Does no always have to mean no?

Ever get a performance review that you didn’t agree with? Or wish you could foresee it coming and correct something beforehand? Sometimes when people apply for life, disability, critical illness or long-term care insurance they are declined coverage. Why? It could be as simple as not selecting the right company to apply to in the first place.

Each company operates its own businesses and has underwriters who evaluate the risk to the company of taking on clients. Some companies are narrow in their acceptance criteria, while others have more capacity. They also tend to have different sweet spots where they like to compete for market share. With the same case one company may decline a case while another companymay offer coverage but in a modified way. The industry jargon for this is called a “rating.” A company may choose to increase the premium in a variety of ways. It could be for the duration of the agreement or for a period of time, i.e. perhaps the first five years and then drop the extra charges. Rather than adding a flat dollar charge to the policy, some companies will increase the age of applicants to cover off their increased risk. For example, a 30-year-old with health concerns, they may add an additional five years to their age making them 35 years old when it comes to pricing. However, at this young age it may only marginally effective pricing. Some companies may also indicate that they will reassess the decision after a certain amount of time.

Think back to your insurance policy — was there ever mention of a rating? If so, have you reviewed it? Smoking and a heavier build are common factors in rated policies. If you are thinking of applying for insurance coverage but have concerns with your medical history, you can have your adviser obtain some preliminary opinions. There are a couple of methods to do this depending on the nature and complexity. The insurance broker can collect the relevant information and forward it anonymously to companies.

This preliminary underwriting can save a lot of time and avoid a lot of frustration. The next step or an alternative step would be to do a “trial application.” This is close to a regular application since all information is collected from the client and medical records or ordered from the doctor. However, no medical samples are collected at this point. The nice thing with both of these options is that it gives better focus to the application and may avoid a decline or even rating before it is too late.

If a rating is placed by the insurer, there may still be some wiggle room with the decision. I just completed a case where we challenged and negotiated some of the parameters for the review and ultimately have the opportunity to drop the rating in the future. It was concerning high blood pressure but other things could be refined to the benefit of a client. If a more holistic approach is taken, coverage may be put in place where it otherwise may not have been. The value of an insurance broker is not solely based on the best premium. If you are concerned about a rating, please consult an insurance broker to ensure you are given the best chance of obtaining the most suitable coverage.