What Should I Do If I Have Problems In Getting Coverage?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Life insurance companies do not issue life insurance to all people who want it, in any amount they want to buy. If they did, people who are very sick — and thus have a very short life expectancy — would buy lots as they’d only pay premiums for a very short time, then die, and their beneficiaries would collect the face amount.

Life insurance companies generally “underwrite” individual applicants for life insurance policies. The underwriting process can be very simple — it sometimes consists of just a few questions about gender, age, weight, smoking history, and health history (such as “Have you been diagnosed with or treated for any of the following conditions……”) and if the answer is “no”, the policy is issued. (If the answer is “yes”, then additional underwriting is necessary.) However, as the amount of insurance a person is buying increases, and as his or her age increases, the amount of information the company asks for, and the extent of underwriting the companies must undertake to profitably write business increases. For example, a 25 year old may be able to get $100,000 of life coverage with just a few questions, but a 75 year old might have to have a physical exam by a doctor or para-medical, and give more information, including all . At $1 million it is likely everyone would be required to undergo at least an examination.

The underwriting process is designed to screen out people who are wholly “uninsurable” (such as someone in the intensive care ward after a heart attack, or in a hospice dying of ALS or cancer) and classify the remaining risks so the company can charge the right price for all persons who are insurable. For example, a healthy 35 year old who weighs 150 pounds can expect to pay significantly less than a 35 year old who has diabetes and weighs 300 pounds.

Some companies only write the healthiest risks, and do so at preferred rates. Other companies are comfortable taking in people who are less than perfectly healthy, and take in a range of risks, charging the very healthy less than the health impaired. Also, some companies evaluate risks differently and different companies may view the very same person differently. For example a person with diabetes that is under control may be accepted at a slight increase in premium by company A and rejected at any price by company B. At the same time, his twin, with a mild heart condition, may be offered coverage from company be and rejected by company A.

If you have any health impairments, before you apply for any insurance, be cautious. Just applying to a company that claims to have the lowest price is usually NOT the answer. If that company does not accept you or “rates” your policy as “non-standard” it may harm you when you apply to another company. (Most companies ask if you have ever been denied or rated, and a false statement makes any policy that is issued contestable for at least 2 years; also a company typically files a report with the Medical Information Bureau and that rating or rejection may come back to haunt you.) Speak with a good insurance agent or broker that specializes in dealing with people who have health impairments as he or she should be able to recommend a company that has a favorable view of people with your health condition.

If you can’t get individual insurance, consider these approaches:
(1) See if you are automatically eligible for group life coverage, through your employer or any organization you belong to. This type of coverage is sometimes issued without any individual underwriting; the insurance company relies on the general experience of the whole group. Very often, group plans permit people to buy up to a fixed amount, without any evidence of insurability. If so, buy as much as you need but still can afford.
(2) Consider “cash value life insurance, ” such as Whole Life or Universal Life. Life companies often are more liberal in terms of underwriting on cash value life insurance than on pure term life insurance.
(3) See if you are eligible for any other form of life insurance that does not require underwriting. Such policies generally are awful, the amounts available are usually small, the premiums usually are very high, but as there may be a 2 year waiting period before your beneficiaries would be able to collect anything more than the premium you paid in, it may make sense for those who can’t get anything else.
(4) Consider buying Accidental Death and Dismemberment Insurance (AD&D). AD&D covers only deaths that result from accidents, but that may be better than nothing.
(5) Consider certain types of credit card insurance — the cost is normally outrageously high, but it may be the only alternative.
(6) Consider going without life insurance. Save the money you would have paid as premium, and build a nest egg for your survivors.
(7) Do whatever you possibly can do to address the health concerns that caused you not to be able to get insurance. That may involve weight loss, exercise, diet, smoking cessation, etc.
(8) Consider reapplying after you have addressed the health concerns or time has passed. Someone who may not have been insurable at age 40, perhaps because of a recent cancer diagnosis, may become insurable at 45 if there is no recurrence.

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