Having your life insurance application denied can be a frustrating and confusing experience. You might be left wondering what went wrong and, more importantly, what you can do about it. But before you start panicking, remember: a life insurance application denied isn’t necessarily the end of the road.
It’s important to understand that insurance companies carefully assess risk. While the specific reasons for denial vary between companies, several common factors come into play when your life insurance application is denied. These factors play a large part in determining your life insurance rates.
Table of Contents:
- Common Reasons Behind a Life Insurance Application Denied
- What to Do When Faced with Life Insurance Application Denied?
- Conclusion
Common Reasons Behind a Life Insurance Application Denied
Understanding the common reasons behind denials can equip you to take proactive steps. It might also help you better prepare for future applications, and in turn, help you secure the right life insurance coverage.
Health History
This is probably one of the most common reasons people face when they encounter a life insurance application denied. It’s no secret that insurance companies want a clear picture of your health to assess the risk associated with insuring you. Your medical records could contain some of these things.
They consider factors such as existing medical conditions like diabetes or high blood pressure. They might also look at family medical history of serious illnesses like a history of heart disease. Recent diagnoses, particularly cancer, often lead to applications being put on hold, requiring a period of remission before approval.
Age
Unfortunately, getting older often means higher premiums when applying for term life insurance. This is because as we age, the risk of health problems statistically increases, making it riskier for insurance carriers. Many insurance companies have age limits, usually around 75-80, beyond which they typically won’t issue new policies.
While it’s generally a good idea to start thinking about life insurance early, that doesn’t mean those over 50 are out of luck. It just means that life insurance options might be more limited or pricier than someone in their 20s or 30s. If you are over 50 you can look at guaranteed issue life insurance, although the death benefit is less.
Lifestyle Choices
Think of it from the insurance company’s perspective. Certain lifestyle choices might make an individual “riskier” to insure, causing many to pay higher premiums. For example, if you have risky hobbies such as skydiving, mountain climbing, or race car driving, you may find yourself paying a higher premium – or in some cases – having your application denied.
Similarly, occupations deemed high-risk (like firefighting or law enforcement) can also influence your insurability. Additionally, having too many speeding tickets can be seen as reckless driving, causing your driving record to make your premiums increase. Finally, a history of substance abuse – whether it’s drugs, alcohol, or tobacco – will be a factor in the insurance company’s risk assessment.
Financial Situation and Stability
It’s not just about your health and lifestyle; insurance companies look closely at your financial stability when reviewing an application for things like accidental death insurance. They do this because your credit score, more specifically, your credit report plays a role in their decision.
For example, if you have a history of bankruptcy, defaulted loans, or consistently late payments on bills, you might encounter roadblocks in securing a life insurance policy. You also might find yourself paying higher premiums with bad credit utilization or being required to submit to a drug test by life insurance companies. This is simply because insurers want to mitigate their risk. They want some level of assurance that you can reliably meet the premium payments, and are not facing serious financial issues.
Misleading Information and Application Honesty
It goes without saying, but honesty is absolutely crucial when you’re filling out a life insurance application. If you withhold information, omit crucial details, or worse – outright lie – you’re creating a very shaky foundation. Any inconsistencies uncovered during the underwriting process can have serious consequences.
This could mean a life insurance application denied on the grounds of non-disclosure. Even if you manage to secure coverage, inaccuracies might come back to haunt your beneficiaries down the road when they file a claim. Having an insurance agent in your corner that understands how life insurance works can be helpful.
It’s simply not worth the risk; be truthful and upfront. Remember, insurance companies have resources at their disposal. They often utilize tools and databases to verify the information you’ve shared on your application, like a credit check.
What to Do When Faced with Life Insurance Application Denied?
Finding out that your life insurance application was declined isn’t ideal, but it’s not an insurmountable hurdle. Here are some steps you can take:
- Understand the reason: Don’t just accept the denial – contact the insurance company directly and politely ask them to explain the reason for the denial. Knowing why your application was unsuccessful can help you make informed decisions moving forward.
- Review the details and correct errors (if any): Mistakes can happen. There may be errors or misunderstandings in the information you provided or how it was interpreted.
- Consider making changes to your application: Sometimes, making small adjustments can increase your chances of getting approved. For example, if you smoke, quitting can significantly lower your premiums and improve your chances of approval.
- Work with an independent insurance broker: Brokers can provide valuable insights and shop around for policies from different insurers, increasing your chances of finding a carrier that meets your needs. Insurance brokers can help with all types of insurance like traditional life insurance and even car insurance.
Conclusion
Encountering a life insurance application denied can certainly feel like a setback. But rather than viewing it as a dead end, treat it as an opportunity to re-evaluate. You might need to adjust your strategy when it comes to life insurance.
Understanding the reasons for denials empowers you to navigate the application process better moving forward. Hopefully, you are now more clear on what life insurance requires and what the process is for how life insurance companies review applications.
Learn more about Life Insurance here.