Why Was My Application for Life Insurance Rejected?

Thousands of People are Denied the Ability to Purchase Life Insurance Annually

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(Note - this article previously referred to health insurance rejections which were based on pre-existing conditions. This is no longer valid since, with implementation of the Affordable Care Act in 2014, insurers can no longer deny insurance to citizens with pre-existing conditions.)

This article has been updated to refer to Life Insurance instead, for which these problems still hold true.

Each year, hundreds of thousands of people are denied the ability to purchase life insurance.

They apply for that insurance, are willing to pay for it, but find their applications rejected. Why do they get turned down, and what can they do about it?

Why Was My Application Turned Down?

Like so many answers to insurance questions, the heart of the answer is, "follow the money."

Life insurance companies are businesses. Their goal, of course, is to make money, no matter whether they are considered to be a profit, or a non-profit organization. If you are likely to die within the timeframe you want to purchase insurance for, they will most likely turn you down. Their goal is to keep their money, not pay it to your heirs.

Insurance is a risk business. When you purchase insurance, you are choosing to pay money up front to help your family in the case of your death. In the insurer-insured relationship, one of you will always lose. Life insurance companies take great pains to be sure YOU are the one who loses.

If you want to purchase life insurance, and made an application to acquire that insurance, and you were turned down, you will have been turned down because the insurer thinks you are too big a gamble. They think they will have to pay out on your behalf.

How Did They Decide You Were Too Big a Gamble?

To begin the process, you were asked to fill out an application.

In the application, you had to specify certain aspects of your lifestyle that were clues. For example, if you stated you are a smoker, you may have been turned down because the insurer decided that at your age, as a smoker, there was a good chance you would die and they would have to pay.

You also had to disclose any medical conditions. Perhaps you take a statin drug (indicating a problem with cholesterol levels) or high blood pressure medicine (indicating potential heart attack or stroke problems.) 

It's also possible they think you lied on your application. If they asked you about drugs you take or your weight or smoking, and you make statements that are not true, then they may reject your application.

How did they know you weren't truthful? Insurers belong to the Medical Information Bureau. Similar to the credit bureaus, the Medical Information Bureau keeps tabs on anyone who has ever had health-related insurance, including any diagnoses they have had. When you applied for health insurance, the insurer checked in with the MIB to see what it could learn about your health.

If you withheld information from your application, it probably turned up with the MIB report anyway. You were turned down based on that information, even if your application did not disclose problems.

If you feel that you have been turned down for insurance because an error was made about your health or your family's health, then go back to the company and show them evidence of how they are wrong. While you are doing that, make sure to correct your MIB records as well.

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