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Three Common Reasons For A Term Life Insurance Rejection

2010-10-05

Life insurance is meant to cover substantial debts that exist upon the death of the insured. Such expenses may include a mortgage, car loan, or college or university tuition. If the primary bread-winner dies, then these costs will be nearly impossible to pay off. An insurance policy can also be used to provide income for a surviving spouse and children. When a person obtains term life insurance quotes, a medical examination is usually required which is used to determine the premiums paid throughout the life of the policy, which may be anywhere from 10, 15, 20, or 25 years. In some cases, the applicants may experience an application rejection. This can happen for several reasons.

Because all insurance policies are based on the amount of risk a person poses to the insurance company, the medical questionnaire is one of the leading determining factors for the premium charged. It also helps determine a policy application rejection or approval. Family history as well as current health status is all reviewed. If a person has cancer, diabetes, heart disease, or another chronic illness, this can lead to an application rejection.

The occupation held by the applicant as well as their lifestyle also plays a part in determining if a life insurance application is accepted or rejected. For example, if a person is in a dangerous job that has a high risk of serious injury or death, such as logging or farming, this could cause an insurance underwriter to decline the application. As well, if a person actively participates in dangerous activities, such as rock climbing or bungee jumping, the same can occur. There is a much higher chance of a insurance claim being filed in these cases.

Another reason that a term life insurance application can be rejected is if the applicant lies on the application. This is considered to be misrepresentation as well as fraud. A person may hide the fact that they are a heavy smoker or drinker or may not reveal certain elements of their lifestyle. If the insurance company did know of these facts ahead of time, they may have offered a different premium. Again, they fully research all information and if they find out that the applicant has lied, they can reject the application.

When shopping around for term life insurance quotes, it is important to understand how premiums are determined. If, for one of the above reasons, the application is rejected, then there are steps a person can take before re-applying that can increase the chances of being accepted. By changing one's lifestyle, such as stopping smoking or drinking or changing occupations, these risk factors will be eliminated.

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