Life insurance is largely defined by risk: the risk of being uninsured and the risk that insurers undertake to cover you. Covering that risk is loads of what many feel are excessive and intrusive medical and lifestyle “underwriting”, designed that way so what you pay for insurance adequately reflects the risk an insurer perceives of you.
And then there’s the unfortunate by the wayside, those who have been deemed “uninsurable” due to a variety of reasons – be they health, lifestyle, or other factors.
So if you’ve been declined coverage before, are worried you’re going to be declined coverage, or if you simply want to know more about what to expect when buying life insurance – read on. We’ll tell you how you can figure out why you’ve been declined and how to still get coverage anyway.
How May You Be Declined Coverage?
From health issues to dangerous hobbies, curious drinking habits to a curious family history – there’s seemingly no end to the reasons and ways a decline can come about. Though it does tend to fall into a few broad reasons:
- The presence of a serious or chronic health issues, such as cancer, heart disease, or Alzheimer’s. This may also include compelling medical evidence that a health issue may exist;
- A lack of effective management of less-serious diseases (ill-managed Diabetes is a common example);
- A clear and marked family history of disease that shows a potential risk;
- Engagement of activities that are deemed risky (piloting, deep-sea diving, skydiving);
- Personal habits that are considered risky (excessive smoking, drinking, or overeating/obesity);
First: Confirm that You Were Declined
A decline is always going to be a discouraging roadblock in planning your finances, but it’s important not to get ahead of yourself and assume that red rubber stamp is the end of your application.
First of all, some applications are returned as “postponed” applications, which often get confused with “declined” applications. Having your application flagged “postponed” means that the application isn’t approved, but the insurer will require follow up information in order to make an informed decision. That could require another medical test, or potentially a second round of underwriting. So if that’s the case: follow up with your broker and see what’s required to turn that postponed status around.
Because of the sensitive nature of health information, your broker may not be able to find out specifically why you’ve been declined and you will have to correspond with your insurer and your doctor. There are three primary circumstances as to why a rejection is made on health grounds:
- You have a health issue you didn’t know about (and count yourself lucky that you’re able to find out!);
- You have a health issue that’s considered considerably more serious than you originally believed, or;
- There was an abnormality in the test that needs to be verified and/or corrected.
In each case, following up with your GP is the best course of action, both for your own health’s sake and to arrange a follow-up test that may still keep you eligible for coverage.
Figure Out Your Alternative Life Insurance Options
In some cases, the problem isn’t solvable and you won’t qualify under traditional life insurance plans. While that can be a significant roadblock in your attempt to get insured, it’s by no means a serious problem if you know your options.
Getting a deferral period: Many insurers can still offer a traditional policy under the caveat of a “deferral period”. This period states that, should you die within the first two years of a policy, your benefit will equal premiums paid (plus applicable interest.) This is often the best solution if you’ve been declined on more superficial grounds.
Get a Simplified Life Policy: Simplified life insurance, also known as No Medical Life Insurance, provides coverage with no examination and minimal underwriting – oft times as little as a handful of “Yes or No” health questions. The advantage to these plans is you won’t need to hear back whether or not you qualify: you’ll know before you finish the application if you’re able to qualify.
Get Guaranteed Coverage: If your health is not well enough to qualify for simplified policies, you can also consider a guaranteed life policy, which covers you with no health questions whatsoever. Applications tend to be short, simple, and coverage options focus around small amounts for final expenses and so on.
Bear in mind that the market is always changing, and largely in favor of offering more and more options to individuals with health issues through a variety of plans. Application rejections are a common element of the market, and insurers are always looking to open their doors and accommodate cases that, twenty years ago, would have no solutions whatsoever.