What to Do If You’re Declined for a Life Insurance Policy

Many people seek out life insurance coverage to leave a financial benefit for loved ones in case they pass away. Life insurance is a legal contract between you and the insurance company, but it can have a powerful emotional significance, too. So it serves to reason that getting declined for a life insurance policy can be stressful if it leaves you worried about how to provide for people you care about.

If your life application is declined for coverage, that doesn’t necessarily mean you’re at the end of the road. There are a few options you can explore even if your application wasn’t approved.

Why Was I Denied for Life Insurance?

There are a few reasons why you might have been declined life insurance coverage. Broadly speaking, two big possibilities are that either your application was too high-risk for the insurer to offer coverage, or your application was denied by mistake.

Reasons Life Insurance Companies Decline Coverage

When you apply for most life insurance policies, professional underwriters carefully consider various aspects of your profile. This helps them assess what risk category is the best fit and what rates or policy options the company can offer. They review things like:

• Health:Your medical history, prescribed medications and any current diagnoses are important information about your health. Underwriters may also seek information from blood or urine samples collected at your medical exam. Depending on what they learn, certain health conditions might result in an insurance provider declining to offer a policy.

• Lifestyle risk: People who work in high-risk professions (e.g., firefighter, movie stunt double) or engage in risky hobbies or activities (e.g., base jumping, driving under the influence) are risker to insure than a person with quiet, homebody hobbies (all other factors being equal).

• Finance:Insurance companies look at your financial history. If there are serious concerns about your finances (e.g., bankruptcy, high amounts of debt), this can impact your application, as the insurer may not be confident you’ll be able to make premium payments.

• State where you live: Some insurance companies don’t offer a policy in every state. If the insurer doesn’t offer coverage where you live, you’d need to look at other companies to find an insurance provider that can work with you.

Depending on these factors, sometimes it happens that an applicant carries a higher risk than the company will insure, so the application gets declined.

Was Your Application Denied by Mistake?

Life insurance companies work hard to gather complete and correct information to make an accurate decision about your application. There is, however, a small chance that occasionally there might be a mistake regarding an applicant’s information.

For example, let’s say you have a common name, or perhaps share a name with a relative, and that person has a ton of significant risk factors that raise red flags for an underwriter. Sometimes it’s possible for companies to cross signals and make an error with some information so that your application ends up getting declined.

If you believe your application was denied in error, you may be able to appeal the decision. Read the letter from the insurance company closely. There should be specific information about why your application was declined. If the reason is based on incorrect information, contact the insurer or your financial representative. It may be helpful to make sure you have the most complete and up-to-date information on hand about your health records or lifestyle history to make a clear case for the insurance company to review its decision.

Options to Find Coverage After Being Declined

If your application for life insurance application was declined, you may still be able to find other coverage. Here are some options to consider.

Apply With a Different Insurer

If you’d like to try again to get coverage under the same type of policy (e.g., term life), you can try applying with a different insurance company. Insurance providers have some variation between them in terms of what they will or won’t be able to cover.

The advantage of trying this option is that if you’re successful, you will get coverage with your preferred policy type. The main disadvantage is that whatever factor made the first company decline your application may be an issue for another insurance provider, too. You will also have to disclose that you were already declined by another insurer. If possible, making changes in your life (e.g., getting a medical condition under control) may help improve your chances of finding coverage through another insurance provider.

Get Group Life Insurance Coverage Through an Employer

Some workplaces offer group life insurance as a perk to employees. Generally speaking, these policies guarantee coverage to everyone in the group and typically do not require a medical exam.

The main advantages of group life are the convenience and low cost of coverage. Some downsides to keep in mind are that coverage often maxes out at a lower level than many people’s financial needs; employers can provide up to $50,000 in coverage without tax consequences, so that’s often the max that a company policy will offer. Group life policies also generally offer coverage only while you are employed at the company where you got the policy. If you change jobs or leave the workforce, many plans won’t let you take your coverage with you unless you convert your policy into a permanent life insurance policy.

Apply for Simplified or Guaranteed Issue Insurance

Simplified issue and guaranteed issue are two types of life insurance that may be easier to qualify for than a typical term or whole life policy. Simplified issue insurance asks for a more limited scope of health information than traditionally underwritten insurance, and guaranteed issue doesn’t ask as many health questions or review medical records.

These policies are much easier to qualify for and aren’t tied to a workplace agreement the way group life is. The coverage caps may be lower than what most term life policies can offer. Simplified and guaranteed issue policies may also be more expensive than term life policies with equivalent coverage.

Consider AD&D Coverage

Accidental death and dismemberment (AD&D) insurance is a form of coverage that offers a financial benefit if you die or experience certain qualifying injuries in an accident. The policy doesn’t require a medical exam—generally, as long as you satisfy age, citizenship and other requirements (e.g., some policies might not cover people in certain high-risk jobs), coverage is nearly always approved. AD&D insurance premiums

also tend to be lower than similar coverage through guaranteed issue policies, and AD&D coverage limits are often higher.

If you are declined for a traditional life insurance policy but still want convenient coverage with a higher death benefit than many simplified or guaranteed issue policies, AD&D insurance may be worth considering. The main disadvantage is that your loved ones only receive a death benefit if you pass away due to a qualifying accident, not an illness—so there are many more restrictions on which forms of death the insurance provider would cover.

A declined life insurance application can be disheartening, but it doesn’t mean you have to go without any coverage. There are several alternative options that may provide some coverage. Consider advantages and disadvantages of different policy types to decide which may be the right fit for you.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Information provided is general and educational in nature, is not financial advice, and all products or services discussed may not be offered by Fabric by Gerber Life  (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Consult an attorney or tax advisor regarding your specific legal or tax situation. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. The views and opinions of third-party content providers are solely those of the author and not Fabric by Gerber Life.