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What do I do if my life insurance application is declined?

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A

Each insurer’s underwriting guidelines vary, so if you get declined for life insurance by one company, you may have more luck with another.

Zack SigelRebecca Shoenthal author photo

Zack Sigel & Rebecca Shoenthal

Published August 20, 2020

KEY TAKEAWAYS

  • Every insurance company has its own guidelines, so a rejected application from one does not mean you will be rejected from others

  • If you do not qualify for traditional life insurance coverage, there are alternatives including guaranteed-issue, simplified-issue, final expense insurance or group insurance

  • Working with a licensed independent broker is the best way to navigate a declined application and understand your options

Whether it’s a declined college application, an unreciprocated right swipe, or a denied life insurance application, rejection is never easy. While we can’t help with the first two scenarios, we have some answers if you’re facing rejection on your insurance application.

Life insurance companies use a process called underwriting to determine not only how much your insurance premiums will be but also whether you’re eligible for life insurance coverage at all. Each insurer’s underwriting guidelines vary, so if you get declined for life insurance with one company, don’t panic yet; you may have more luck with another.

Among the most common reasons for a rejection are pre-existing conditions, which you may have to declare during the underwriting process or which may be later discovered in your medical records or during your paramedical exam. People with pre-existing conditions may have to pay a higher premium for insurance coverage, choose a guaranteed-issue policy, or accept a lower death benefit.

Below, we’ll walk you through next steps and options if you’ve been denied on your insurance application. The most important thing to remember is you still have options even if this isn’t your first rejection.

IN THIS ARTICLE

Why was my application declined?

During underwriting, life insurance companies look at many different factors. The insurer will want to get a picture of the risk you pose, which means looking at your hobbies, family history, and health. It’s of the utmost importance to be honest on your application even if you have poor health or a risky hobby. If you lie about anything – like smoking, skydiving or having a family history of cancer– the insurance company can deny your application outright or increase your premiums later if they discover you withheld information.

But not all life insurance companies are created equal. Each company sees these risk factors differently. Company A may decline you because you have diabetes, while Company B may accept you. If you’re worried that your application could be declined because you exhibit a certain type of risk, ask an agent at Policygenius to go over your options. They can help you compare quotes and life insurance policies without bias, and will know which company is best for someone with your risk factors and where to go next should your first choice not pan out.

We’ll dig into some common risk factors that insurance companies use to determine your insurability below.

Chronic illness

If you’re suffering from a chronic illness at the time you apply, the insurer may decline your application.

You’ll increase your chances of acceptance if you can show that your illness is currently being treated, which will be explained on the attending physician’s statement (APS) that some underwriters may request. For example, if you have asthma, you’ll need to show regular usage of a maintenance inhaler and long-term care from the relevant medical specialist.

There are several points during the application process where medical concerns will be unearthed. First, you’ll have to address them at the beginning, either on the phone or when you apply online. Next, you’ll have to take a medical exam (also called a paramedical exam), which is sponsored by the insurance company. This may include a blood or urine test that could detect internal illnesses as well as illicit drug abuse. Finally, the underwriter will look at your medical records and the full APS.

Although every insurer is different, common health conditions that could cause a denial or higher premiums include:

Lifestyle choices

Making dangerous lifestyle choices also doesn’t necessarily translate into a rejection. You can get coverage if you’re a smoker, but your premiums will be significantly higher. But if you’re already suffering from one of the medical conditions related to smoking, like emphysema or lung cancer, your application will likely get declined.

As we mentioned earlier, you shouldn’t lie on your application to try to avoid a denial. If you die and your insurer discovers that you had a medical condition or a dangerous hobby for which you would’ve been denied life insurance coverage, they can cancel your policy and your beneficiaries will only get a refund of your premium payments and not the death benefit.

Age

The older you are, the more difficult (and expensive) it will be to get insured. After a certain age, some life insurance products will be off-limits to you. Although you still have options, you’ll have to get covered by a policy that may not meet all of your coverage needs. But, as you age, your need for life insurance will likely decrease too. Older adults are less likely to have the debts and financial dependents that incentivize people to buy life insurance. But if you’re 55+ and have people who depend on your income, or if you’re looking for final expense coverage, there are options for you.

