Life insurance companies are businesses. They aren’t required to offer you protection. They will decline your application if you fail their criteria for qualification. Once you’re declined, you’ll have difficulty getting insurance — life, disability, critical illness, long term care, travel, health — in the future.
Some conditions make you ineligible for life insurance. The list changes but includes serious cancers and heart issues. Combinations cause trouble too. If you weigh more than what’s normal for your height, you may have other health issues. Rather than charging you extra, the insurance company may decline you instead. Tip: take care of your health!
You can’t get more coverage than your life is worth. Otherwise you’re worth more dead than alive. That’s risky for you and the insurance company. If the insurance company thinks you’ll have difficulty paying your premiums, you’re not attractive either.
You may be involved in activities that increase your risk of dying. Driving while intoxicated, for instance.
If you’re a scuba diver, you could face extra premiums or an exclusion for scuba-related deaths instead of a decline. If you have a dangerous job, you risk higher premiums or a decline.
Life insurance is based on trust. Suppose there’s a decline due to a stroke. The person could apply to another insurance company and not mention the stroke. This lie will likely get caught because there’s a shared database called the Medical Information Bureau (MIB).
If fraud is detected after you buy, your insurance gets cancelled and there’s no refund. This is worse than a decline because your beneficiaries thought they were protected.
Your advisor snitches
When you apply for life insurance, your advisor is an agent for the insurance company. Your advisor must disclose information about you in a confidential report or covering letter you never see. For example, your application may say you don’t race or plan to race cars but if the advisor knows or suspects otherwise, the insurance company will know too.
Your advisor messes up
You can’t be declined if you don’t apply. There’s no point applying if you could be declined.
Before you apply, a good insurance advisor will spot reasons you could have trouble getting approved. Your advisor will then ask selected insurance companies for their tentative underwriting decisions without identifying you. If a decline looks likely, you don’t apply. That prevents you from having a red flag in the MIB.
Insurance companies assess risks differently. The standards change (e.g., more leniency for marijuana use and AIDS/HIV). A decline today could be an approval later.
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