Why was I turned down for life insurance?

Get clued up on how insurers view risk and 3 key tips to boost your chances of a successful application.

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Rejection can be hard to take and that's certainly true if you've been turned down for life insurance. While it's easy to get disheartened, there are steps you can take to give you confidence for your next application.

First step: Understand how underwriting works

Before you can get insurance, you'll need to go through a process called underwriting. Underwriting is how risk is set for an applicant. It leads to a decision on whether an underwriter will offer you life insurance, and the price you need to pay for it.

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Your age, job, health and family medical history are all key factors weighed up by an insurer during underwriting.
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There are also lifestyle factors, such as whether you smoke or if you take part in high-risk hobbies such as sky diving or racing. All of this, and more, is weighed up by an underwriter that is calculating how likely it is you'll make a claim on your insurance.

An insurance provider – the brand you get your policy documents from, and the one you pay a premium to – works on behalf of its underwriter. It is the underwriter that issues the policy and takes on the risk of you making a claim.

If you feel confused about how underwriting works with life insurance, you're not alone. Insurers have different terms and processes to get your head around.

Direct life insurance and underwriting explained

With direct life insurance, most providers ask you to go through underwriting at the point of application. This will mean the policy is fully underwritten as an assessment has been made upfront, before the quote. On the other hand, a policy that isn't fully underwritten is assessed at the time of a claim.

How long does underwriting take? Underwriting and policy approval can be completed within an hour. However, it can take weeks or even months if more information is required.
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Good to know: In some cases, you'll receive a follow up phone call from an underwriter. It may ask you to complete a further questionnaire. You may need to provide medical documents and undergo a medical examination.

At the time of writing, 9 of the 15 life insurance providers compared on Finder offer fully underwritten life insurance cover. These are: AAMI, ahm, Australian Seniors, Bendigo, Insuranceline, NobleOak, RAC, Suncorp and Woolworths.

For these 9 direct policies, the underwriting process won't be the same for each. For example:

NobleOak Life Insurance

NobleOak told Finder it sets a pre-screening where you'll answer 4 basic questions on cancer, heart conditions, diabetes and mental health. Based on your responses, you may need to take a further pre-assessment. This can include speaking with an underwriter in more detail about your health, job, lifestyle and medical records. You may also need to undergo a medical exam, and NobleOak will usually cover any associated costs.
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Insuranceline Life Cover

Insuranceline also provides fully-underwritten insurance (via TAL). However, it said it didn't directly arrange medicals. We tried its online application and it is straightforward: You answer a short series of questions, including whether or not you've smoked in the past 12 months; your income; and how much cover you're looking for. You then leave your details and you'll be contacted about your application.
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ahm Life Insurance

ahm is another company that offers fully underwritten cover (via Swiss Re). It asks a longer upfront series of more than 20 questions, before it makes a decision on whether or not to offer cover to a new customer. ahm won't ask you to go through a medical examination during this assessment.
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Second step: Know your options

Phil Thompson is director of Skye Wealth, a financial advice company that offers insurance-only advice.

"Insurers are taking a 30-year bet on you"

"Once an insurer has accepted a policy, they've accepted it for good. That's why they'll commonly decline an application or put an exclusion on a policy," explained Thompson.

"The way an insurer looks at the world is very different from how a doctor does. If you've got a medical event that gets worse, you can always go back to the doctor and they can assess your health again.

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Did you know?
Applying for a policy with a Body Mass Index (BMI) of 34 or above will often incur a premium loading.

"[The insurance process] might not make sense to the rest of the world, but an insurer only gets 1 chance to look at your health – today. They have to make a 10-, 20- or 30-year bet on you."

Thompson added: "There are no anti-discrimination laws for insurance companies. That's what insurance is all about: pricing based on risk. It's a discrimination."

3 tips from expert Phil Thompson on how to boost your chance of being approved

Phil Thompson headshot

Number 1
Always tell the truth. Even if you think something isn't a concern, or your doctor doesn't – still disclose it. The insurer is either going to find out when you apply, or when you try and claim. This can leave you with a policy that's void and essentially worthless.
Number 2
Find a financial adviser who can do the initial health assessment. They can tailor the application to the insurer that's going to give you the best terms. They'll ask heaps of medical questions upfront before advising a client on which insurer to go with.
Number 3

If you keep being declined, there are super funds that will offer auto-acceptance policies. Some of the contracts won't pay out on a pre-existing medical condition within the first 2–3 or 5 years. After that, they will pay if you haven't claimed during the waiting period.

Be aware: Super funds could change these rules; and consider how your insurance is impacted if you switch funds.

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Did you know?
Claims for mental health account for around 20% of all life insurance claims for retail policies. "Retail" means policies that are bought with the help of an adviser.
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Did you know?
Insurers differ in how they approach underwriting. That's why it's important to compare a range of options and shop around until you find an insurer that meets your needs.

