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Life Insurance Rejections Aren’t the End of the Line

April 1, 2015
Insurance, Life Insurance
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TV commercials for certain life insurance policies promise that you “can’t be turned down for any reason.”

But they aren’t telling you the whole story. Companies that won’t turn you down generally charge much more when you’re buying life insurance. Other life insurance companies make coverage decisions based on the likelihood that they can profit on your premiums and, sometimes, your situation doesn’t look profitable.

Several factors could land your application in the “rejected” pile.

Your health

Life insurance exists to protect your loved ones against the risk you might die, and companies make money because, well, most of the time you don’t die during the duration of a term life insurance policy. Or, if you have permanent life insurance, the insurer has calculated that it has enough time to make investment returns on your premiums. If you have a serious health condition, the math changes dramatically.

“For example, someone who has cancer or has had a heart attack recently might get declined for a traditional life insurance policy,” the industry nonprofit Life Happens notes.

If you’ve ever applied for life insurance, you know that companies ask about obesity, kidney disease, heart disease, sleep apnea, diabetes, depression and many more conditions. These all factor into your life expectancy and therefore affect whether a company will offer you coverage and, if so, at what price.

Of course, failing health or a grim diagnosis may make you realize you need to get serious about life insurance, Life Happens adds. “Most consumers with health issues admit that getting life insurance while they were young and healthy was always a thought, but nothing ever pushed them to pursue it until now.”

Your lifestyle

Even if you’re in perfect health, certain lifestyle choices have a big impact on life insurance. Smokers, for instance, will always pay more. Some other activities could even get you turned down.

This can include activities with health implications, such as drug use and drinking, or ones with high potential for fatal accidents, such as mountain climbing, flying ultralight aircraft, hang gliding, cave diving, international travel to certain dangerous places and military deployment, according to the National Association of Insurance Commissioners and Life Happens.

Your age

No matter how healthy you are now, you’re going to die at some point. And the older you get, the higher the probability that your time will come soon. After a certain age you might not be able to buy life insurance.

State Farm Life, for instance, stops issuing 30-year term life insurance policies at age 45, 20-year policies at 65 and 10-year policies at 75. New York Life stops issuing 20-year term policies at age 60 and five-year policies at age 75.

Your finances

There’s a good chance you won’t be able to get a life insurance policy while going through bankruptcy, according to Life Happens.

Also, while most of us are worried about having enough life insurance, there is such a thing as too much. Insurance companies typically won’t sell you policies covering more than 30 times your annual income, Life Happens advises.

Illegal activity

Life insurers also may decline to cover you because of DUIs and other criminal convictions, according to Life Happens.

What can you do?

The first thing to keep in mind is that not every company has the same rules. So, if one insurer turns you down, try another. An independent insurance agent can get you multiple quotes. Some agents specialize in high-risk policies.

Prudential’s website, for example, notes: “While it may surprise some people, many insurance companies will provide life insurance to people who suffer from hypertension, Alzheimer’s, and even cancer. Naturally, coverage will cost more than it would for a person without such conditions.”

If you can show that your chronic medical condition is under control, that should help you get insurance, according to Life Happens.

For more severe conditions like Alzheimer’s, however, you’ll likely need to find an agent who works with an impaired-risk specialist. These agents know which companies are most likely to accept you.

Finally, a note about those companies that promise not to turn you down for any reason: They’re selling “guaranteed issue” life insurance policies that cost significantly more than policies that take health and other factors into account. The National Association of Insurance Commissioners warns that the premiums you pay into these policies could end up being more than the death benefit.

So it’s best to try the conventional path first.

Aubrey Cohen is a staff writer covering insurance for NerdWallet. Follow him on Twitter @aubreycohen and on Google+.

Image via iStock.