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Step One: Talk to your broker

If your life insurance application is declined, the first thing you should do is talk to your life insurance agent or broker. They’ll probably contact you first – when informing customers that they’ve been declined, life insurance companies tell the broker first and then send the shopper a letter directly. The insurer will usually say why your application was declined. Your broker can then work with you to analyze the decision and strategize what to do next.

Luckily, when you apply to another life insurance company, you can reuse the medical exam from your first application, which can shave a few weeks off your application timeline.

Step Two: Make some lifestyle changes

Sometimes, insurance companies won’t reject your application outright and instead will postpone your application to another date, usually six months to a year later. If, for example, you have a recent medical diagnosis, the insurer typically will allow a full year to pass to allow your body to adjust to any new medications or symptoms and then check back with you to verify stability.

If your application is postponed for other reasons, like if you’re recovering from alcohol or drug abuse, then it’s complicated. But usually you can reapply after a period of time and when you have more favorable medical exam results.

Step Three: Explore alternative life insurance products

If a life insurance company deems you to be high risk, you may still be able to get insured by purchasing an alternative form of life insurance. These are no-exam life insurance policies, but they may offer lower coverage.

Simplified-issue life insurance

With simplified-issue, you’ll be able to skip the paramedical exam. However, that doesn’t mean you won’t have to discuss your health issues, and the underwriter will still see your medical records.

Plus, if you already applied previously, your information is stored in the Medical Information Bureau’s database, which insurers pull from to see why you were rejected for coverage in the past. Medical exam results from a failed life insurance application will be visible.

Simplified-life issue life insurance is also more expensive than traditional insurance. For the same amount of coverage you’d get from a traditional term life insurance policy, you’ll pay much higher premiums. Additionally, most simplified-issue plans offer no more than $100,000 in coverage.

Guaranteed-issue life insurance

Also called “guaranteed-acceptance” life insurance, guaranteed-issue life insurance skips underwriting entirely. That means no medical exam or review of your medical records. You’ll still be asked about your health, and misrepresenting yourself will have the same consequences as it does for other life insurance policies.

Not only is guaranteed-issue life insurance more expensive, it also offers a much smaller death benefit. Usually, it’s between $10,000 and $50,000. But if you’re running out of options, guaranteed-issue life insurance might be a good choice.

Final expense life insurance

Final expense life insurance is often called burial insurance. Policyholders are expected to die relatively soon, so final expense insurance typically only covers costs associated with the funeral. Still, it can lift a huge burden off your loved ones’ shoulders (a typical funeral in the U.S. costs between $8,000 and $10,000) if you can afford the high premiums.

Step Four: Ask your employer about group life insurance

If your life insurance application is declined, you may still be able to get group life insurance through your employer. Many employee benefits packages include a small amount of life insurance coverage, which you’re entitled to even if you have a serious medical condition or a dangerous hobby.

Employer-provided group life insurance premiums are low because you’re part of a larger coverage group, but you may not receive enough coverage. Additionally, when you leave the job, you lose the coverage.

Compare and buy life insurance

Compare and buy life insuranceGET STARTED

An application rejection doesn’t mean you won’t be able to get life insurance indefinitely. Each insurance company has its own underwriting standards, so your age, certain health conditions and/or risky hobbies will be treated differently depending on where you apply.

First, understand the reasons why your application was denied and talk to your broker to learn what options are available to you. From there, you may have to make some healthy lifestyle changes or wait a certain period before the insurer will re-evaluate and approve your application.

If your application was flat-out denied, your broker may also recommend other types of coverage, such as simplified-issue, guaranteed life, or final expense insurance. If those options don’t work for you or if they are too expensive, you might be able to find coverage through your employer’s group life insurance.

Comparing rates and talking to a licensed independent broker like Policygenius is the best way to exhaust all your options and make sure you’re getting the best coverage at the best price.

About the authors

Managing Editor

Zack Sigel

Managing Editor

Zack Sigel is a SEO managing editor at Policygenius. He covers personal finance, comprising mortgages, investing, deposit accounts, and more. His previous work included writing about film and music.

Insurance Expert

Rebecca Shoenthal

Insurance Expert

Rebecca Shoenthal is an insurance editor at Policygenius in New York City. Previously, she worked as a nonfiction book editor. She has a B.A. in Media and Journalism from the University of North Carolina at Chapel Hill.

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.

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