The Uninsurable
Many applicants have their life insurance application denied. This does not mean they are uninsurable. The reasons for denial are usually health related and are based on the insurer’s underwriting policies. Each insurance carrier has different underwriting practices and requirements. Consequently, rejection by one insurer does not eliminate opportunities with other insurers.
Reasons why uninsurable
- health – the most common basis for denial is health. Life insurance companies have different underwriting criteria, depending on the company’s risk management strategy. One company may find a condition such as asthma acceptable whilst another will deny sufferers a policy or increase their premiums.
Most insurers require you to undertake a medical exam. They will request and examine your medical records, your family’s medical history, prior health conditions and any diseases or ailments. If you have a medical condition, illness or disability, you may be asked to see one the insurer’s nominated doctors. The exam costs are paid by the insurer.
If you are deemed uninsurable by a particular insurer, a record of the policy rejection is made with the Medical Information Bureau, Inc (MIB), a centralized database of insurance and medical records. The purpose of this is to reduce fraud. Any future insurers you approach will be able to access this data and will determine if you have tried to conceal information.
Common conditions which result in denial of coverage include heart disease, cardiac problems, congenital heart conditions, asthma, smoking, being overweight, HIV/AIDs and cancer.
- Age can be another factor in making you uninsurable by some companies. Depending on which type of policy you are applying for, the insurer will consider your age in light of your health status. Some policies also have age restrictions. For example, most term policies are difficult to obtain after your 70s.
- Occupation – insurers are wary of dangerous or hazardous vocations. They will assess your occupational exposure to danger and deny life insurance if the risk is too high.
- Bad habits – even if you are in good health, you may still find yourself uninsurable based on your behavior or addictions. If you take drugs, have numerous speeding fines or been caught driving under the influence multiple times, then you may be rejected for life insurance.
- Lifestyle – you may be denied coverage based on recreational activities. Dangerous hobbies and sports such as scuba diving, rock climbing, skiing, snowboarding, surfing, base jumping and skydiving can be a reason for rejecting an application, even if you are healthy.
If I’m uninsurable, should I cheat on my next test?
In short, absolutely not! The details of your life insurance application(s), your medical records and your results are stored by MIB. Every insurer has access to these records. If you lie on your next application and the insurer checks your records, you will have your policy rejected with the reason “intention to deceive or misrepresent” being noted. After that, you will most likely never be insured by any insurer.
If the company doesn’t check against your MIB records you may end up getting the policy (on incorrect or omitted information). However, most states have a contestability period of two years from the date of issue. If you pass away within this two year period, you are jeopardizing your beneficiaries’ entitlement to the life insurance proceeds. An insurer can void the policy even after you have died if they find out you have lied or misrepresented facts on your application form.
Being uninsurable, what are my options?
If you have been declined life insurance, there are still options available. Don’t just take one rejection as the final answer. Some insurers are very strict in applying their underwriting criteria whilst others are more lenient. Your options will depend on the reasons why you have been rejected or why you believe you would be refused.
Health:
Impaired-Risk Agent
If you face difficulties in obtaining life insurance due to your health, you may wish to consult and impaired risk specialist. Impaired risk brokers specialize in obtaining insurance on behalf of persons who have insurability issues. Many of these advocates don’t charge you any fees, since they are paid commission by the respective insurance companies. They are apt to know which insurer is most likely to cover you in light of your health condition or circumstances.
Young Conditions
If you had a condition as a child (eg: congenital heart condition) and were denied life insurance in your younger years, try to reapply. The severity of your heart condition should be known by your adolescent / adult years, giving you a greater chance of insurability.
Medical Records
If you’re applying for the first time, obtain a copy of your medical records or history from your doctor. If you have an illness or you’ve recently had surgery, make sure you’re doctor notes any positive recovery or changes. Get them to write down if you’re following a daily/weekly health plan and whether you’re improving or stable. These notes and the doctor’s opinion will help the underwriter see how the condition is likely to affect you more positively.
If you’ve had an application declined, you are entitled to a written explanation. Make sure you obtain the reasoning and also a copy of your personal records stored with MIB. Your doctor can check the MIB records for any errors. If there was an error or misunderstanding in your details, have this corrected immediately. You don’t want false information affecting any future application or claim and ending up with no life insurance.
Some companies even specialize in insurance for persons with a serious condition or illnesses, even though it may be more expensive. Whilst some companies may deem you uninsurable, others will give you a surcharge, loading or even standard rates for the same condition.
Basically, you need to show the company that you don’t fit their estimated category of risk. If you have health problems, you may be more likely to be accepted by a company that participates in reinsurance.
Age:
Obviously you can’t do much about your age and falsifying documents is not an option. You need to remember that you don’t need life insurance for the whole of your life. At retirement, you hopefully won’t have any debts or dependents. You will most likely just need burial insurance which is usually attainable up to 95.
If you are within a required age bracket set down for a particular policy, then you cannot be rejected based solely on age. You can however be declined, or have higher premiums or exclusions imposed based on your health.
Occupation / Lifestyle:
If you are deemed uninsurable because of your occupation or hobbies, think of a way to alleviate some of the risk for the underwriters. Undergo training or safety classes, a course or even obtain a licence. Go and see an impaired risk insurance agent who can recommend insurers likely to find you an acceptable risk.
Bad Habits:
Everyone has unhealthy or damaging tendencies every now and then. Yours may be a thing of the past. If you haven’t had a DUI, speeding ticket or used drugs in years, point out your steps to recovery. What’s made you change? Tell them the steps you went through to eliminate these habits from your life and demonstrate how you intend to maintain your new path.
More tips to Avoid Being Uninsurable:
If you’re not being approved for life insurance, you can try group insurance if you’re employed. You can attempt to combine life insurance with your spouse or seek to reduce the death benefit. Often a company will insure two people under one policy if one of them is uninsurable. If you can afford single-premium policies, they don’t have as many underwriting requirements.
Look for companies that don’t require full underwriting, but always check their integrity and financial stability. Whole life, group insurance and burial insurance don’t require much underwriting if at all. It may just be a few qualifying questions. In any event, don’t give up trying. Not having any life insurance can end up being extremely difficult for your dependents.