A modified offer happens when an insurance company makes an offer for life insurance coverage, but the cost for the policy is different from your initial quotes at the time of your application.
Also called “approved other than applied,” modified offers are usually the result of new information the insurer uncovers during its review of your records or medical exam results.
It’s typically best practice to accept your offer — or an offer for reduced coverage — so that your family is covered while you shop around for a cheaper policy or try to improve your circumstances to apply for lower rates.
What to do if you get a modified life insurance offer
If your life insurance application is approved other than applied after you go through underwriting — the process where the insurer reviews your application to determine how much you’ll pay for coverage — you have a few options.
Working with an agent or broker, you can:
Accept the modified offer.
Decline the modified offer.
Adjust your coverage amount or term length to lower the premiums, and then accept that offer.
Apply for a lower rate with a different insurer.
Each life insurance company views every health condition a little differently. Insurers will also have different guidelines around other circumstances that can raise your prices, such as bankruptcies, high-risk occupations, or criminal records.
If you receive a modified offer and want to apply to another insurer, a policycentral agent can use the information you already provided to compare guidelines from multiple insurance companies. They may be able to recommend a company that’s more likely to offer you a lower premium.
Should you accept a modified life insurance offer?
While you wait to see if you can get approved for a more affordable policy, you should still accept your current offer and continue to pay your premiums. This way, you won’t have any gaps in coverage.
If you’re approved for a cheaper policy and sign your new paperwork, you can cancel the more expensive policy.
→ Learn more about life insurance underwriting
What is life insurance reconsideration?
Reconsideration is when a life insurance company reviews your updated profile and active policy to determine if it can lower your premiums.
If your premiums are higher than you anticipated when you first activate your coverage, you may benefit from accepting the current offer while making some lifestyle changes, like quitting smoking or giving up a risky hobby.
If you sustain the changes for 12 months or longer, you can then ask your current provider for a rate reconsideration, which could result in lower premiums.
Your insurer or the agent you’re working with can tell you when you’ll be eligible for reconsideration, and what you’d need to do to lower your premiums.
Why it makes sense to accept a modified offer
If you can’t find a cheaper life insurance offer, it’s best to accept the offer as is, or adjust the term or coverage amount on your policy to get it to a lower premium.
Even if you’re planning to reapply for a different policy immediately, there are a few reasons why it’s better to accept the offer you have while exploring your other options.
1. You won’t risk going without protection
When you accept an insurance offer, you’re covered once you submit your signature and premium payment. Once your policy is active, your beneficiaries will receive the policy’s death benefit if you die.
2. You lock in the first insurer’s premiums
Accepting the offer will lock in the premiums offered to you.
If you decline the offer or leave it hanging while you apply to other companies, there’s a risk that the modified offer could increase, based on additional information uploaded to your Medical Information Bureau (MIB) record.
Life insurance companies upload your application materials and the results from your medical exam to the MIB, a reporting database used by all insurers.
If you decline an offer from one company and apply to another one — immediately or in the future — the second insurer can access your records in the MIB, but it may also do its own research.
For example, if Insurer A only looked at five years of medical records, Insurer B might decide to look back 10 years. These additional records could reveal health information that would increase your premiums.
And because this information is also added to your MIB record, Insurer A now has access to it as well, meaning they might increase their initial offer to you based on the new information.
3. There’s no penalty for canceling a term life insurance policy
If you do find a cheaper policy, whether now or in the future, you won’t face a cancellation fee when you cancel your current term life policy.
(Note that if you have whole life insurance, canceling your policy may come with surrender fees, so it’s best to speak to a licensed agent before canceling.)
→ Learn more about how to cancel a life insurance policy
What are the reasons for a modified life insurance offer?
Your life insurance quotes are based on the personal and medical information you share when you apply. Your final premiums are based on your medical records, the results of your medical exam, and other details like your driving record — the insurer will verify the information on your application to protect itself against fraud
It’s not unusual for some small discrepancies to appear between your life insurance application and the medical exam. People can sometimes forget to name prescriptions or misstate their weight by accident. Everyone’s medical history is different and nuanced — so it’s normal for the insurance company to uncover more detailed information in your records.
For example, if your medical exam reveals that you have high cholesterol and you were unaware when you applied, your final premiums could come back higher than the initial quote you received.
If you forgot to mention a traffic violation on your driving record, you’d also see your premiums increase.
You also may get a modified offer if the life insurer can’t find financial justification for the coverage amount for which you originally applied. In this case, it could offer you a lower coverage amount, and your premiums would likely be lower as well.
The bottom line
Be as honest and thorough as possible regarding your medical and financial information when you apply for a policy, and your premiums will be less likely to change dramatically throughout the process.
If your application is approved other than applied, it’s better to accept the policy you’re offered in the interim to ensure that your loved ones are financially protected when you pass away.
At Policygenius, our experts are licensed in 50 states and can walk you through the process, even if you need to modify your coverage or shop around with a different company.
