Much as we hate hearing “no,” it is sometimes inevitable. Whether it is a job, mortgage, or credit card application, you can get rejected for any. This includes life insurance also even if you apply via an insurance broker/agent.
Declined life insurance applications can be frustrating and worrying as you feel like you have made a lot of effort to go through the process, but your family will not even get the protection they need. Our team has found some reasons explaining the result of your application. You do have control over what impacts some of them also. These will all be discussed in further detail in our FAQ session.
The most important thing to do in this situation is not to panic; think of this as a redirection rather than a rejection. There are different options for those whose life insurance applications have been declined. Read on to find out what to do next if you, unfortunately, get denied.
What are your options if this aggravating circumstance happens?
While many Canadians get quick approval for Life Insurance in Canada, you are not alone should you receive a denial letter. Each insurance company has its own underwriting process and assesses risks differently.
Gather all the information you can to find out why the application got declined:
Reach out to the insurance provider to ask for information about why you were rejected. This is not one of the topics which you want to be in the dark about. The insurer will be willing to disclose upon your request whether the reason was because of medical history, exam results, driving record, etc. Knowing the explanation will provide you with clear insights and guidance for future applications.
For instance, if it was for a health reason, the result can indicate some severe conditions that you might be unaware of. Check with your physician to confirm the diagnosis.
Consult a professional insurance advisor:
Insurance advisors are experts in the field, and they are knowledgeable about different products and providers. They can help you compare quotes and consult you whether to reach out to another insurance company with a different underwriting guideline or wait before reapplying. In the meantime, you can improve some adverse medical conditions or daily habits by stopping smoking, taking medications/ supplements, starting healthy diets, and exercising.
Besides, they can even offer you options other than the one you recently got rejected as they understand the features and benefits of each insurance plan more than non-specialists. This way, you can choose other coverage amounts, term durations, or even alternative insurance products.
Ask for a re-evaluation:
Mistakes can happen, so at this stage, you need to double-check all information you have provided is honest and up to date. Should you find an error in the application, request the insurance provider to reassess the application with the new and correct medical details.
Ask for exclusions:
In some rare situations, if you agree to some exclusions based on the medical exams, the insurance company might still consider a denied application.
For example, your application is declined because of heart disease. If you feel comfortable precluding payouts for any heart-related complications after your death, you will still be granted coverage.
Some insurers might still rethink it if they see your risks reduced. There’s no harm in asking about exclusions.
Try another provider:
Each insurance company in Canada has its own underwriting process. Hence, it is highly likely that you will not get rejected for all of them. Look for another provider on the market, check out their Life Insurance quotes online, and read about their policy to see if you will be eligible. Eventually, you’ll get there!
Apply for No Medical Life Insurance:
If you got turned down because of your medical results/ records, you could still resort to No Medical Life/ Simplified Issue/ Guaranteed Issue Life Insurance. All you need to do when applying is filling in a health questionnaire honestly. The application process is rapid and straightforward, especially if you fear medical exams, blood, or needles, etc. It’s hassle-free, but of course, the premiums will be more expensive than traditional policies.
The application rejection can stay on your record for up to 7 years, unfortunately. Insurance companies in Canada share limited information about an applicant’s insurability via a regulated body known as Medical Information Bureau or MIB. This non-profit corporation operates in both the US and Canada to ensure consistency and transparency among insurance providers.
To illustrate, companies will be aware of applicants who hold too many policies simultaneously or provide falsified details to get accepted by one provider after being denied by another.
Other than that, MIB is also designed to protect applicants and policyholders from misrepresentations or omissions on their insurance applications for life, health, critical illness, disability, and long-term care insurance plans.
Their role is to make sure all insurers and insurance seekers get fair treatments during the entire process.
Finding a suitable Life Insurance policy is already a daunting experience, as most of us know. Even if your application got rejected, it is undoubtedly not the end of the world.
Knowing your policy and the common reasons why applications get rejected can help you prevent this outcome from happening altogether. You need to follow some rules to make sure your family is protected in the future in the FAQ.
Consider other viable options instead of traditional life insurance, take the necessary steps to mitigate the negative aspects of your previous application, and increase your chance of obtaining coverage in the next one.
Reasons why an application/a claim gets denied
This section excludes any medical conditions as this is contingent on different policies, and they should have all been considered when you shop around for insurance coverage.
1. Lying on your application:
Everyone has something to hide, or they just do not want insurance companies/ strangers to know details about their private life. Leaving out specific details or fudging them can sound harmless, but it is never recommended that insurance applicants lie to the insurer.
Companies are taking a significant risk to ensure you, and they have to make cash payouts to their beneficiaries after your passing. Hence, they need as much information as possible about your medical history and habits to determine your eligibility and suitable policy.
Solution: Always be upfront and transparent about your situation (e.g., depression, critical illness, driving history, smoking, drug use, dangerous travel/ occupation) as insurance providers can uncover any secrets you wish to hide.
2. Unintentionally forgetting details:
What if you cannot remember the truth or a routine check-up went past your mind? That is understandable. After all, we are all humans. However, in this case, even if the check-up came out clean, the insurer might be wondering why you did not disclose it adequately. They would automatically assume you have something to hide. This can be a real life-changer.
Solution: Take the time to finish your application diligently. Ensure nothing is left out by taking the necessary steps to find the correct answers to all questions. By guessing, you are potentially nullifying your application.
3. Under-qualified agents:
An unqualified or inexperienced insurance broker can mess up your once or twice in a lifetime application as there can be unpredictable circumstances. Having an expert in the industry guiding you is especially crucial in fulfilling your claims.
Solution: You should look for experienced agents from a reliable company with references and proven track records.
4. Mortgage payments missed:
In the case that your mortgage payment is tied with your insurance policy, if you default a mortgage payment, you are missing a premiums payment as well. Lapsing can undoubtedly be a reason for cancellation, and this can leave you and your beneficiaries unprotected.
Solution: Remember to purchase personal life insurance, which is not connected to your mortgage.
5. Expired policies:
It is pretty easy to forget the exact date our policy expires. Also, if you are not using standing orders or automatic bank payments, you are even at more risk of forgetting your premiums.
Solution: Pay close attention to the notices from your insurance provider as they will be sure to warn you near the expiry date. You should always enter a policy you know you can keep up with the premiums and make a conscious decision to check every month if you have paid the insurer.
6. Insufficient documents:
To process a claim, insurance providers need both the claim form and the official death certificate. And we don’t just mean the one from the funeral home.
Solution: Although it is hard to sort out documentation after the death of a loved one, make sure to stay collected and keep all official documents in a neat organization to fulfill all claims.
If the insurance company finds out you have a tendency of intentional self-destruction, your application is likely to get declined. And same with the claim, cash payouts are usually denied when it comes to suicide.
Solution: Be mindful of different policies and companies’ underwriting to protect your beneficiaries.