Updated September 1, 2020|6 min read
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Sometimes when you apply for life insurance and go through underwriting, your final premiums from the insurer come back higher than what you were quoted when you initially applied. This is called a modified offer , also referred to as approved other than applied.
You may receive a modified life insurance offer if the information you initially gave when applying for your policy differs from what the underwriters find when reviewing your application details, like medical exam results. It can be disappointing to be offered a policy at a higher premium than you expected, but you can search for better prices while staying covered. Accept your offer or accept an offer for reduced coverage while you comparison shop with an independent broker or make lifestyle changes to improve your health.
Being approved other than applied for life insurance means your policy premiums are higher than you were first quoted
The higher premiums reflect information discovered during underwriting that you didn’t disclose
You can accept, decline, reduce the coverage amount, or shop around for a new offer
It’s best to accept the policy as is or at a reduced coverage amount so your beneficiaries are financially protected, even if you’re reapplying elsewhere
If your life insurance application is approved other than applied after you go through underwriting, you have a few options. Working with an agent or broker, you can:
Accept the modified offer
Decline the modified offer
Adjust your coverage amount or term length to lower the premiums, and then accept that offer
Apply for a lower rate with a different insurer
Each life insurance company views every health condition a little differently during underwriting. If you receive a modified offer and want to apply to another insurer, an independent broker like Policygenius can use your full medical history to compare underwriting guidelines from multiple providers and recommend a company that is more likely to offer you more favorable premiums.
If an independent broker thinks you’ll get a better offer elsewhere, you should accept your current offer and continue to pay your premiums until you are approved for a more affordable policy elsewhere. After you’re approved, you can cancel your other policy.
If your premiums are higher than you anticipated due to the insurer’s concerns about your health or hobbies, you may benefit from accepting the current offer but making some lifestyle changes like quitting smoking or giving up a risky hobby. If you sustain the changes for 12 months or more, you can shop for a more affordable policy either with a new insurer or by asking your current provider for an application reconsideration. Your provider may want to see you maintain a lifestyle change for longer than one year, depending on their concern. Ask your insurer what they need to see to lower your premiums so that you make the right adjustments and don’t reapply too soon.
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If you can’t find a more favorable life insurance offer, it’s best to either adjust the term and coverage amount on your policy to receive a lower premium or accept the offer as is, assuming the higher premiums are within your budget. Even if you’re planning to reapply or apply for reconsideration in the future, there are a few reasons why it’s better to accept the offer you have while exploring your other options.
When you accept the modified offer, you are covered once you submit your signature and premium payment and your policy is confirmed in force. If you die after your policy is in force, your beneficiaries have financial protection, which is the reason you’re buying life insurance in the first place. If you don’t accept and continue to shop around, you’ll leave your loved ones vulnerable.
There is no penalty for canceling a term life insurance policy. You won’t face a cancellation fee no matter when you cancel your term policy, but you won’t be refunded for the premiums you’ve paid unless you cancel during the free-look period.
When you accept a modified offer, you lock in the final premiums offered to you. If you decline the offer or leave it hanging while you apply to other companies, there is a risk that the modified offer could increase, based on additional information uploaded to your Medical Information Bureau (MIB) record.
Life insurance companies upload your application materials and the results from your medical exam to the MIB, a reporting database used by all life insurance companies. If you decline an offer and apply to another one — immediately or in the future — the second insurer can access your records in the MIB and may do more research as well.
For example, if Insurer A only looked at five years of medical records, Insurer B might decide to look back 10 years. These additional records could reveal health information that would increase your premiums. And because this information is also added to your MIB record, Insurer A now has access to it as well, meaning they might increase their initial offer to you based on the new information.
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Your life insurance premiums are based on the personal and medical information you share when you apply and are solidified into an offer based on your medical records, the results of your medical exam, and other details like your driving record. It’s not unusual for some small discrepancies to appear between your life insurance application and the medical exam. People often forget to name prescriptions or misstate their weight by accident. Slip-ups like these won’t always leave you with a higher premium, but bigger errors and omissions might.
For example, if your medical exam reveals that you have high cholesterol and you were unaware when you applied, your final premiums could become back higher than the initial quote you received. If you forgot to mention a traffic violation on your driving record, you’d also see your premiums increase.
You also may get a modified offer if the life insurer cannot find financial justification for the coverage amount for which you originally applied. Your death benefit is principally meant to be an income replacement, as well as support for end-of-life expenses and other financial needs. So if you applied for $1 million in coverage but you make $30,000 a year and have no dependents or shared debts, the provider may approve you, but at a lower amount of coverage. However, your premiums would likely be lower to match the lower coverage amount.
You might receive updated quotes at three main stages of the application process:
After you apply for a life insurance quote online
After you share health and lifestyle information with an agent or broker
After you’ve completed the full underwriting process
Your premiums are subject to change at any of these three points because you provide more information for the insurer to assess at each stage. An initial application may include some basic medical questions, but a conversation with an agent or broker will give them a fuller picture of your medical history. If you’re forthcoming during this conversation, your final premiums will likely be similar to what you’re quoted after this discussion. Changes can happen if more discrepancies are found during the medical exam or in an Attending Physician Statement.
Be as honest as possible when you begin to shop for a policy and your premiums are less likely to change dramatically throughout the process. If your application is approved other than applied, it’s better to accept the policy you’re offered, with slightly less coverage or as is, to ensure that your loved ones are financially protected when you pass away.