Most people denied life insurance coverage are caught off-guard when the agent or company lets them know their decision. Many times, the denied individual could have known upfront if they’d have a problem getting a life insurance policy issued and may have been able to make personal adjustments or find another company that would likely approve their application.
This article is intended to help you understand potential reasons why you could be denied life insurance. Hopefully, your situation is such that you’ll be able to locate an insurance company that will find you to be an acceptable risk.
Now, let’s look at some common reasons that people are denied life insurance when they apply for coverage.
Life insurance companies employ people called “actuaries,” who analyze risk and the company’s claims-paying history to help determine your insurability. With your age and mortality rate being critical factors in their decision about issuing you a policy, your health status plays an important role.
Let’s look at three health conditions that prevent many applicants from getting approved:
- Obesity. As of 2021, the American obesity rate is 42.4%, and it continues to rise. It’s a big issue because it is a significant contributor to the development of illnesses and events like heart attacks and strokes. Some life insurers aren’t necessarily more liberal with their underwriting, but they will take into account your build, as well as your weight. If you think this could be a problem area for you, have your agent research companies that use a “build chart” when underwriting policies.
- High Cholesterol. Another common reason for denials is high cholesterol, lipids, and triglycerides. Your total cholesterol is determined by the ratio of high-density cholesterol (HDL) and low-density cholesterol (LDL). HDL is “good” cholesterol, and LDL is “bad” cholesterol. The wrong ratio puts you at an increased risk for heart disease and stroke.
- Diabetes. High blood glucose/sugar levels also is a primary reason you can be denied coverage. High levels are an indicator of the onset of diabetes or that you are already considered to be diabetic. Some companies are more lenient concerning diabetes, so do your homework before you fill out your application.
If you suffer from a chronic illness and apply for life insurance coverage, there is a high probability of your application being denied. Chronic illnesses include:
- Heart disease
- Parkinson’s disease
- Alzheimer’s disease
If you can provide a statement or medical records from your doctor attesting to the treatment and stability of your illness, some companies will be more comfortable insuring you.
Yes, there is age discrimination when applying for life insurance. Older adults will find it more difficult to find life insurance products they want at affordable premiums. Statistically, the older you get, the more health problems you’ll develop. This makes you an increased risk for the insurance company, which is something they avoid.
As it is with most types of insurance like health insurance and disability insurance, it’s best to apply when you’re younger and healthier.
When applying for life insurance coverage, it’s almost always a pre-requisite that you have a medical exam, including providing a urine sample. If the lab that examines your urine finds blood or protein, this can pose a major problem for you.
It can be caused by either extreme physical activity or kidney disease. If you’re denied because of this, have your doctor get another sample from you and have it analyzed. If it comes back normal, submit that information to the insurance company for re-consideration.
Learn More: No Medical Exam Life Insurance
Another facet of the medical exam is having a blood sample drawn. From your sample, insurers can determine if your alcohol consumption level is much higher than “normal” levels. If they are, the odds are much greater you’ll be denied coverage.
Some occupations are riskier than others, which poses a more considerable risk for the insurer. Some jobs that are considered to be hazardous include:
- Airline pilots and flight engineers
- Logging workers
- Fishers and related fishing workers
- Refuse and recyclable material collectors
- Structural iron and steelworkers
- Truck drivers
- Farmers, ranchers, and other agricultural managers
- Construction laborers
- Electrical power-line installers and repairers
- Police and sheriff’s patrol officers
If you earn a living through one of these hazardous occupations, life insurance is often available for members of an industry association for your profession.
When applying for life insurance coverage, your income and net worth will determine how much coverage you can apply for. For example, an individual earning $20,000 per year is not likely to be approved for a $1 million life insurance policy. The risk to the insurer is too great that there would be an enormous financial benefit for someone from your death, which could also put you at risk.
Life insurance companies provide information to a repository called the Medical Information Bureau (MIB). This information contains a lot of information about you, including your health history, prescription medications you take, and how many life insurance companies you’ve applied for coverage with. It’s a big strike against you if your report shows that you have recently applied at numerous other life insurance companies and were denied coverage.
These are some of the reasons you could be denied life insurance coverage. It can be beneficial to work with an independent life insurance agent who represents multiple life insurers. They can often match your situation with insurers that are known to issue policies to people with similar circumstances as yours.
Reputable insurance companies will not go out of their way to avoid paying a valid claim, but they make it clear up front what could cause them not to pay a death claim. These are four common reasons why insurers can legally deny payment of a claim.
- The death occurred during the contestability period. The first two years you are covered by a life insurance policy is known as the contestability period. If you die during this period, the life insurance company can investigate whether or not you provided correct information on your application. Even if it was an accident, like you provided the wrong date of birth, the claim could be denied.
- The policy didn’t cover the type of death. Life insurance policies contain wording which explains what kinds of death will cause a claim to be denied. For example, if you were killed while committing a felony, like a bank robbery, the claim will be rejected. Death caused by your participation in a hazardous hobby, like skydiving or scuba diving, that is excluded by your policy could also be a reason for denial of claims payment.
- You failed to disclose relevant information. This wouldn’t include writing down the wrong zip code on your application or the wrong driver's license number. It does include pertinent information, including facts that would have impacted their decision to issue you a policy, such as not disclosing that you had previously suffered a heart attack.
- You failed to pay your premiums. It’s happened more than once that a named beneficiary approached a life insurance company to have a claim paid, only to find out the policy had lapsed years ago because of the non-payment of premiums. Having premiums paid by a monthly bank account debit can help prevent this from happening to you.
A good life insurance agent is worth their weight in gold. They’ll make sure accurate and complete information is submitted to the insurer, that you understand any conditions that could void payment of a claim, and they’ll let you know if your policy is in danger of lapsing. A referral from a friend is often a great way to find the right agent.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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