While having your life insurance application denied can be frustrating; it doesn’t mean you’ll never get life insurance. Understanding how insurance works can help you to get past an initial denial of coverage. The first thing you need to realize is that life insurance companies determine whether or not you’re eligible for coverage and how much your premium will be using a process called underwriting. Every insurer has different underwriting guidelines, so even though you may have been declined by one company, that doesn’t mean another won’t accept you. That being said, here are some steps you can take if you’ve been denied coverage.
Figuring out the “Why?”
The main reason an insurance company would deny life insurance coverage to an applicant has to do with risk. Each applicant represents a risk of losing money for the company. Insurance companies protect themselves from risk by being selective about who they will cover. The underwriting process considers any pre-existing conditions such as high blood pressure, diabetes, cancer, etc. as well as medical history, driving record, and hobbies. Those who are deemed to be at a higher risk of premature death may be required to pay higher premiums, accept a lower death benefit, choose a different policy type, or be denied coverage entirely.
The key here is to determine precisely why you’ve been denied coverage. You have the right to request information on the reason for your denial. Once you’ve received this information, you’ll want to review the information. If you’ve been declined due to recent blood work or a physical exam, it can be a good idea to reach out to your physician to ensure that the insurance company’s information is accurate.
Group Life Insurance
Review your employer’s benefits package. A small amount of life insurance is offered by many employers in the form of a group life insurance policy. You are entitled to this insurance regardless of pre-existing conditions. The premiums for these policies tend to be low, but depending on your life situation, you may decide the coverage isn’t enough. Be aware that changing jobs will cause you to lose this coverage.
Seek Advice from a Broker
Once you’ve determined why you were denied coverage, you should seek advice from a broker. An insurance broker can research your options. You may find that the company you initially applied to wasn’t the best choice for you, and talking with a broker can help you find a plan that is right for you.
In certain situations, the reason for denial may be considered too significant. If that is the case, a broker may suggest a different type of life insurance policy.
One form of alternative life insurance is called simplified-issue life insurance. This insurance allows you to forgo the physical exam, but you’ll still be required to disclose any health concerns, and the underwriter will have access to your medical records. These policies come with higher premiums and tend to cap coverage at $100,000.
Another option we offer at Enrollment First, Inc. may be guaranteed-issue life insurance. These policies don’t require a physical exam, and they skip the underwriting process entirely. Again, you’d still need to disclose pre-existing conditions. These guaranteed-issue policies are expensive and have a significantly lower predefined maximum death benefit. Enrollment First offers up to $100,000 in benefits.
As a last resort, you may be able to receive final expense life insurance, commonly referred to as burial insurance. This type of insurance would only cover costs associated with the funeral, and while that may not seem like much for the expense, it could still lift some burden off of your surviving family members if you’re able to afford it.
So if you receive a denial of coverage, take a deep breath and remember that you may have other options. Just because you’ve been denied doesn’t mean you can’t get life insurance, it just means you may need to consider your options more carefully or take on the expense of a higher premium.