life insurance are options that do not require medical exams or consider risk factors when determining eligibility. However, these policies often have lower death benefit caps and higher costs compared to traditional life insurance. Exploring a variety of companies and controlling other risk factors in your life can also help improve your chances of obtaining coverage and lowering your premiums.
Remember, if you are denied life insurance, you have the right to appeal the decision, especially if it was due to incorrect or insufficient information. Submitting timely and complete information, including up-to-date medical records and personal history, can strengthen your appeal.
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Criminal record
Life insurance companies are diligent in their application reviews, and if you aren't honest about your criminal record, the insurer can find out through a background check. While a criminal record does not mean that you will be automatically denied life insurance, it can complicate the process. Insurers' data shows that people with criminal records tend to live shorter lives, especially those convicted of felonies. When you apply for life insurance, you will be asked questions about your criminal history, including whether you are currently being charged with a felony or have been convicted of a felony. The type of felony, how long ago it took place, and the number of offences in your history will impact your application. Repeat offences and the severity of crimes can contribute to application denial.
If you are currently being charged with a felony, you will need to wait until the charges are dismissed or the trial is over before applying for life insurance. Most of the time, you can still buy life insurance if you have had a felony conviction in the past and are no longer on probation. However, it can be more costly and challenging to get life insurance in the first one to two years post-probation. Each insurer has a different waiting period post-probation before accepting life insurance applications, and it is recommended to apply around 18 months post-probation. During this time, a life insurance agent can help you research your policy choices, and you can opt for a shorter term or lower coverage if your premiums are more expensive.
If you have a criminal record, it is essential to be honest on your application. Lying on your application could lead to worse outcomes, and there is no reason not to be forthcoming, as a background check will be conducted. Working with an independent broker or licensed agent is the best way to ensure you are getting the best possible life insurance policy available to you. They can help you understand your options and compare guidelines from different life insurance companies to ensure you apply with one that suits your personal situation.
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Financial history
When applying for life insurance, your financial history and stability are assessed as part of the risk evaluation. This means that a history of unpaid debts, late fees, delinquent payments, or bankruptcy will count against you, as insurers will view you as more likely to be unable to pay your life insurance policy premium. Similarly, applying for a level of coverage that doesn't match your financial situation may result in denial, as this raises red flags for the insurer. For example, someone with a low annual income and little net worth applying for a million-dollar policy may be denied coverage.
Insurers may also deny applicants who have intentionally misled or lied on their application, including about their financial situation. If you are found to have lied, you can be denied coverage. However, if the reason for denial is based on incorrect or insufficient information, you have the right to appeal. In this case, you can request information regarding the denial and submit timely and complete information to support your appeal. This can include anything from your credit report to your driving record to updated information about your occupation.
If you are denied life insurance, you can also take steps to improve your financial situation and reapply. This may include improving your credit score or paying off debts. You can also work with a financial professional to help you with the application and appeal process. They can help you pinpoint your options and apply to the insurers that offer the best chances of approval.
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