Even though it’s rare, life insurance companies have been known to deny coverage to certain applicants. While its “no big deal” to be denied life insurance coverage, it can sometimes be a shot to one’s pride or a wake-up call. Let’s take a look at how and why you can be denied and what you should do if you are.
The Life Insurance Application Process
When applying for life insurance, there are some circumstances in which you would have to further explain situations on the application form. These cases must all be handled according to the life insurer’s instructions and company policy. Some health conditions or personal habits/activities might make you “uninsurable” or “high risk”.
It is always recommended that you be honest and open about everything when applying for a life insurance policy. After all, it’s better to be truthful now than to save frustration and headaches down the road if your life insurance claim were to be rejected. You have more to lose (years of premium payments) than to gain by lying on an application form.
How Are Life Insurance Applicants Grouped
Life insurance policies are grouped according to risk class. Life insurers do this not only to limit their risk in taking on a client. They also do it to ensure that policyholders pay fair premiums (you cannot be charged much different rates than others in the same class). In some cases, however, the applicant would not really fit into a risk class because they pose more risk than the company is willing to insure.
What To Do If You Are Denied A Policy
- Don’t Panic – Its best to remain calm and rational throughout the underwriting process. Sometimes you might be denied simply because there is insufficient information, inadequate responses, or just a misunderstanding. If you are to be denied, stay calm, and be in constant communication with the insurer and underwriter.
- Request Information – You are encouraged to ask the insurance company for a specific reason for the denial of your application. The most common reason for denial is no payment for the first month of the policy or for the application fee (check that first). Another common reason is an unknown medical issue that showed up on your health exam. In this case, you should be thankful that the issue was discovered and then take the necessary steps to remedy it. A third common reason for denial is risky behavior. We’ve discussed cigarettes and cigars in the past, but things like mountain climbing and motorcycle riding can also lead to denial of coverage.
- Get A Physical – You should make an appointment with your doctor for a physical exam; especially if you were denied due to health reasons. Many times, these issues can be fixed quickly and after they are, life insurance can be obtained. Once the treatment has begun, the applicant should inform the life insurance company to see if this would change the results of the underwriting.
- Validate Medical Records – Sometimes, mistakes are present in the medical records of the applicant. If you were denied because of this reason, double-check to make sure your medical profile is accurate. Check with your doctor to verify the accuracy of such records and then notify the life insurer if any discrepancies are discovered.
- Talk With A Different Broker – If you were denied coverage from a specific company, it may be beneficial to “see what else is out there.” You might be successful in obtaining a similar policy from another company. Remember – every company’s underwriting process is different. If you are denied from one company, another might welcome you with open arms. Life insurance agents and brokers have access to application forms from many different life insurance companies. It’s highly recommended that you speak with one to get his/her suggestions.
Remember, it’s not the end of the world if you are denied life insurance coverage. Remain calm and get second opinions from different life insurance companies. A life insurance quote comparison service like Life Ant can help you connect with many different life insurers. Get quotes from multiple companies to learn about the multiple options available to you.