3 reasons why life insurance claims get turned down

According to Moneysmart, the main reasons your life insurance claim could be refused are:

  1. You have a pre-existing condition that's excluded from the policy.
  2. You fail to tell the insurer any relevant information when signing up to the policy.
  3. Your claim doesn't meet the requirements of a definition for a claimable policy benefit, such as a heart attack.

Figures from APRA, the financial regulator, suggest the industry average for life insurance claims being accepted for death cover is 91.5%. This means nearly 1 in 10 have their claims for life insurance turned down.

How to avoid this: It's important to be as informed as possible before lodging the initial application. Ultimately, you'll want cover that is specific to your needs. We outline some of the different ways to get to this point below.

"My application took over a year… in the end, I just gave up"

Kelly Vieira headshot
Before buying her first home 3 years ago, Kelly Vieira wanted to make sure her life insurance would cover half her mortgage, for financial protection in case of the worst happening to her or her partner.

"Back in 2010, I'd had a successful brain and spine surgery to correct a birth defect," explained Vieira. Happily, the procedure was fully effective. It was only when she tried to increase her insurance that problems began.

"I wanted to increase the default life insurance I had in my super fund," said Vieira. "My insurer mentioned that I'd visited my neurologist in the past 10 years. This was true; I had some follow-up scans.

"I had to forward the insurer correspondence from my neurologist to prove everything was going okay."

But Vieira was asked to share further information on every medical visit she'd had since.

"This included one visit to a GP where I had an inflamed nerve in my ankle and couldn't walk," she said.

"It was inflamed because I had a cold. I get this every so often if my immune system is compromised, but it isn't related to my surgery.

"They also brought up that I'd seen a nutritionist to find out if I was intolerant to anything.

"I am lactose intolerant; this isn't something I'd ever tried to hide. In fact, I put it in my application.

The 31-year-old added: "But they just saw 'nutritionist visit' on my history and wrongly assumed it was for Irritable Bowel Syndrome (IBS).

"They also said I'd insufficiently explained the minor nerve issues in my feet. Neither of which are true.

"It took months of back and forth emails and calls to get anywhere. I lodged an appeal, turning my application from 9 months to past a year. My request was denied.

"In the end, I gave up. I kept my current level of cover and just ended up getting a joint account with my partner instead."

Third step: What to do when you're ready to lodge your next life insurance application

Get more information

Find out any information you can from the insurer that turned you down in the past. You could visit your GP for a second opinion based on any medical records used.

Your GP could also help you with a plan to make your condition more manageable.

Review your insurances

Then review any life insurance you already have within your super fund. Cover is easier to secure with your superannuation as it's offered on "group" terms that apply to everyone on the policy.

Your premium payments can be cheaper and easier to manage – they come straight out of your super. But policy benefits aren't as generous, meaning you could be underinsured.

Seek help

A financial adviser or a broker can help with more tailored cover. Those with complicated medical histories can benefit from this more personalised approach. An adviser can put you in a strong position before your application is sent. You can enquire with a broker below.

Keep in mind: They'll charge a fee for their services. Some use advisers or brokers to help them with a range of financial decisions to get more value out of the service, but you'll want to be aware of all their fees and commission from the get-go.

Shop directly

Another option you have is to go directly to an insurer for your cover.

A fully underwritten policy can offer you a decent middle ground between a weaker policy held in your super and one you've sought help with from an adviser.

Compare policies easily with our comparison tool below.

Compare direct life insurance from leading brands in Australia
1 - 7 of 16
Name Product Maximum Cover Maximum Entry Age Terminal Illness Benefit Average Claims Acceptance Rate Average Claim Time Sum Insured
NobleOak Life Insurance
Data not available
Data not available
$20,230 million
Get 2 months free when you apply for one or more life insurance types with NobleOak's Premium Life Direct policy before 30 June 2022. T&Cs apply
TAL Life Insurance
3 months
$36,630 million
Comprehensive cover from one of Australia’s leading insurers. Get up to 15% off with TAL’s Health Sense program, plus counselling and financial planning benefits.
Real Family Life Cover
2.1 months
$53,462 million
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
Medibank Life Insurance
4.2 months
$31,745 million
Get $100 cashback when you purchase Medibank Life Insurance by 18 May 2022 and hold cover for 6 months. T&Cs apply.
Zurich Ezicover Life Insurance
Data not available
Data not available
$12,444 million
Get your first month free and a 10% discount by taking out a second life insurance policy (discount applies to the second policy). T&C’s apply.
ahm Life Insurance
4.2 months
$31,745 million
Get ahm life insurance by 30 June and keep your cover for 6 months to receive $100 cashback. T&Cs apply^.
RAC Life Insurance (Only available in Western Australia)
Data not available
Data not available
$20,230 million
When you purchase RAC Life Insurance, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at rac.com.au.

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