Buying a term life insurance policy is one of the best ways to secure your family’s financial future. If something happens to you during the policy period, then the insurance company will pay them the sum assured, which they can use to take care of their everyday expenses. While the importance of term insurance cannot be asserted enough, there are several factors because of which the insurer can deny offering you coverage.
Here are the most common reasons the insurer may turn your term insurance application down.
Pre-existing illness or specific health condition
Many insurance experts recommend buying term insurance at a young age, as you can get coverage at an affordable premium. This is because when you are young, you tend to be healthy, and the chances of developing health complications are low.
But as you grow older, the chances of developing ailments increase. If you have any pre-existing health condition or are diagnosed with any critical ailments like cancer, then the insurer may either turn your term insurance application down or provide the coverage at a higher premium.
Some professions or jobs carry a higher degree of risk than others. Life insurance companies are usually cautious about offering insurance cover to individuals who are involved in such high-risk jobs.
For example, if you work in a chemical company, firecracker factory, mines, or as a seafarer, truck driver, flight engineer, etc., then the insurer will identify you as a high-risk customer as the probability of your demise at work is higher.
If you are involved in such a profession, then the insurer may reject your term insurance application.
Providing false or incomplete information
The most common reason why insurance companies reject term insurance applications is that people provide incorrect or incomplete information in their application. Many people deliberately hide details of their health condition, profession, and age or provide incomplete addresses.
Remember, the insurer verifies each and every piece of information you provide in the application form. If they have a reason to believe that you are lying, then they will not offer you insurance cover.
When you apply for term insurance or any other form of life insurance policy, the insurers underwrite the policy based on your income. Also, the insurers determine the amount of sum assured basis the multiple of annual income. The minimum income required may vary from one insurer to another, and it may be different for self-employed and salaried individuals.
So, if your annual income is below the insurer’s minimum income criteria, then they will decline your policy request.
Previous rejection of your insurance application
The insurance business is all about covering risks. When you buy any form of life insurance, the insurer takes a huge risk. Remember, like other businesses, insurance companies are also profit-making organisations, and they try to reduce the risk to the lowest level.
So, if your insurance application is declined earlier by another insurer, from an insurance company’s perspective, then the overall risk of offering you the insurance cover is higher. However, the reason for the rejection of your application earlier would play a critical role in the new insurer’s final decision.
Involvement in dangerous activities
Like certain hazardous professions, insurance companies consider certain activities as high-risk as they can have fatal consequences. So, if you participate in dangerous activities like rock climbing, mountaineering, or any other adventure sports, then it may be difficult for you to get term insurance cover.
Remember, the reasons mentioned above for insurance application rejection are a general compilation and not limited to a specific insurance company. Each insurer may have their own underwriting rules, and the final decision on whether to cover your life or not will depend on their assessment of your risk profile.