Declined for life insurance? What to do next

A decline means one insurer decided your risk was outside what it will cover at any price on that policy. It is not a verdict from the whole industry. Ask the insurer for its reasons, check your MIB file for errors, and then look at other routes: a different insurer, a rated offer, simplified or guaranteed-issue coverage, or group coverage through work.

Why applications get declined

Insurers decline when underwriting finds a risk it cannot price, or when the answers do not add up. Common reasons:

• A serious or unstable health condition, such as advanced heart disease, recent cancer treatment, severe kidney or liver disease, or a condition under active workup.
• Test or exam results (blood pressure, blood sugar, liver values, a positive drug screen) outside the insurer's limits.
• A recent event, such as a heart attack, stroke, surgery or hospital stay. These more often cause a postponement than a decline; see postponed application: why insurers make you wait.
• Substance misuse, a recent DUI, or a record that suggests ongoing risk.
• Hazardous activities or occupation that the insurer will not cover.
• Financial justification: coverage far above what your income or circumstances support, or a missing insurable interest.
• Inconsistencies: records that contradict the application, which can look like misrepresentation (see what happens if you lie on a life insurance application).
• Residency, immigration or travel issues that the insurer's rules exclude.

Insurers differ in appetite. A condition that one carrier declines may be rated or approved by another, since each has its own underwriting guidelines and reinsurance arrangements.

Steps to take now

1. Read the notice and ask for the reasons. Many states have laws based on the NAIC's Insurance Information and Privacy Protection Model Act, which lets an applicant request the specific reasons for an adverse underwriting decision and the sources of information behind it. Put the request in writing to the insurer. Rules vary by state, so check with your state insurance department if the insurer is unresponsive.
2. Request your MIB file. According to MIB, you can obtain a free copy of your consumer file once a year, and an additional free copy if an insurer tells you an MIB record influenced a rating or decline. You will only have a file if you applied for individually underwritten life or health coverage in the last seven years. See The MIB report: what insurers know about your history.
3. Check your prescription and medical records for errors. A wrong diagnosis code or a medication that was prescribed for something other than the condition it implies can trigger a decline. You can dispute inaccurate MIB entries through MIB's process, and ask your doctor to correct medical records.
4. Do not stop at one insurer, and do not lie. Applying elsewhere is normal. The application will ask whether you were ever declined; answer yes. Insurers can see prior applications through MIB, and a false "no" creates a bigger problem than the decline.
5. Talk to an independent agent or broker who can place the case with insurers that fit your profile. Describe your health honestly and ask for an informal inquiry before a full application, so that you avoid piling up declines on your record.
6. Fix what can be fixed. If the cause is temporary, such as a new medication being stabilized, a recent test needing follow-up or a short-term issue, wait and reapply once your doctor can document improvement. See asking for a better rate class later.

Options after a decline

The right route depends on why you were declined and how much coverage you need. A small amount of guaranteed-issue coverage can pay funeral costs, but it will not replace an income. If you need larger coverage, work with an independent agent and consider waiting for a documented health improvement.

A worked example

This is hypothetical. Say a 55-year-old applies for $500,000 of term coverage the month after an emergency room visit for chest pain. Testing found no heart disease, but the insurer sees the claim record and a pending cardiology referral and declines. The applicant requests the reasons, learns the cause was "incomplete evaluation," completes the cardiology visit, collects the results, and asks an independent agent to approach other carriers with the full records. One insurer offers the coverage at a rated price. The applicant also keeps the $25,000 guaranteed-issue policy he bought in the meantime as a stopgap, accepting its limits.

What not to do

• Do not hide the decline on later applications.
• Do not apply to many insurers at once without guidance. It is better to learn each insurer's rules first.
• Do not cancel existing coverage until you hold a new policy.
• Do not buy from unsolicited offers promising approval for anyone; check that the product is guaranteed issue and read the benefit schedule. See Life insurance ads on TV: what "$9.95 a month" buys.

Key takeaways

• A decline reflects one insurer's judgment, and other carriers may approve, rate or price the same risk differently.
• Ask the insurer in writing for its reasons, and request your MIB file; MIB gives one free copy a year and an extra copy after an adverse decision based on its record.
• Always disclose a prior decline on later applications.
• Guaranteed-issue, simplified-issue and group coverage are fallbacks, with lower limits and higher prices.
• If the cause is temporary, document the improvement and reapply later.