By Sheryl Smolkin

If you are turned down for life insurance by one company, the odds of another carrier agreeing to cover you are slim. So it’s important to understand when life insurance coverage may be denied and what options are available if that happens.

When your application reveals you have or had a serious or life-threatening illness such as diabetes, HIV/AIDS, cancer, heart disease or Lou Gehrig’s disease (ALS), the insurer may charge you higher premiums or postpone coverage for specific conditions until you can show the condition has stabilized. Or, the insurer may refuse to cover you.

Insurance broker Chantal Marr of LSM Insurance* says when she thinks one of these circumstances may apply to a client, she first submits a preliminary inquiry on a no-name basis. Based on the insurance company’s response, she may recommend the client apply for a more expensive “simplified issue policy” that may have a less rigorous screening process.

There are other reasons why a life insurer may red-flag your file when you fill out a preliminary questionnaire. Here are some of them:

1. Obesity: For example, life insurance for a six-foot-tall man weighing 320 pounds will probably be declined, particularly if he has other underlying conditions such as high blood pressure or diabetes.
2. Uncontrolled blood pressure: Erratic blood pressure will typically trigger refusal of your application. If your blood pressure is high, but controlled by medication, most insurance companies will underwrite you.
3. Travel: An insurer can decline your application if you plan to travel to a region it views as dangerous or unstable. Your option is to exclude your trip from the policy or start your policy once you are back.
4. Alcohol use: Three or four beers a day will probably bump up your premiums. More than that and coverage will likely be refused, depending on the carrier.
5. Drug use: Use of illegal drugs such as cocaine, crack or heroin is a no-go. Marijuana users will be treated as smokers and pay twice the premiums of non-smoking applicants.
6. Dangerous recreational activities: Are you a rock climber or skydiver? Some providers offer a high-risk insurance policy that includes such activities.
7. Dangerous occupation: People with dangerous jobs such as miners, pilots and members of police bomb squad teams may need to seek coverage from specialized carriers or available workplace group coverage.
8. Careless driving or DUI: Careless driving or driving while impaired by alcohol or drugs can pose a life-threatening situation. Therefore, some insurers will either deny a life insurance application or cancel an existing policy if you have a record of such behaviour.

In some cases, lifestyle changes will improve your insurability. You can get into better physical shape and stop smoking, drinking or taking drugs.

But if your application is likely to be declined for other health-related reasons, you may improve the odds by applying for a simplified issue policy based on a less complex questionnaire and no medical examination.

“Simplified issue insurance is more expensive and has lower maximums,” Marr says. “So if you need $500,000 in life insurance, we may have to cobble together coverage from a number of carriers,”

Guaranteed policies (often referred to as funeral policies) may also be a partial solution. They require no health information whatsoever but coverage is typically limited to small amounts up to $25,000. There may also be a waiting period (usually two years), so if you die within that period, your beneficiaries will only receive a return of premiums.

Application acceptance outcomes for all types of policies can vary across numerous life insurers. As a result, it can help to work with an experienced insurance broker who regularly deals with many life insurance companies and understands their policies and practices.

Also, where you are eligible for group life insurance at work, make sure to apply for the non-evidence maximum benefit available to you, regardless of your health.

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*LSM Insurance Brokers is located in Markham, Ontario. They have a working relationship with Delorie Jacobs and Gord Martens affiliates with the Sentinel Financial Group headquartered in Saskatoon.