You finally decided it was time to get life insurance and protect your family, estate, or business. Surprise, surprise, the insurance company you applied with isn't in sync with you and they decline to offer cover, or offer coverage at a rate that you can't afford. What options do you have after being denied life insurance?Applying for Coverage
When you apply for life insurance, whether term or permanent coverage your agent will tell you at what rating they think you will qualify. The ratings are as follows:
- Preferred best, preferred, standard plus (only for some companies), and standard. These are the top 3-4 rating categories.
- Then come the Table ratings. They run from Table 1 through Table 8. These approval ratings can be significantly more costly than the top categories.
When you apply for insurance there are many factors that are considered when the underwriter is deciding your rating. The most common are your build, medications you take, family medical history, your medical history, driving record, and several other factors.
What Happens When Your Life Insurance is Declined or Rated?
When an insurance company makes a decision on your case, they notify your agent. When we have a case rated or declined, we call our independent in-house underwriter and ask them to review your file. Here's what's next...
- Our underwriter may agree with the insurance carrier and tell us this is as good as it gets. They will tell us why and we will explain it to you!
- They may go back to the insurance carrier and discuss the case with the underwriter there. We have had insurance underwriters improve the rating on some cases (thereby improving your cost).
- Our underwriter may say we need you to have a test, or get a letter from your doctor, or take care of something. After that is done, our underwriter will go back to the insurance carrier with your new info and see if we can improve the rating (or get a declined case placed). They will often ask before you take any steps if this will help the rating- so you don't go spinning your wheels.
- They may decide another carrier will give you a better offer as they are more aggressive in your problem area. Sometimes they can talk to an underwriter at the new carrier and see what they think. If so, we take a new application and use the exam you already took and send all your records with the new application. This saves time and hopefully improves your rating too.
Being an independent agent with an in-house underwriting department and many different insurance carriers gives us a lot of flexibility when we have a case with a problem.
You may have a condition where you can't get any underwritten insurance. There are two options at this point, final expense coverage and guaranteed issue life insurance.
Final expense insurance has simplified underwriting, meaning no exam, no doctor records, just a number of questions. Surprisingly you may qualify for final expense coverage even if you can't get a fully underwritten policy. Depending on your answers to these questions you may be able to get coverage which may start on the first day of the policy or may be phased in over one to two years. These policies are available in most states up to age 90.
Guaranteed issue life insurance is available in most states up to age 85. If you pass away during the first two years your beneficiary will receive the premium you have paid plus interest. After two years, they would receive the face amount of the policy.
The Medical Information Bureau (MIB) keeps records on each of us. Every insurance company that you apply with will look at your MIB file and may place information in your file. These files have information about different medical conditions, high risk activities (extreme sports, bad driving records) that can affect your ability to be insured.
You can learn about the MIB here. You can request your consumer file and make certain it is correct if you like. When we hear that the insurance company is questioning something they learned from a confidential source, it may be the MIB.
Should You Withdraw Your Application?
If you are rated or denied life insurance coverage, you can be sure there will be an MIB entry made by the insurance company. Most applications ask if you have been rated or declined for life insurance. Now you know it pays to be truthful, because they will find out anyway!
When we see that you may be declined for something you can fix, we may have you withdraw your application. This way, you will not be rated or declined. For example, your blood pressure is high and you won't get the rate we quoted you. If you can lower your pressure, either by diet and exercise or with medication, you will most likely get a better price. So we may suggest you withdraw the application, take care of the "problem" and then reapply for insurance when you are improved and stable. (You have to have enough medical history of good reports- based on your issue we will suggest how long you need to wait). This can save you significant amounts of money on your premiums over the life of your policy.
If you have been declined, but currently have a term policy in force, another option is a term conversion. This is where you convert your term policy into a permanent policy (that lasts for your lifetime).
If you have a policy, it is most likely at a better rate than you can get today! While permanent coverage is more costly than term usually, this may be your best option. It's certainly one to consider. Your independent agent can help you find out what you can convert into and the cost.
The Bottom Line
Surprisingly, just because you have been denied life insurance coverage doesn't mean it's the end of the road. There are options. If you are denied life insurance you should contact an independent life insurance agent. An independent life insurance agent will give you the best chance to turn things around.