What to do if your life insurance application is declined

Applying for a life insurance policy is essential to protecting your family’s future. Most applicants would not expect insurance companies to deny coverage, but it happens. Being denied life insurance coverage is not the end of the road, though.

Life insurance applications can be declined for a variety of reasons, so understanding the application process and potential outcomes is important.

If your life insurance application is declined, it is likely for a specific type of insurance rather than a complete denial for life insurance. If coverage is denied, consider exploring alternative options, such as choosing a different policy from the same provider or seeking coverage from another insurance company. You can also request a reassessment from the insurer with up-to-date medical information to be reconsidered.

In this guide, we’ll demystify why declines happen, what to do next, how exams work, and the no-medical alternatives.

Why was your life insurance application declined?

As an applicant, understanding the reason behind the denial of your coverage application is crucial. One possible factor is that the insurer perceives you as too high of a risk. Risk factors such as a medical condition, pre-existing health conditions, or a health issue are common reasons for denial. Pre-existing conditions and unfavorable health metrics are among the primary reasons for such denials. Additionally, health conditions such as obesity, cancer, diabetes, or other chronic illnesses can also lead to a denial of life insurance coverage.

The denial typically occurs during underwriting, where something in your application is deemed unacceptable. Life insurance underwriters use their own underwriting guidelines to assess risk factors such as medical history, lifestyle, and financial background. For instance, underwriting guidelines necessitate a review of the medical exam and the health questionnaire, both standard components of the application. Common reasons for denial include health issues, lifestyle factors, financial issues, occupation, and misrepresentation.

A medical exam review may reveal severe health conditions, such as heart disease, which can lead to the denial of life insurance coverage. A medical examination and an attending physician’s statement may be required, especially if a medical condition or pre existing health conditions are disclosed.

Additionally, if the answers provided on the health questionnaire disclose conditions that the life insurance company does not cover, your application may face denial. Undisclosed or misrepresented health issues or medical history can result in denial, and this can also affect eligibility for critical illness insurance.

What to do if your life insurance application is declined

If your life insurance is declined, you should explore alternative avenues for coverage. Many insurers offer the option to consider other life insurance types. For instance, if your application was for permanent whole life insurance, there might be other life insurance products for which you qualify. Many life insurance companies have more flexible underwriting, so being declined by one does not mean you will be declined by others. Guaranteed life insurance typically has a cap on coverage, often limited to $50,000, due to the higher risk associated with not requiring medical evaluations.

Term life insurance is one such option, generally easier to qualify for than permanent life insurance. Alternatives like simplified-issue and guaranteed-issue insurance may also be options, as they focus less on health conditions. Simplified issue life insurance and guaranteed life insurance are options for those who want to avoid medical exams or have been denied traditional coverage, and guaranteed insurance and medical life insurance may be suitable for applicants with health issues. 

Simplified life insurance is available for those who were declined for traditional life insurance and only requires a short application with few medical questions. However, simplified life insurance may have higher premiums compared to traditional policies due to the increased risk taken by insurance companies.

Alternatively, you can apply to numerous other life insurance companies available in the market. Working with an insurance broker can help you compare policies from various insurance providers, different life insurance companies, and specialized insurers, including other insurance companies that may be more lenient.

You may incur higher costs if you shop for coverage after a life insurance denial. Applicants with higher risk profiles may face a higher premium, especially if they request more coverage than their financial situation supports. So, compare quotes before applying to find the best coverage at the lowest price.

Lifestyle risks and their effects

Lifestyle risks are a major factor that life insurance companies consider when reviewing your application. Choices such as smoking, participating in extreme sports, or working in high risk professions can all impact your eligibility for life insurance coverage and the cost of your premiums. For example, if you regularly engage in activities like skydiving, scuba diving, or rock climbing, you may be placed in a higher risk category, which can lead to higher premiums or even denied coverage for certain life insurance policies.

Similarly, high risk professions, such as firefighting, roofing, or commercial fishing, are seen by insurance companies as having a higher likelihood of claims, which can also affect your ability to get affordable coverage. It’s important to be upfront about any lifestyle risks on your life insurance application. Failing to disclose these details can result in a denied claim later on.

A licensed insurance advisor can help you understand how your lifestyle choices may affect your application and guide you toward the best life insurance policy for your situation. They can also recommend insurance providers that are more flexible with certain lifestyle risks, helping you navigate the underwriting process and secure the coverage you need.

Financial factors and their role

Your financial situation plays a significant role in how insurance companies assess your life insurance application. Insurers look at factors such as your income, outstanding debts, and credit history to determine your ability to make premium payments and maintain your policy over time. If you have a high debt-to-income ratio or a history of missed payments, you may be seen as a higher risk, which can result in higher premiums or even a denial of coverage.

On the other hand, a stable income and a strong credit history can help you qualify for more affordable coverage and better policy terms. It’s important to provide accurate financial information when applying for life insurance, as discrepancies can delay the underwriting process or lead to denied coverage.

Insurance advisors are valuable resources when it comes to understanding how your finances impact your life insurance options. They can help you find insurance companies that offer affordable coverage based on your unique financial profile and guide you through the application process to improve your chances of approval.

Criminal record considerations

Having a criminal record can affect your eligibility for life insurance and the premiums you’ll pay. Insurance companies view applicants with a criminal record as higher risk, which can lead to higher premiums or denied coverage, depending on the nature and severity of the offense. For example, a recent felony conviction may result in a denial, while a minor misdemeanor from many years ago may have less impact on your application.

