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You want to ensure that your family will be taken care of after your death, but your application for life insurance has been rejected.
Thankfully, you don’t have to give up protecting your loved ones. Keep reading to find out what steps to take next.
Know why you were rejected
“The first thing you need to do is get the exact details as to why you were denied. Was it due to a known condition, unexpected lab results, or information from your medical records? Insurance companies must provide the details,” said Michael Horble, founder of risk quoterA life insurance brokerage that specializes in high risk underwriting.
To see exactly what data insurance companies use to decide on an application, “You can (also) make your request Medical Information Bureau And Milliman IntelliScript Files directly from those data bureaus. If you’re being declined because of incorrect information, you can make it right with those organizations (like fixing a problem with your credit report),” explains Matthew Gratt, founder of CoverSavvy Agency.
Fix the problem (if possible)
Rejection of an application does not constitute a permanent denial of coverage. For example, if you were rejected because of your build, you may qualify after losing some weight.
Some issues resolve on their own with time. For example, many insurance companies will not issue you a policy if you have had major surgery or a medical diagnosis within a specific time frame. Once that period is over, you may be able to get coverage.
Find a Life Insurance Broker – and Reapply
A life insurance broker has deep expertise in the industry and partners with multiple insurance carriers. They can advise you on what type of coverage to apply for and with which insurance company, based on your likelihood of approval and budget.
“In many cases, people are denied life insurance because they applied to the wrong company,” Horble said. “Some companies are better than others for conditions like cancer history, heart disease, HIV, diabetes, etc.”
Being declined for coverage can be a red flag to other insurers (especially if it happens multiple times). You should apply for a policy only when you or your broker are absolutely sure that you will be approved.
Explore other options
If you are truly ineligible for a traditional life insurance policy, consider these options:
- Workplace Policy: Coverage through your employer typically won’t cover you if you leave your job, and it typically only pays one to two times your salary. However, you will not be required to undergo a medical examination, and the company may pay the premium.
- Guarantee-Issue Final Expense Policy: Coverage through a guaranteed-issue final expense policy is typically limited to $25,000 and can be expensive depending on your age. If you die within two years of the policy being issued, your beneficiary can receive only the premium you paid. However, your application will be approved regardless of your medical condition.
- Accidental Death Policy: Coverage is usually limited to $500,000, and the policy typically pays out only if you die in an accident or are disfigured in certain ways as a result of an accident. However, as long as you are within the insurer’s age limits, you may qualify for coverage even if you have a serious medical condition.
You can also self-insure by accumulating enough cash and assets to support your family, so you don’t need an insurance policy. You can also pre-pay for your funeral.
“You can save your money in a safe instrument like a (certificate of deposit) or a bond index. Make sure the beneficiary designation on the account matches the way you set up your life insurance beneficiaries, so the account will pass to your heirs when you die,” Gratt said.
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