What Will Disqualify You From Getting Life Insurance?

Several factors can lead an insurer to decline an application or offer coverage at a higher premium. The main ones are health history, tobacco use, risky hobbies or work, driving record and whether the application is complete and accurate. The answer to “What will disqualify you from getting life insurance?” depends on the facts of your situation and the type of policy you want.

NR CPAs & Business Advisors is a Miami CPA firm. We help families, professionals and business owners across the United States, including Indian-American households and business owners, look at life insurance with a CPA’s view of tax and cash flow. This guide explains what insurers review, so you know what to expect.

What Insurers Review When You Apply for Life Insurance

Underwriting is the insurer’s review of your application, medical history and other information. It decides whether to issue a policy and on what terms.

Insurers usually look at your age, height and weight, medical history, prescription medications, tobacco use, driving record, occupation and hobbies. They also look at the amount of coverage you request.

Each insurer sets its own underwriting guidelines. So the same applicant can get different results from different insurers. That is simply how underwriting works. Your answers are the starting point, so keep them complete and accurate.

Knowing what will disqualify you from getting life insurance starts with knowing what insurers review. Each factor is one piece of the file, and none decides the result on its own.

Health Conditions That Can Lead to a Decline or Higher Rating

A health condition can lead to a decline, a higher premium or a policy with different terms. Insurers ask about these conditions directly.

A pre-existing condition is a health problem you were diagnosed with or treated for before you apply. Underwriters look at the type of condition, when it started, the treatment you received and whether it is under control.

They often review heart, cancer, diabetes, kidney, liver, mental health and breathing history. Two people with the same diagnosis can get different results, because the details matter.

Table rating is one common outcome. Instead of declining you, the insurer may approve the policy at a higher premium or with a different structure.

Fully underwritten policies include health questions. Your answers are required, and issue may depend on insurability. Give complete answers, even when a condition seems minor.

Lifestyle, Occupation and Driving Factors

Tobacco use, risky hobbies or work and a poor driving record can affect both approval and price.

Insurers ask about tobacco and nicotine use, including recent use. Answer for the period the application asks about, and don’t guess.

Some jobs and activities carry more risk to an insurer. Examples include flying aircraft, certain racing and deep-sea diving. List them, because underwriters ask about these directly.

Driving history matters too. A license suspension, a DUI or DWI conviction or a serious at-fault accident can affect eligibility or rating. Older events can still matter, so review your records before you answer.

Height and weight are compared with insurer charts. They are one input, combined with medical history and other facts in your file.

Application Accuracy, Exclusions and Claim-Limiting Terms

A policy can limit a payout through its contestability period, its exclusions and a lapse for missed premiums.

Under Florida law, a life policy becomes incontestable after it has been in force for 2 years from its issue date, during the lifetime of the insured. § 627.455 The statute lists a few exceptions, including nonpayment of premiums. A wrong answer on the application is the kind of issue an insurer may raise during that window.

Incontestability has limits. § 627.463 says an incontestability clause in a life insurance policy bars only a challenge to the policy’s validity; an insurer can still rely, at any time, on policy provisions that exclude or restrict coverage, whether or not the clause makes an exception for them.

Exclusions are written into the policy. One common example is a suicide exclusion during the early years of coverage. Read every exclusion in full.

Missed premiums matter too. Fla. Stat. § 627.453 states that every insurance contract shall provide that the insured is entitled to a grace period of not less than 30 days within which payment of any premium after the first may be made, during which period of grace the policy shall continue in force; at the option of the insurer, the payment may be subject to an interest charge not in excess of 8 percent per year for the number of days of grace elapsing before the premium is paid, and if the policy becomes a claim during the grace period before the overdue premium is paid, that premium with interest not in excess of 8 percent per year may be deducted in any settlement under the policy.

Options If You Are Declined or Rated Higher

A decline or higher rating is not always the final answer. Several options may fit your facts.

Guaranteed issue life insurance is issued without medical underwriting. It usually has a graded or limited death benefit during an initial period. Review those limits closely, because they differ from a fully underwritten policy.

Other changes may help. A different policy type, a smaller coverage amount or an insurer with different guidelines may change the result. Term life insurance covers a limited period. Whole life insurance is designed to cover the insured for life and may include a cash-value feature.

You can ask the insurer for the specific reason for a decline or rating, in writing. That reason shapes your next step.

No option guarantees coverage. Read the terms of any policy in full before you decide.

Key-Person and Business-Owned Coverage Underwriting

Key-person and buy-sell policies are usually owned by the business or another owner. The insurer reviews the health of the owner or employee who is insured.

Florida law lets a business insure an owner, officer, partner, manager or key person. The business must have an insurable interest, and it needs written consent from that person before buying the policy. § 627.404 The business may not retaliate against a key person who refuses consent.

Business coverage can also turn on the company’s finances and on how much coverage fits its value.

Tax rules affect the numbers too. Fla. Stat. § 627.404 governs insurable interest in another person’s life; it does not address whether a business beneficiary can deduct premiums. 26 U.S.C. § 101 provides that, under the general rule, gross income does not include amounts received, whether in a single sum or otherwise, under a life insurance contract if such amounts are paid by reason of the death of the insured, except as otherwise provided in paragraphs (2) and (3), subsection (d), subsection (f), and subsection (j). 26 U.S.C. § 101 Under IRS guidance, interest on proceeds left with the insurer is taxed.

Premiums and proceeds can affect the books and the tax return, so review them with the policy terms. Insurance is offered by a licensed insurance agent, separately from the firm’s accounting practice.

Talk With a Licensed Agent About Your Situation

A coverage review is our first meeting, where we go over your facts. It can help you understand a decline, a rating or the limits of a policy.

Maybe a rating notice arrived with a higher premium than you expected.

Nischay Rawal, a licensed insurance agent, can review the reason for a decline or rating, the policy types that may fit, and how coverage fits household or business cash flow. We can’t promise any particular result.

Insurance is offered by Nischay Rawal as a licensed insurance agent, separately from the firm’s accounting practice. Florida law bars anyone from acting as an insurance agent unless licensed and appointed. § 626.112 provides that no person may act as, or hold himself or herself out as, an insurance agent unless currently licensed and appointed. If the firm or its licensed agent accepts a commission on a policy, § 473.3205 calls for the firm to tell the client of that fact in writing, in accordance with rules adopted by the Florida Board of Accountancy. § 473.3205

For more on business coverage, read our key-person insurance guide. For the basics of buying a policy, see how to buy life insurance.

If a new diagnosis, a declined application or a higher rating is on your mind, contact NR CPAs & Business Advisors to set up a coverage review.