Investopedia defines an uninsurable risk as ‘a hazard or condition that either has either a high likelihood of loss, or in which the insurance would be considered against the law.’ Many individuals applying for life insurance have been deemed uninsurable and had their application for cover declined. This article will take a closer look at some of the reasons why a life insurance company would deny an application for life cover.
While it is important to remember that each and every company has different underwriting policies, here are some of the more common reasons for denying an individual life insurance:
Pre-existing medical conditions, for example heart disease, cancer or HIV/AIDS. Note that in some cases insurers might not decline cover but might load premiums or limit cover to accidental death only, or apply a waiting period to the condition.
Age: life cover will not be granted to those under 18 or generally over 65 years of age
An insurer may not insure you if they feel you are over insured (i.e. you already have sufficient cover from other providers) or if they feel you would not be able to afford the premiums
Individuals who earn their money illegally are not considered insurable
Individuals with no so-called ‘contractual capacity’ due to mental illness, i.e. individuals who are legally not allowed to enter into a contract
Lifestyle: an insurer may deny your application for cover if you take part in dangerous sports like base jumping, sky-diving etc
Some insurers wont insure those with hazardous vocations for example policemen or paramedics
Here are a few guidelines if your cover is declined:
Speak to the life insurance company and find out why the cover was declined. Perhaps there is a solution or compromise that you can come to with the life insurance company.
Don’t give up if you are denied cover by one life insurance company. As different companies have different underwriting policies, you might be turned down by one company but granted cover by another.
Remember that certain life insurance companies may insure individuals with serious medical conditions, for example HIV positive individuals or those with Type 1 or Type 2 Diabetes.
Lastly, remember that withholding information from a life insurance company when you apply for life cover is not only illegal but it might mean that any claims your family make one day are rejected or reduced. Do not risk a reduced or rejected claim and waste years of premium payments!