It’s crucial to be honest about your criminal record when applying for life insurance. Failing to disclose this information can result in denied coverage or a rejected claim in the future. The underwriting process will take into account the type of offense, how long ago it occurred, and whether there has been a pattern of criminal activity.

Working with an insurance advisor can make a significant difference if you have a criminal record. They can help you find insurance companies that are more understanding of your situation and guide you through the underwriting process to improve your chances of securing life insurance coverage.

Consequences of false information

Providing false information on your life insurance application can have serious consequences. Insurance companies rely on the accuracy of the details you provide to assess your risk and determine your eligibility for coverage. If an insurance company discovers that you have misrepresented your health, lifestyle, financial situation, or any other key information during the underwriting process, your application may be denied, or your policy could be cancelled.

Even after your policy is issued, if false information comes to light, the insurance company may deny a life insurance claim or void your coverage entirely. In some cases, providing false information can also result in legal action. That’s why it’s crucial to be completely honest and transparent when completing your life insurance application.

Insurance advisors can help you understand the importance of full disclosure and guide you through the application process to ensure that all information is accurate. This not only protects your eligibility for life insurance but also ensures that your loved ones will receive the death benefit when they need it most.

Group life insurance alternatives

If you’ve been denied traditional life insurance coverage, group life insurance may be a valuable alternative to consider. Group life insurance policies are typically offered through employers or associations and often have less strict underwriting requirements than individual traditional life insurance coverage. This means that even if you have health issues or other risk factors, you may still be able to obtain life insurance coverage through a group plan.

While group life insurance policies can provide essential protection, they may come with certain limitations, such as lower coverage amounts or lack of portability if you leave your job or organization. It’s important to review the terms and conditions of any group life insurance policy to ensure it meets your needs.

An insurance advisor can help you explore group life insurance options and compare them to other available life insurance policies. They can also help you understand how group coverage fits into your overall financial plan and whether you should supplement it with additional individual coverage for more comprehensive protection.

Can I change any information if my life insurance application is declined?

In limited cases, you can change the information you submitted on your insurance application. Life insurance contracts rely on an element of trust. The last thing you want to do is commit fraud by attempting to change a legitimate condition that caused you to be denied.

You may be able to amend your application for various reasons. Your life insurance advisor can help you determine what can be amended.

Errors in answering health questions are typical items that can be amended. Some questions may be hard to understand, and you may have erroneously provided information that needs to be more factual.

Other items that may be amended are your credit report and driving record. If your finances were poor at the time of application and things have changed, you can amend that information. Your driving record may have improved, which is also possible to update.

Making these necessary corrections and updates can increase the likelihood of having your life insurance application approved if you reapply.

How is my medical information used (PIPEDA consent/MIB)?

In Canada, insurers must obtain meaningful consent to collect, use, and disclose your personal health information; for sensitive health data, that consent is typically express.

Consent forms explain what will be shared with service providers and industry databases. Many Canadian applications also include consent to query or report to MIB (Medical Information Bureau), a shared database used by insurers, including Canada Life, to verify applicant information and prevent fraud. You may request your MIB consumer file to check accuracy.

Which tests affect underwriting (A1C, cholesterol, kidney markers)?

Commonly evaluated markers include fasting glucose and/or HbA1c (diabetes control), lipid panel (total/HDL/LDL cholesterol and triglycerides), liver enzymes (ALT/AST), kidney function (creatinine, BUN), and nicotine (cotinine). Abnormal results can lead to ratings, postponements, or declines depending on severity and history.

How much life insurance coverage do I need?

There are some standard rule-of-thumb formulas to estimate a baseline amount for insurance.

The first rule commonly used is the “rule of 10.” Multiply your annual income by 10, which is a reasonable death benefit to look after your family if you should die.

However, the DIME formula is a comprehensive way to determine how much life insurance you need. Using this method, you evaluate:

• Debts
• Income (use the annual amount and multiply by the number of years your dependents need to live off your income)
• Mortgage
• Estimated cost of education for your children.

Add all the above together, and you have baseline insurance coverage to care for your family. Keep in mind that different insurance plans offer varying coverage limits, features, and eligibility requirements. Most life insurance policies also include specific exclusions and conditions that may affect claim payouts, so it’s important to review these details when choosing your coverage.

Why is working with a licensed life insurance agent the smart choice if your life insurance application is denied?

Having your life insurance application denied can be incredibly frustrating. The average person needs to be sufficiently informed about life insurance to know what to do when that happens. Insurance agents deal with every imaginable scenario in the marketplace; they can be invaluable sources of guidance and information. Insurance advisors are knowledgeable about industry underwriting rules, which can help applicants navigate the complexities of the process.

Life insurance application denied Canada – Conclusion

If you’re declined, start by asking the insurer or your advisor which factor triggered it, then tighten up the next application: gather records, prepare for the paramedical (the insurer covers the cost), and correct any inaccuracies. Reviewing the denial letter for errors or misunderstandings is important in preparing for an appeal.

Consider switching carriers or products, including simplified-issue or guaranteed-issue if timing or health is the constraint. Keep in mind that eligibility for coverage may depend on the age limit for the insured person, and age limits can vary by insurer. For transparency, request your MIB consumer file and remember your data rights and consent obligations under PIPEDA. With a clear plan, most Canadians can still secure suitable coverage on a second pass.

When reapplying or seeking alternative coverage, consider both life and health insurance options to improve your chances of approval and find the best fit for your needs.

Frequently asked questions about what do I do if my life insurance application is declined

Sources:

1. CLHIA, “A Guide to Life Insurance”