Has your life insurance application been declined?
Do not worry. It is not the end of the road for you.
An application denial does not necessarily mean you cannot get life insurance. Another insurer may well rate you as insurable and offer you the desired coverage. Even if that does not happen, there are other life insurance products that you can purchase to secure your family’s future and give you peace of mind.
Continue reading to find out about the various options available to you.
What is life insurance?
A contract between you and a life insurance provider is known as a life insurance policy. They agree to pay a death benefit (a lump sum of tax-free money) to someone you pick if you die. In exchange, you agree to pay them an insurance premium on a regular basis: (a small amount of money over time).
You and your partner decide on the quantities of money coming in and out, as well as the time frames involved, but that’s it in a nutshell.
What can a life insurance claim payment be used for?
Your beneficiary (the person you choose to receive the payout) is allowed to utilize the death benefit from your life insurance in any way they see fit. The death benefit is exempt from taxation. They can put the money towards:
- Covering day-to-day expenses so that their family can maintain a similar standard of living (groceries, bills, rent, etc.)
- Pay off your credit card debt (mortgages, lines of credit, credit card bills, business loans, etc.)
Invest in the education of their children.
- Make a significant donation to their favorite charity.
- Make arrangements for their funeral.
- Keep their company safe.
If you don’t choose a beneficiary, the death benefit will be paid to your estate, which may be subject to taxation.
Do I need life insurance?
Perhaps a better thing to ask is whether or not the people in your life require it.
Insurance is used to pay off debts (personal or business-related) and provide a source of income to someone who relies on you but is no longer alive.
By purchasing life insurance, you can secure assets for your family’s future by investing in a secondary source of income. Without life insurance and the security of a death benefit, you’re putting all of your family’s financial eggs in one basket: your ability to produce an income while you’re alive.
You may believe you have life insurance through your employer’s group benefits, but such policies must be scrutinized carefully to ensure they cover all of your needs.
How much life insurance do I need?
You should purchase the most comprehensive life insurance policy you can afford. When they die, most people want to leave a multimillion-dollar fortune to their family and loved ones. However, most people are unable to do so due to budgetary constraints.
Determine what you consider to be an “affordable premium.” Create a budget to examine your family’s existing and future financial needs, as well as your current liabilities and debts, as well as any costs related to your death. This will show you what kind of coverage you should get and how much it will cost.
When should I buy life insurance?
Life events necessitate the purchase of life insurance. Purchasing a home, having children, and marrying are all signs that you have people in your life who rely on your salary to maintain their standard of living. Because insurance premiums climb as you get older, buying it earlier in life can save you money.
Why is My Life Insurance Application Being Declined?
Your insurance application could be turned down for a number of reasons, such as:
Life insurers view customers as different levels of risk, and classify us into groups depending on our overall health. More than anything, any life insurance company does not like early deaths.
This is because it means they must issue a payout before they could collect many premiums.
If your risk of early death is severely high, carriers may reject your application. Health conditions that could lead to denial include cancer and HIV, among others.
Not all jobs are created equal. Some occupations are more hazardous than others. Examples include pilots, flight engineers, and truck drivers. If your profession carries a higher degree of danger, you may find it hard to get coverage. Likewise, a dangerous hobby — like bungee jumping or skydiving — could lead to an application denial.
Life insurance contracts are based on trust. But what if you break the trust by purposely lying or withholding information on your application? The consequences of lying can be severe, so you should not even entertain this idea.
If you get caught, the insurer will immediately reject your application. What is more, the incident will be logged into a central database. Which means other insurance carriers with whom you may apply later will find out about your misdeed. Consequently, they may reject your application as well.
Reckless driving is linked to a higher risk of death. That is why, a life insurance company will also look at your driving record while evaluating your application. If your driving record is spotty, you may be denied life insurance coverage.
A serious criminal record may discourage life insurers from offering you a policy. Likewise, your application will be rejected if presently you are facing felony charges.
Poor Financial Situation
Insurers look at your personal financial situation as part of their evaluation process. You may be denied if you:
- Are not able to afford the cost of insurance
- Have a lot of debt
- Previously filed for bankruptcy
What Can I Do If My Life Insurance Application is Declined?
There is no one-size-fits-all answer to this question. What you should do after you are denied life insurance coverage depends solely on why you were rejected in the first place.
But one thing is certain: having your application turned down does not automatically mean there is no way to get a life insurance policy. In most cases, it is possible to buy some form of life insurance coverage.
First, get in touch with the insurer to learn the logic behind your denial. Insurance carriers share detailed information regarding it upon request. Next, depending on the reason for disapproval, you can explore one of these options.
Request a Reassessment
Insurance companies evaluate your application on the basis of the information provided by you and your exam results. If you made an honest error on your application, you can request the carrier to reassess the application with the right medical data.
Reapply After Some Time
Let’s say you were rejected due to uncontrolled diabetes. Try to make amends by taking your medication on time, regularly monitoring your sugar levels, and making lifestyle changes. Reapply once your diabetes is under control or at least not severely high.
Similarly, if you have too much debt, you may consider reapplying after you have paid off all or a good part of it.
Try to Get Coverage with Exclusions
In a few cases, insurers may agree to offer coverage with one or more exclusions. This could happen if, for example, you were turned down because of an underlying heart condition. A carrier may still be able to offer you coverage, excluding death due to heart complications. That is, the life insurance company will not issue the death benefit if you die because of your underlying condition.
