While auto insurers look at your driving record, life insurance underwriters look for factors that suggest a potential policyholder has a high mortality risk. Underwriting, the process of evaluating an insurance application, uses strict, objective standards for approving or denying an application. So if a risk factor shows up while your application is in the underwriting process, such as an odd liver reading on a blood test that might suggest you have hepatitis, you could be denied coverage.
What's Considered Risky?
Here are several reasons some applicants are turned down for term life insurance:
- Diagnoses of an incurable disease, such as cancer
- A family history of a medical condition, such as Huntington's disease
- Dangerous occupation
- Frequent travel to dangerous destinations
- Dangerous hobbies, such as hang gliding
- A history of drug use or drunk driving
What to Do When You Are Denied
If you're turned down for term life insurance, ask the insurer why. It's possible there was a mistake made during your medical examination. Many insurance companies collect health information from the Medical Information Bureau, which maintains a database on 16 million US and Canadian insurance customers. If the bureau has made a mistake, you can demand that it be corrected.
It's also possible that your doctor can explain the abnormality to reassure the insurance company and convince them that you're healthier than they thought.
You can also try another insurance company--obtaining competing life insurance quotes from qualified agents can be simple. Some insurers are more willing to accommodate certain medical conditions than others. You can also consult an independent insurance agent who works with many different insurers, rather than an agent that works with just one company.
You can also seek help from an "impaired risk specialist," an agent who specializes in finding insurance for applicants with uncommon medical conditions.
Applying the Second Time Around
It's important not to hide the fact that you were turned down by another insurance company. That kind of misrepresentation could get your policy rescinded in the future.
You can also wait and apply for coverage again at a later date. If the medical condition improves and tests reveal that you are healthier, the underwriter may give you the green light.
If you do try again, make sure you're adequately prepared for the medical examination. Go in well hydrated and rested, and skip the coffee and alcohol in the days leading up to the exam. Some medications--such as aspirin or ibuprofen--can also affect the results, so avoid them before your exam.
What Other Options Do I Have?
Many large employers provide life insurance for their employees, often with the option to increase coverage at an additional cost. Because the risk is spread out over many employees, these policies usually don't require a medical examination.
Another option is guaranteed issue life insurance, which requires no medical exam. Most people within a certain age range can get this type of policy--provided your answers to questions about height, weight, smoking, and other basic health questions don't raise any red flags.
However, premiums for guaranteed issue policies are higher and the face amounts tend to be lower. Additionally, this type of policy may not pay out the full benefit right away. For instance, should a policyholder pass away within the first year of coverage, the beneficiaries may only receive what was paid in premiums.
Keep in mind that it is illegal to refuse to sell insurance to anyone due to their race, color, sex, religion, national origin, or ancestry. Many states have added to this list by saying marital status, age, occupation, language, sexual orientation, physical or mental impairment, or the geographic location can't be used to deny coverage.