Life insurance is an essential financial safety net that offers financial security to your loved ones in case of your untimely demise. But if you apply for life insurance policies, your application may get rejected, leaving you disheartened and confused, and there is a reason behind it.
This article will discuss the top five reasons why your life insurance application may face rejection, and these rejections can impact your financial future. Once you know these reasons, you can take the necessary steps to avoid them and secure life insurance coverage for you and your loved ones.
Here are some of the top reasons why life insurance applications get rejected.
Reason 1: Due to A Specific Medical Condition or Incomplete Information
A life insurance company can deny your application for life insurance for having specific medical conditions or furnishing incomplete information provided in the application. Here is an example.
If you have a medical condition that is considered risky, such as a history of heart disease or cancer, the insurance company may deny coverage. The insurer may offer the insurance but at a higher premium.
Furnishing incomplete information on the application, such as a failure to disclose a pre-existing condition, can also result in denial of coverage. Be honest and thorough when filling out a life insurance application to avoid any issues with denial of coverage.
Reason 2: Working in Risky Professions
Life insurance companies often hesitate to approve policies for individuals working in particularly risky occupations. This is because some professions, such as airline pilots, flight engineers, loggers, fishermen, construction labourers, electrical power-line installers and repairers, drivers/sales workers, truck drivers, farmers, ranchers, and agricultural managers, have a higher degree of danger associated with them.
Reason 3: For Someone Having Severe Mental Health Conditions
Insurance companies can reject applications in case there is a history of severe mental health conditions, such as schizophrenia, or conditions that cause a gradual decline in cognitive abilities, such as Alzheimer’s Disease. However, if it can be demonstrated that the condition is controllable with systematic treatment, then the application may be approved.
Reason 4: If There is Any Previous Denials History
The foundation of the insurance industry lies in the underwriting of risk. Simply put, the premium an individual pays for an insurance policy is determined primarily by the likelihood of future claims assessed by the insurance company. Therefore, if an individual has a record of denied insurance applications, their enrollment with a new insurer would raise the overall level of risk. Also, it is essential to note that the new insurer would consider the specific circumstances and reasons for prior application rejections before making a final decision.
Reason 5: Income Capacity
Before issuing a policy, the insurance company typically requires proof of income to verify the policyholder’s capacity to afford the insurance coverage. For example, if a policyholder requests coverage of ₹5 crores but has no assets or verifiable income to support it, the insurance company may reject their claim.
Being aware of the reasons that can lead to the rejection of your life insurance application is crucial to secure the coverage you need. Some of these reasons include having a specific medical condition, working in a risky profession, participating in dangerous extracurricular activities, having previous application denials, and not having sufficient income to sustain insurance coverage.
By understanding these factors and taking the necessary precautions, such as having multiple policies or a contingency plan, you can ensure that your family is protected financially in the event of your untimely demise. Another important aspect is to choose a good health insurance provider or policy like Tata AIA life insurance so that your family can claim the benefits without any hassle.