A life insurance application denial stays on your record for as long as seven years. Furthermore, other insurers can see this information, along with the reason for rejection. Life insurance companies do share some information about applicants through Medical Information Bureau (MIB). MIB provides fraud protection to insurers from applicants who would try to hide or withhold information when applying.
As you can guess, hiding or omitting crucial information on your application will get you nowhere. If there is some mismatch between the information provided and medical exam results, the insurer will likely scrutinize your application more rigorously.
There is a good chance you will be caught and be turned down. Worst case scenario: Your beneficiary will be denied the claim if you die and the insurance company finds out that you lied.
What Options Are Available to Me After Having My Life Insurance Application Declined?
If you have received a denial, you may want to consider some of the following options:
Employee-provided Life Insurance
A group life insurance policy through work is guaranteed. That means people with serious health conditions can qualify. If your company offers life insurance as a part of the employee benefits package, sign up for it.
Look for a More Lenient Insurer
Just because one or two insurers have turned you down does not mean every insurer will. Some insurance companies are more lenient than others for certain medical issues. Speak to an agent or do online research to find out if there is an insurance company that may be willing to offer you coverage.
Consider Other Life Insurance Policies
If you do not make the cut for the term or permanent life insurance, check out other coverage opportunities. These options, however, are usually more expensive than term life. That said, having coverage will give your loved ones some financial protection and you some peace of mind.
Guaranteed Life Insurance
A guaranteed life insurance policy neither involves a medical exam nor health questions. That means you can get coverage regardless of your health. The death benefit, however, is usually small. But, as they say, some life insurance is better than none.
So, what is the maximum death benefit?
Most providers do not offer more than $50,000. Also, premiums are considerably higher than a comparable standard policy.
Guaranteed life insurance is typically used for covering end-of-life and funeral expenses. It is a good option for applicants who do not qualify for the standard coverage because of poor health.
Simplified Life Insurance
Simplified life insurance has more lenient criteria than standard life policies. Unlike the latter, it does not require a medical, and eligibility is assessed on the basis of your response to a few simple health questions.
The coverage, however, is lower than standard policies and the premium higher. But it is more affordable compared to a comparable guaranteed life policy. First, give simplified life a try if you are turned down for standard life insurance.
Mortgage Life Insurance
This life insurance product ensures your family does not lose their home after your death. If you pass away, the policy will pay off the outstanding mortgage balance.
Since mortgage life insurance does not involve a medical exam, most people qualify for it. You can buy it when you sign up for a home loan or shortly after it.
Can I Change Any of the Information if My Life Insurance Application Got Declined?
There are several things you can do to improve your chances of getting approval. For example, if you recently have had financial troubles, defer applying until you have cleaned up your credit report.
All insurers have specific rules for dealing with applicants who have recently filed for bankruptcy. Try to find out this information before you apply for coverage with a provider. Some insurers will not consider your application until 12 months have passed since you filed for bankruptcy.
Also, make sure all information provided by you during the application process is accurate. Life insurers use this information to decide your eligibility, and an unintentional mistake can lead to a denial.
At times, a health issue may affect eligibility or the premium rate. In either scenario, delaying the application until you have improved the underlying issue is a good idea.
A spotty driving record is another red flag, as it points toward a higher risk of death. While a poor driving record is not easy to clean up, you can adopt safe driving habits from now onward to avoid collecting any further demerit points. You may also consider taking classes to give your driving record a boost.
How Much Life Insurance Will I Need?
You need enough life insurance coverage to pay off your outstanding debts and cover your financial obligations. In most cases, 10-15 times the yearly income is a sweet spot. That said, you may have unique responsibilities and hence may require more coverage. Speak to an insurance expert if you are in unsure about the amount of coverage you need.
Who Can I Talk to After Having My Life Insurance Application Declined?
Rejection can be hard to deal with — be it a denied college application, a job rejection, or declined insurance application. We cannot offer you much help with the first two, but we can provide you the right answers if life insurers are turning down your application left and right.
Having your life insurance application declined does not mean you will never be able to get life insurance. Or that you will not get any life insurance at all. Each insurer follows different underwriting guidelines. If one provider turns you down, there is a chance you may still be able to get the desired coverage from another insurer.
First, learn the reason for rejection. Next, speak to your insurance agent or broker to find out the available options. You may have to make lifestyle changes to get a re-evaluation. Or they may suggest waiting for a certain period before approaching the insurer again.
If you have a serious underlying health condition, see if you can get group life insurance through your work. If not, a simplified life or guaranteed life policy may be your best option.
Speaking with an independent broker, is the best way to ensure you get the right coverage at the right price.
Which is the best life insurance policy?
The answer to this question isn’t found in the back of the book. Life insurance is a deeply personal purchase and there are many factors to consider. In addition to taking into account your current family’s financial needs, you should also account for future expenses like tuition, funeral arrangements, estate taxes, and any other debts you would like settled if you died. (If that sounds complicated, there are insurance calculators).
When you search for insurance quotes, there are a multitude of options to choose from. Nevertheless, you should only purchase a policy you can afford and that makes sense for you and your family.
Thankfully, AG Group Enterprise Ltd, is here to help! Our mission at AG Group is to provide a wide range of life insurance policies, including term coverage, permanent coverage, RRSPs, RESPs, and more!
With AG group’s insurance policies, you can protect the future of your family and your finances. A good policy ensures a bright future!