Life insurance can help ensure that your dependents have the resources they need to replace your income should you die. But how do you go about purchasing coverage? And what can you do to get the best possible rate? Understanding the process of obtaining life insurance can help you get the coverage you need at a price you can afford. Read on to learn about what's involved in buying life insurance from the application process to the underwriting process. This will typically involve filling out some paperwork, submitting to a paramedical exam, and providing your and your immediate family's health histories. The lower the risk you present to the insurer (often associated with youth and healthiness), the lower you can expect your premiums to be.
There are two main categories of life insurance: permanent life insurance, which provides coverage for your entire life, and term life insurance, which provides coverage for a set period of time. A local insurance broker can help you understand more about your options. Once you have decided to purchase life insurance, you'll need to determine your coverage amount by considering how much your beneficiaries will need after you die, and how much you already have covered through personal assets or group term insurance (such as a policy offered by your employer).
The amount of life insurance coverage you will need depends on several factors, including the age of your dependents, your spouse's earning ability, any debt you may have, and your combined financial resources. You will need to apply for life insurance. The application will ask for basic information such as your name, address, and employer. It will also ask for the following personal information:
While it may be tempting to lie about your weight or other health issues, it's important to tell the truth. If the company discovers you lied about a health condition or lifestyle, it can increase your premium, cancel your policy, or deny a beneficiary's claim to the death benefit. Some insurance companies will accept your answers to health-related questions, such as which medications you take or any surgeries you've had, on the application. These no-exam life insurance—such as guaranteed issue life insurance and simplified issue life insurance—are usually more expensive and have a lower face value than insurance that requires a medical exam. Most companies and policies require an in-person medical exam. A life insurance agent will arrange for a paramedical (a licensed healthcare professional contracted by the insurance company) to meet you at your home, office, or a clinic selected by the insurance company. During the exam, the paramedical will likely:
There may be additional tests you need to undergo depending on your age, the type of policy you want, and the amount of coverage you're applying for. Additional tests could include an EKG, a chest X-ray, or a treadmill test. Next, an underwriter at the insurance company will review your application and medical exam results. They may order medical records from your physician to learn more about any medical conditions you may have and any treatment received. This information helps them determine what risk you represent to the company financially and how much to charge you for coverage. Once your application and medical exam have been reviewed, the company will either approve or deny your request to purchase coverage. That process can take days or weeks, depending on whether you submitted a complete application, how long it takes to receive lab results, if the company requests information from your physician, and so on.
If you lie about a medical condition, the insurance company may not only deny you coverage but may also "red-flag" you, meaning other insurers will know you were denied coverage because you lied. If you "fail" the medical exam and the insurance company declines to cover you—or if it offers to cover you at a higher rate due to the results of your exam—you have a few options. You can pursue group term life insurance through your employer, which often doesn't require a medical exam, ask your insurance broker if there is a company that will work with your medical status, or try for a no-exam policy. If you are offered a policy but aren't happy with the rate, you can purchase it for now and then ask to be re-evaluated at a future date (and aim to improve your health during that time). And, of course, you can enquire with more than one insurance company to try and find the best possible life insurance policy for your circumstances. While you can't do anything about two of the three main factors affecting your insurance premium (age and family medical history), there are steps you can take regarding the third: lifestyle. You could lower your insurance premium if you:
Other non-lifestyle-related ways to reduce your premium include:
Many life insurance companies will contact your doctor's office and obtain medical records after you have given permission to do so. The doctor's office will also complete a medical questionnaire. The doctor may also be required to sign an attending physician's statement asserting the veracity of this information.
It is considered insurance fraud if you lie or knowingly misrepresent information on a life insurance application. By signing the policy, you affirm that everything included in the application was accurate and truthful.
This will vary by location, but the minimum age at which someone can sign a life insurance application in most states is 18. In Washington State, those aged 15 and older must sign any life insurance application someone takes out on them.
In order to take out a life insurance policy on someone else, you need to be able to show that there is an insurable interest in that person. This requires proof that an individual or entity would experience financial or other hardships as the result of the death of a person. |