Most people who are denied life insurance are caught off-guard when their agent or the company that denied their application informs them of the decision. Often, the individual denied coverage could have been better informed upfront about the possibility of having a problem getting coverage. As a result, they may have been able to make some personal adjustments or find another insurer that would have been more likely to approve their application.
Jump ahead to these sections:
- Can an Insurance Company Deny Your Application?
- Common Reasons for Life Insurance Denial
- What Can You Do If You’re Denied Life Insurance?
This article is intended to explain the potential reasons your application to buy life insurance could be denied and what you can do if you’re denied. Hopefully, this will help you locate an insurance company that will consider you to be an acceptable risk.
Can an Insurance Company Deny Your Application?
In short, yes, an insurance company can deny your application for a life insurance policy. This can be a confusing process, so it’s normal to have questions.
Insurance companies use a process called “underwriting” to decide whether to approve your insurance application or deny it. The employees who carry out this process are called “underwriters,” and they are the gatekeepers when it comes to getting a policy issued.
Every life insurance company has its own underwriting guidelines to determine insurability, but most underwriters follow these same steps:
- MIB report: Formerly known as the Medical Information Bureau, the MIB helps insurance companies share information to prevent fraud and make underwriting decisions. Your report provides details about your medical history, your medical records, and more. They use this information to learn of any medical diagnoses and treatments reported by other underwriters.
- Application quality check: An underwriter thoroughly reviews your application and conducts a phone interview with you to make sure all of the information you submitted is accurate and correct.
- Medical exam: Depending upon the type of policy you apply for and the face amount, you may be required to undergo a medical exam. A paramedic performs the exam, at the insurer’s expense, at your home or office. Blood and urine samples are usually required, and your height, weight, and blood pressure will be recorded.
- Physician statement: If an underwriter has concerns about your medical exam results or answers to health questions you provided on your application, they may order an attending physician’s statement (APS).
- Motor vehicle report: This report provides details on your driving history as far back as seven years. It gives details on traffic tickets, vehicular crimes, accident reports, driving record points, and DUI convictions.
- Credit report: Depending on the face amount of the policy, the underwriter may pull a credit report to check on the amount of outstanding debt you carry and how responsible you’ve been with your finances.
- Actuarial tables: Underwriters will also analyze your life expectancy based on different charts and tables to help determine the likelihood that you’ll die at any given age and the risk you pose to their company.
As you can see, an underwriter collects many facts and pieces of information about you to decide whether or not to issue a policy. Their opinion and experience also play a factor in their decision. This is why asking for someone else within the company to review their decision if you’re denied coverage may result in the company ultimately approving your application.
Common Reasons for Life Insurance Denial
Having your application for life insurance be denied can be a confusing experience. Agents sometimes aren’t made aware by an insurer of the reason for the denial because of privacy concerns, and insurers are sometimes reluctant to share their reasoning directly with the applicant.
Here are nine common reasons your application for life insurance might be denied:
1. Your physical health
First, there are many conditions concerning your physical health that can cause an insurance company to deny your application, including:
- Obesity: Being overweight or obese is a significant factor in an underwriter’s decision because it’s a major cause of heart attacks and strokes, which results in insurers paying out billions of dollars annually in related death claims.
- High cholesterol: Another common reason for denials is unacceptable levels of cholesterol, lipids, or triglycerides in your blood, also because of their association with an increased risk for heart disease and stroke.
- Diabetes: High blood glucose/sugar levels indicate the possible onset of diabetes or that you already have diabetes. Diabetes is a leading cause of many other risk factors that insurance companies avoid, including obesity and high blood pressure.
2. Mental health
Second, many insurers will deny your application if you have a history of mental illness, including depression, anxiety, bipolar disorder, schizophrenia, and PTSD. This is particularly true if you have been hospitalized for one of these disorders or are taking prescription medications to treat it.
The increased risk of suicide and dangerous lifestyle associated with mental illness are major concerns to insurance companies. This is worth talking about with your doctor.
3. Chronic illness
Next, if you suffer from a chronic disease and apply for a standard life insurance policy, your application will probably be denied. Chronic illnesses include:
- Heart disease
- Chronic kidney disease
- Heart disease
- Alzheimer’s disease or dementia
Providing an attending physician’s statement or a copy of your medical records describing your treatment and the stability of your illness increases your chance of getting a policy issued with some companies.
