Life insurance modified offer or approved other than applied

Assessing your options when your life insurance offer is higher than you hoped.

Sometimes when you apply for life insurance and go through underwriting, your rates from the carrier come back higher than the rates that you were quoted when you initially applied.

This is called a modified offer and is also referred to as approved other than applied.

It can be disappointing to be offered a policy at a higher rate than you were expecting, but you still have some options.

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Where modified offers come from

You may get a modified offer when the information that the underwriters use to review your policy is different than the information you initially gave when applying.

For example, if your medical exam reveals that you have high cholesterol and you didn’t know that when you applied, your rates could come back higher. Or if you listed your weight as 200 lbs. on your application and your medical exam reveals that it's actual 250, your rates will be higher than initially quoted.

You also may get a modified offer if the carrier cannot find financial justification for your original coverage amount. For example, if you apply for $1 million coverage for income replacement and the carrier sees that you’re making $30,000 a year, they may approve you at a lower rate of coverage.

How your life insurance rates are set

Your life insurance rates are based on the personal information and medical history you share when you apply, and are solidified into an offer based on your medical records, the results of your medical exam, and other information.

Your rates may change throughout the three stages of the application process:

1. Stage one: Online quotes

When you apply for life insurance quotes online, whether directly through a carrier or a broker like Policygenius, the quotes you get are based on your personal information and a series of medical questions you answer.

Policygenius’ online quote engine is incredibly accurate, but it’s always possible that your rates could change throughout the application process as new information comes to light.

Quotes are only as accurate as the information you have provided; the more information you share, the more accurate your quote will be.

2. Stage two: Updated quotes after phone interview

The second phase of your application is talking to an insurance agent on the phone. The agent will ask additional questions to get a fuller picture of your health history, and this additional information may change your estimated rate. After your conversation, the agent will share your estimated rate.

If you’ve been honest and thorough with your agent and no new information is uncovered in your medical exam or review of your medical records, your application should be approved at this rate.

3. Stage three: Offer after underwriting

As the insurer’s underwriters review your application, they will look at your application and the results of your medical exam, and they may request attending physician statements (APS) and medical records to get a fuller picture of your health.

During this process, it’s possible that they find some new information that changes the original rates you were quoted by the life insurance agent. If they decide to offer you a policy, they'll do so with the new rates they calculated during the underwriting process. This is called a modified offer.

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What to do if you get a modified offer

If you get a modified offer after your application goes through underwriting, you have a few options, depending on how you submitted the application:

If you apply directly through the carrier, you have three options:

1. You can accept the modified offer

2. You can decline the modified offer

3. You can adjust your coverage amount or term length to lower the premium rates, and then accept that offer

If you apply through Policygenius, you have one additional option:

4. You can apply for a lower rate with a different carrier

Policygenius has a team of in-house underwriters and relationships with 16 of the best life insurance companies, each of which view different health conditions a little differently during underwriting.

Using your updated medical history, we can make a specialized and personalized recommendation for another carrier that may give you a better a rate.

If we can find a better option for you, we suggest that you accept the original offer, pay your first month’s premium, and then we’ll send your application to the new carrier to see if we can get you a better rate.

If we can’t find a better option, we still suggest you accept the original offer, or adjust the term and coverage amounts until the premiums are affordable. Low coverage is better than no coverage.

Also, depending on why your rates are higher than expected, it may be possible to make some lifestyle changes and reapply in a year or two, either to through different carriers or through your own carrier via reconsideration.

Why you should accept your modified offer

There are three reasons to accept your modified offer, even if you’re planning to re-apply to a different carrier:

1. You won’t risk going without protection

When you accept the modified offer, you are covered once you submit your signature and payment and your policy is confirmed in force. If you die after your policy is in force, your family is protected — which is the reason you’re buying life insurance in the first place. If you don’t accept and continue to shop around, you’re leaving your family without protection.

2. There is no penalty for canceling a policy

Whether you find a cheaper policy or not, there is no penalty for canceling a term life insurance policy. You won’t get the premiums you’ve paid refunded — unless you cancel during the free-look period — but you won’t be penalized, either.

3. You lock in the first carrier’s rates

When you accept the modified offer, you lock in those rates. If you decline the offer, or leave it hanging while you apply to other carriers, there is a risk that initial rates could increase, based on additional information uploaded to your Medical Information Bureau (MIB) record (more below).

Life insurance and the Medical Information Bureau (MIB)

Life insurance companies upload all medical records, APS forms from your doctors, and the results from your medical exam to the Medical Information Bureau (MIB), a reporting database used by all life insurance companies. The database also includes records of your applications, offers, and declines.

The main purpose of the MIB database is to discourage fraud, but it also means that if one life insurance company knows something about you, all life insurance companies know it.

If you decline an offer from a life insurance carrier and apply to another one — either immediately or in the future — the second carrier will access your records in the MIB and may do more research as well.

For example, if Carrier A only looked at five years of medical records, Carrier B might decide to look back 10 years. These additional records could reveal health information that could increase your rates. And because this information would also be added to your MIB record, Carrier A would now have access to it, as well.

If you’ve already accepted the offer from Carrier A, your rate is locked-in. But if you decline the offer from Carrier A or leave it hanging while you apply to Carrier B, if you later decide you want to go with Carrier A anyway, Carrier A will re-check your MIB records, see the new information, and may increase your rate.

If you’re given a modified offer, Policygenius and its in-house underwriters are uniquely positioned and committed to helping you find the cheapest life insurance coverage, whether that’s the modified offer or a rate with a different carrier.

It can be disappointing to be paying more than you initially planned for life insurance, but the most important thing is that you have coverage for your dependents.

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Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.