Life insurance can provide you with the confidence that your family and loved ones will not experience any financial distress if you die unexpectedly. However, the importance of having a life insurance policy can make being rejected sting even more.

Why do life insurance companies reject applications, and do you have any recourse if you have been rejected? Below, we will discuss a few of the steps you can take after your application for a life insurance policy has been denied.

Pre-Existing Conditions or Chronic Illnesses

A common reason for an insurance application to be denied involves pre-existing conditions. This term refers to conditions—often chronic illnesses like asthma, diabetes, cancer, and others—that can impact your lifespan or increase your risk of death, however slightly. Obesity can also be considered a pre-existing condition by some companies.[1]

But while it may be tempting to gloss over medical conditions to improve your odds of approval, this can be a dangerous tactic—if it is later revealed that you lied on your application, your policy may be canceled or voided.[2]

Bad Habits

Another reason for a life insurance policy to be denied is the disclosure of bad habits like smoking, drinking to excess, or even driving without wearing a seatbelt. All these habits can increase the odds of sudden death, so those who engage in them should be prepared to shop around to find an understanding life insurance company. Just as with pre-existing conditions, omitting these habits or lying about their frequency on your application can mean instant cancellation of your policy, even if this falsehood isn't discovered until after your death.[3]

Age

One factor you cannot help—but that can affect your premium rate and whether you are eligible for a policy—is your age. The older you are, the tougher it may be to find a comprehensive and inexpensive life insurance policy. On the other hand, the older you are, the fewer dependents you are likely to have. Many who take out their first life insurance policy in their 50s or 60s are simply interested in having enough coverage for funeral and end-of-life expenses.[4]

What to Do After a Denial

To set the cost of your insurance premiums and to determine whether you are eligible in the first place, your insurance application will go into underwriting. This process has different guidelines depending on the parent company, which means that one company's denial can be another's acceptance. If you have been denied a life insurance policy, your best bet is simply to shop around. You may be able to find a similar policy from another insurance company, sometimes even at a lower price than you would expect.[5]

Other options may turn on the reason for denial. If, for example, your policy was denied because you are a smoker, quitting smoking for a few months can be all you need to have a later application accepted. These sorts of lifestyle denials can be among the easiest to correct.[6]

It is also important to remember that there are alternatives even if you are denied life insurance coverage from several companies. An insurance broker or a financial professional can help you shop around for a policy that fits your needs and budget.

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

 

[1] https://www.forbes.com/advisor/life-insurance/reasons-for-claim-denial/

[2] https://www.cnbc.com/2016/03/22/lying-on-insurance-forms-can-come-back-to-haunt-you.html

[3] https://www.forbes.com/advisor/life-insurance/reasons-for-claim-denial/

[4][4] https://www.forbes.com/advisor/life-insurance/factors-affecting-rates/

[5] http://www.actuaries.org/CTTEES_TFM/Documents/Zagreb_underwriting.pdf

[6] https://www.forbes.com/advisor/life-insurance/rate-reconsideration/

Sources

https://www.forbes.com/advisor/life-insurance/reasons-for-claim-denial/

https://www.cnbc.com/2016/03/22/lying-on-insurance-forms-can-come-back-to-haunt-you.html https://www.forbes.com/advisor/life-insurance/factors-affecting-rates/

http://www.actuaries.org/CTTEES_TFM/Documents/Zagreb_underwriting.pdf https://www.forbes.com/advisor/life-insurance/rate-reconsideration/

LPL Tracking 01-05142150