What is a Counter Offer in Term Life Insurance?

When applying for term life insurance, you may receive a counter offer from the insurance company instead of the initial quote you were expecting. A counter offer adjusts the terms, conditions, or price of the policy from the original quote.

Understanding what a counter offer is and how to respond can help you make sure you get adequate life insurance coverage at a fair cost.

What is a Counter Offer on a Term Life Policy?

A counter offer occurs when the life insurance company replies to your application with an offer that is different from the initial quote. This is common when applying for term life insurance.

There are three main ways a term life counter offer may alter the original quote:

  • Higher Premium – The insurer offers the coverage but requires a higher monthly or annual premium.

  • Lower Coverage – The insurer reduces the death benefit amount but keeps the original premium.

  • Modified Terms – The insurer changes other terms like the length of the policy period.

A counter offer essentially rejects the original quoted premium and coverage parameters but makes a new offer instead of an outright denial.

Why Insurers Make Counter Offers

Life insurance companies use counter offers rather than rejecting applicants for a few key reasons:

  • To offset higher perceived risks
  • To align premiums with actuarial risk models
  • As an alternative to denial for borderline applicants

An applicant may be seen as higher risk due to health conditions, family history, dangerous hobbies, or other factors. The insurer makes a counter offer to balance the extra risk with higher premiums or lower coverage.

Counter offers bring proposed premiums in line with the insurer’s proprietary actuarial models. They allow tweaking quotes when the initial assessment does not match modeled projections.

For applicants who may be on the borderline of approval, a counter offer allows the insurer to provide coverage rather than declining the application.

Common Reasons for Term Life Counter Offers

There are certain scenarios that tend to trigger a counter offer instead of standard approval during the term life underwriting process:

  • Age or health – Older applicants or those with minor health issues often get higher premium counter offers to account for extra mortality risk.

  • High coverage amount – Insurers may lower the death benefit amount if you applied for unusually high coverage.

  • Hazardous hobbies – Dangerous lifestyle activities like skydiving may lead to modified terms or higher premiums.

  • Family medical history – A counter offer may be made if you have close relatives who passed away young or had major illnesses.

  • Driving record – Recent speeding tickets, at-fault accidents, or DUIs often prompt counter offers from insurers.

  • Foreign travel – Frequent trips to higher risk countries could result in changes to your policy terms or pricing.

  • Finances – Low income relative to the coverage amount or a poor credit score may trigger an adjusted counter offer.

Responding to a Term Life Counter Offer

If you receive a counter offer, you have a few options on how to respond:

  • Accept the counter offer – If you are satisfied with the adjusted premium, coverage amount, or terms, you can consent to the new insurer proposal.

  • Reject the counter offer – You can turn down the counter offer if you do not want a policy under the revised conditions.

  • Negotiate the counter offer – It may be possible to negotiate more favorable terms, for example a lower premium increase.

  • Request additional detail – Asking for more specifics on what prompted the change allows you to better evaluate if the counter offer is reasonable.

  • Submit updated underwriting data – Providing new medical exams, financial information, or other data may help improve the counter offer.

  • Apply to another insurer – Rejecting the counter offer means you can shop quotes from other insurance carriers instead.

Don’t feel pressured to immediately accept or reject a counter offer. Take some time to review the details and consider your options before responding.

Example of a Term Life Counter Offer Scenario

Here is an example of how a counter offer might work when applying for term life insurance:

  • Initial quote – 30-year old applicant with excellent health gets $500,000 of coverage quoted at $35/month.

  • Application submitted – Applicant completes application disclosing normal exam and medical history results.

  • Insurer review – During underwriting, a mild case of childhood asthma is noted from old medical records.

  • Counter offer – Due to the asthma history, the insurer counters the original quote with a premium of $45/month instead of $35 for the $500,000 death benefit.

  • Response – The applicant accepts the moderately higher $45 monthly premium to lock in the desired coverage amount.

Here the childhood asthma led to a risk adjustment during underwriting. The counter offer allowed the applicant to get the full coverage amount at a slightly higher but still reasonable premium.

Can You Negotiate a Term Life Counter Offer?

In some cases, you may be able to negotiate more favorable terms on a term life counter offer, such as:

  • A lower premium increase if the proposed hike seems excessive
  • Removal of modified exclusions or limitations unrelated to your risks
  • Increasing coverage back towards the original proposed amount

Steps to potentially negotiate a counter offer:

  • Ask the underwriter to explain the rationale for the proposed changes
  • Present any new medical or financial data that reflects lower risks
  • Politely request consideration of more favorable alternatives
  • Be willing to compromise if certain modified terms are non-negotiable

While insurers rarely reverse counter offers completely, a little negotiation may achieve some improved conditions. Having an experienced life insurance agent as an advocate can also help negotiate counter offers.

Can You Get Declined After a Counter Offer?

In most cases, the insurance company will work with you on a counter offer rather than declining your application outright if you originally qualified for consideration.

However, there are a few scenarios where a counter offer could potentially lead to a denial down the road:

  • You reject multiple successive counter offers the insurer makes
  • You refuse to provide additional underwriting evidence requested
  • New information emerges raising substantial new risks

The goal of making a counter offer is to find terms to approve rather than deny coverage in borderline cases. But ultimately if too much risk emerges or agreement cannot be reached, a denial may still occur in rare cases following a counter.

The Bottom Line

A counter offer from a life insurer allows them to modify the terms, conditions, or pricing of a term life policy from the original quote provided. Counter offers are meant to find a middle ground to approve applicants who present some additional risks. While you can accept, reject, or try to negotiate a counter offer, they are generally preferable to a declination allowing you to get coverage. Working with an experienced agent and being cooperative with the insurer’s underwriting process can help secure approval with a reasonable counter offer.

Common Questions about Term Life Counter Offers

What is the worst they can do if I reject a counter offer?

The worst case would be the insurer declining your application and refusing to extend any coverage. However, this is very rare in practice after a counter has already been made.

Do I have to give a reason if I reject the counter offer terms?

You do not need to provide your reason for rejecting a counter offer. The insurer likely understands if their modified terms are not acceptable to you as the applicant.

Should I apply to multiple insurers to shop for the best offer?

Applying to 2-3 different highly rated insurers can be wise to compare quotes and alternatives if you do receive an initial counter offer.

How much time do I have to evaluate a counter offer?

Most insurers will give you at least 2-3 weeks to review a counter offer before expecting a response. Let your agent know if you need additional time.

Can my agent negotiate with the underwriter on my behalf?

Yes, an experienced independent agent can be very helpful acting as your advocate to negotiate a counter offer and achieve the best possible terms.

Can I reduce my term insurance cover in case of a counter offer with a higher premium? | FAQ #25


What is a counter offer in insurance?

A counteroffer refers to the response given to an initial offer, making it obvious that the original offer was rejected. It gives three options to the original offer—accept the counteroffer, reject the counteroffer, or make another offer.

What is the purpose of a counter offer?

Key Takeaways. A counteroffer is the response given to an offer, meaning the original offer was rejected and replaced with another one. Counteroffers give the original offerer three options: accept it, reject it, or make another offer and continue negotiations.

What happens if you counter offer?

What Can Happen When You Counteroffer. But while you can negotiate, the employer might rescind the job offer if you do so too aggressively. Some employers aren’t thrilled with candidates who go back and forth over salary offers multiple times.

Are counter offers worth it?

A counteroffer may give hope of better working conditions and salary, but statistics show that this is often not the case. Around 50% of people who accept counteroffers leave for a new job within 12 months. Just because the offer may seem like a good option, it won’t guarantee job satisfaction down the line.

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