A banker and a politician walk into a bar…and everyone else walks out. Boom, boom!
We all make the jokes, and since the tracker mortgage disaster and the collapse of the Boom, it’s easy to think that bankers are evil villains, sat in a lair somewhere, petting their fluffy white cats and counting their cash.
But banks are a necessary evil in your day-to-day life – so a lot of people fall into the trap of thinking that they are the best – or indeed, only – option for insurance.
They go to their bank and submit their application form and any documents, and they wait…
…Only for a letter of decline to arrive telling them that their insurance policy request was rejected.
It’s a kick in the teeth – especially if you’ve recently been diagnosed with a chronic illness. What are you supposed to do to protect your family?
As it so happens, there are options – and none of them involve banks.
Let’s break it down:
Okay, so while you might think bankers are the bad guys, they don’t reject Life Insurance applications all that often. In fact, it’s fairly uncommon.
Usually, people are declined because they have a serious pre-existing condition (or chronic illness), a bunch of less severe conditions, or because they have a condition that isn’t under control.
The bank will turn you down if they think you’re too high of a risk for them. Sometimes, instead of being shot down, your request will be postponed instead.
The reasons aren’t wildly different as to why banks reject your application outright. It all comes down to risk. Your application might be postponed if you’re recovering from an illness or were recently diagnosed – in which case, the underwriting team might still need some time to consider; for example, to see how you will respond to treatment.
You might be postponed if you require tests or scans. Let’s say you have a chronic illness that requires surgery. While there’s every chance you’ll have no problems in the procedure, your risk goes up in the eyes of the bank.
You could also be turned down if you have a condition that’s not yet under control – so the underwriting team might wait to see how you respond.
Lastly, your Body Mass Index (BMI) might be a reason why your cover is postponed. If your BMI is over 30, you’ll have to do a mini screening with a nurse from the insurer to confirm your weight and height.
I’ve mentioned underwriting a couple of times in the last few paragraphs and sure, it sounds like a load of jargon-y mumbo-jumbo – but it’s important.
Underwriting is where the insurer works out the possibility of you claiming on your policy –are you likely to make a claim they’ll have to fork out for? People with higher risk (like smokers, for example) will have to pay a higher premium for that very reason.
However, not all conditions will incur an increase. A mild condition won’t mean an increase but a severe illness will – as it all comes back to risk.
The underwriting process goes like this:
You’ll either get a quote (at the standard rate or with a loading/increase), a decline, or possibly a postponement. Now, one bank turning you down doesn’t mean they all will.
Six insurers offer Life Insurance (it’s the usual suspects: Aviva, Friends First, Irish Life, New Ireland, Royal London, and Zurich Life). Bank of Ireland will sell you a New Ireland policy, while all of the other banks are tied to Irish Life so can only offer its products.
Meat Loaf may have warbled that, “two out of three ain’t bad” – but two out of six isn’t great odds for nabbing a good deal on your Life Insurance.
Plus, each of the six insurers takes a different view of health issues. The bank may be less sympathetic than the other insurers about your condition, reducing your chances of getting cover at the best price…or at all.
If you are turned down by a specific bank, you can try again with one of the others. You’ll just have to resubmit your application and go through the underwriting process with a different bank – and hope for the best.
However, if you’re not so into ‘hoping for the best’ when it comes to your Life Insurance, there is another option.
With the banks, your choices are limited – which is grand if you’re in tip-top shape, but for people with chronic illnesses, a financial broker can give you real choice, a full market comparison, and expert advice.
Looking at a table of logos for insurers is confusing and trying to figure out what your policy would actually cover is a head-melt, so having an independent broker who understands your situation and the products on offer can really help.
Basically, if bankers are the villains then brokers are the heroes.
I’ll get my cape…
Are you looking for Life Insurance but have been turned down by your bank? You’ve come to the right place.
If you’d like to know more about your options, you can:
Still on the fence? Why not check out our free Guide to Life Insurance cover in the meantime.
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