Of course, the older you get, the more health problems you’ll develop. This makes you a higher risk for the insurance company, which they avoid. As it is with most types of insurance, it’s best to apply for coverage when you’re young and healthy.
While aging doesn’t necessarily impact your health, insurance has to use special algorithms to make decisions. This isn’t a perfect science, but it protects their interests.
5. Alcohol or drug use
As mentioned earlier, a medical exam is often required as part of the underwriting process. The presence of abnormally high levels of alcohol or drugs in your blood and urine samples will very likely result in your application being denied.
6. Dangerous occupations
Some occupations are more dangerous than others and result in more death claims payments for insurance companies. Some jobs they consider to be hazardous include:
- Construction workers
- Garbage collectors
- Farmers, ranchers, and other agricultural managers
- Electrical power-line installers and repairers
- Police officers
Even if you are engaged in one of these occupations and your application is approved, you’ll likely be charged higher rates.
7. Financial reasons
Believe it or not, your personal finances can also affect your insurability. A poor credit score, large amounts of outstanding debt, or previous bankruptcies can cause an insurer to deny your application.
Luckily, there are options if you’re facing a low credit score. Improving your score can result in a different result over time, so don’t be discouraged.
8. Criminal record
Having a criminal record may indicate that you engage in a high-risk lifestyle, which life insurance companies avoid. Most insurers will evaluate an applicant’s criminal history on a case-by-case basis, taking into account the circumstances and severity of the crime.
9. Driving record
Lastly, reckless driving habits or a bad driving record increase your risk of dying, which will cause an insurer to deny you coverage.
These are some of the main reasons your application for life insurance may be denied. Life insurance companies want to approve applicants who pose a low risk.
What Can You Do If You’re Denied Life Insurance?
If you’ve been denied life insurance and you feel the decision by the insurer was a mistake, don’t give up immediately upon learning of their decision. Here are some steps you can take if you’re denied life insurance:
- Contact your agent: To find out why you were denied coverage, and make sure a mistake wasn’t made on the application you submitted.
- Appeal the decision: If your application was denied, you have the right to appeal the company’s decision. You can submit new information, including doctor’s records, recent information concerning your driving record or personal finances, or updated information about your occupation.
- Make lifestyle changes: If your medical exam came back with negative results concerning alcohol or drug use – cut back, abstain, or seek treatment. If your weight caused the denial, start an exercise program and modify your diet. Many insurers will postpone your application to a future date, which can be six months or longer, depending upon what caused the denial.
- Group life insurance: Many employers offer group life as an employee benefit. Most group life plans don’t require you to undergo a medical exam, and they’re very liberal with their underwriting practices. However, you may not be able to get as much coverage as you’d like since coverage amounts are usually limited to 1x or 2x your salary.
- Apply with a different life insurance company: Finally, each life insurance company has its own underwriting standards and criteria. If you’ve been denied coverage because of a physical health condition, try applying with a company specializing in that disorder, like one with a history of insuring people with diabetes or high blood pressure.
With that in mind, consider a different type of life insurance policy. If you applied for a traditional permanent or term life insurance policy and were denied, there are two other types of life insurance you should consider: simplified issue life insurance and guaranteed issue life insurance.
- Simplified life insurance: Simplified issue life insurance will ask you a limited number of questions concerning your health, and no medical exam is required. As a result, the approval rate for these policies is very high, and you can often get coverage to begin immediately upon submitting your application. These policies usually come with lower face amounts and typically cost more than traditional life insurance policies.
- Guaranteed issue life insurance: Guaranteed issue life insurance is a policy that the insurer guarantees they’ll issue you when you apply. There is no medical exam required, and the insurance company won’t ask you any questions concerning your current health or health history.
Keep in mind that face amounts are limited (typically $2,000 to $10,000) with guaranteed life insurance. It’s also the most expensive type of life insurance you can buy.There will usually be a waiting period of two to three years before a full payout of the death benefit is made to your beneficiaries or whoever is responsible for funeral costs.
A Good Life Insurance Agent: Worth His or Her Weight in Gold
A professional, independent life insurance agent will make sure accurate and complete information is submitted to the life insurance company, and they can steer you towards companies that are more likely to approve your application. They can also help you with finding the best life insurance policy and determining how much life insurance you may need.
If you’re concerned about being denied coverage, consult with an agent before applying online. You only get so many chances to apply, and an experienced agent can improve your odds of being approved the first time around.