Reasons for Denial of Life Insurance
Life insurance is a crucial part of securing your family’s financial future. Unfortunately, not everyone who applies for life insurance is approved.
Life insurance companies have to balance the risk they take on. If an insured person dies, they pay out a lot of money.
If insurance companies approved everyone who applied, it wouldn’t take long before they went bankrupt trying to pay all the claims. To ensure they remain financially secure, insurers use a process called underwriting to determine the risk each applicant carries.
Underwriters review the application itself and may also examine additional records, including prescription history, medical records from the past few years, motor vehicle records, and financial and criminal history. The insurer may decline their application if the applicant is considered too risky.
5 Reasons Why You May Be Denied Life Insurance
- Health History: The insurance company may decline your application if you have a pre-existing condition that significantly impacts your life expectancy.
- Lifestyle Choices: If you have a hazardous job, participate in risky hobbies, or have a history of heavy alcohol or drug use, the life insurance company may be unwilling to accept your application.
- Age: Most life insurance products have age limits, e.g., 80 years old. In addition, your age can also affect how much coverage you’re eligible for.
- Financial History: Insurance companies consider your financial stability when assessing the risk of insuring you. For example, suppose you have a history of unpaid debts, delinquent payments, or bankruptcy. In that case, it may suggest that you have a higher likelihood of being unable to pay your premium.
- Lying on Application: If you intentionally mislead the insurance company, the insurer can reject your application.
Wondering what factors your insurance company looks for? Learn more about the risk factors that impact life insurance rates & eligibility.
What to Do If You’ve Been Denied
Being denied life insurance when you don’t expect any issues can be disappointing. Or maybe, due to health or lifestyle issues, the decline wasn’t much of a surprise. Either way, here are some steps to take if your application is rejected.
Talk to Your Agent or Broker
Sometimes applicants may be denied because insufficient information was provided or there was a misunderstanding. Insurers collect a lot of information from different sources to assess your risk.
As the applicant, you can request information regarding the denial. It could be due to your medical history, driving record, or life insurance medical exam results.
Talk with your broker or agent to figure out what options you have.
Consider Lifestyle Changes
Sometimes life insurance companies will decline an application due to a factor in your control.
- Denied due to a health issue: you could work with your doctor to make improvements and reapply.
- Denied due to a lifestyle factor: perhaps participating in a risky hobby or heavy alcohol use, you can make some changes and reapply.
- Denied due to a financial situation: take time to improve your credit or pay off debt and reapply.
Try Other Life Insurance Options
While you may have been declined for traditional life insurance, like term or whole life, you may have other policy options.
Consider Final Expense Insurance
If you’re between 50 and 80, final expense life insurance (also referred to as guaranteed issue life insurance) may be available. Final expense insurance is a type of permanent life insurance that will last your entire life.
If you were declined due to a health issue, look into final expense life insurance because no medical underwriting is involved.
It’s important to know that final expense life insurance has lower coverage amounts than traditional life insurance. The premiums for final expense are also higher.
Consider Accidental Death Insurance
Accidental death insurance is likely an option if you can’t get traditional life insurance. This policy provides a death benefit if you die due to an accident.
This policy doesn’t provide complete protection. If you die due to illness, such as a heart attack or cancer, it won’t pay a death benefit. But it still provides some peace of mind and is very affordable.
Consider Life Insurance Through Your Employer
Many employers offer a small amount of group life insurance for very cheap or free. Take advantage of this.
Typically, you can buy additional life insurance coverage on top of the free group insurance without going through any underwriting. This is called voluntary life insurance; you can often buy up to 3-5 times your salary.
If you were denied traditional life insurance, we recommend accepting the group life insurance coverage and buying as much voluntary supplement coverage as you can comfortably afford.
Try Applying Again Through a Broker
If you applied through a captive agent, it might benefit you to apply to a broker. Captive agents only have access to the life insurance company that employs them, while independent brokers have access to many.
Not all life insurance companies underwrite the same way. The reason for your denial at one company may not necessarily result in a denial at another. Working with a broker is the best way to determine if you can get approved for life insurance.
Applying for Life Insurance FAQs
Still unsure about applying for life insurance? Here are some answers to common life insurance denial questions.
Do They Drug Test You for Life Insurance?
You may be drug tested when you apply for life insurance.
If you are required to get a life insurance medical exam, the examiner takes a blood and urine sample. These samples are used to test for health issues, such as cholesterol, liver and kidney function, and signs of cancer. In addition, some life insurance companies will also test for drugs, but not always. Many times, it’s on a case-by-case basis.
However, know that marijuana use doesn’t equal a decline. Many carriers are willing to offer coverage to people who use marijuana. It’s essential to work with a broker who knows the ins and outs of what carriers will and won’t accept.
Does Life Insurance Require a Credit Check?
Life insurance companies may request a bankruptcy report or run a credit check on their applicants, but typically only for more comprehensive policies, such as those with a face amount of $1,000,000 or more.
Life insurance companies don’t look at credit scores but will check your public record for a history of late payments, bad debt, foreclosures, bankruptcies, and liens. If the carrier does a credit check, they only perform a soft inquiry, so it won’t affect your credit. They typically only go back up to seven years.
Can I Get Life Insurance if I Have a Pre-Existing Condition?
Yes, having a medical condition doesn’t automatically disqualify you from getting life insurance. While the condition and how severe it is will affect whether you’re approved and at what rate, your Quotacy agent will do their best to help you find a policy that works for you.
Is There a Prescription Check?
It’s common practice for insurance companies to run a prescription (Rx) history report on applicants. Your prescription history is one way insurers can discover or confirm medical issues you may have.
Specific prescriptions can affect your ability to obtain life insurance or may result in higher premiums. Medications may impact your coverage because of the health conditions they treat and/or their potential side effects. For example, the medication Antabuse (disulfiram), used to treat alcoholism, may result in application rejection due to the underlying condition it treats and potentially severe side effects, such as irregular heartbeats.
Learn more about how carriers assess risk in our guide to life insurance underwriting.
Work with a Broker Like Quotacy to Get Your Best Policy
Life insurance is a critical financial tool that helps you protect your family. We understand how important coverage is to you.
Some people get denied coverage the first time they apply but don’t give up hope. Explore other life insurance options or consider making changes in your life.
If you haven’t applied through a broker yet, now is the time. As an independent life insurance broker, Quotacy has access to many top-rated life insurance companies, and we advocate on your behalf.
Ready to turn the situation around? It’s free to apply, and we can help you find the best policy for you. Get your instant life insurance quote today.
