You're not always guaranteed to qualify for life insurance. If you're looking to apply for a policy, most insurers will ask you to go through a process called life insurance underwriting, where they check your health and ask you about your lifestyle. Here's what to expect and how you can prepare.
How Does Life Insurance Underwriting Work?
When you apply for life insurance, the company will send your application to their underwriting department. These professionals review the submitted information and your medical records to estimate your life expectancy. They use this to see if you qualify for life insurance and set the cost of your insurance premium.
Someone in perfect health would pay less than someone with a serious illness. Insurers use this system to control costs. Otherwise, someone could sign up when they develop a terminal illness and skip paying for life insurance before then, leading to more frequent payouts and increasing the average costs for everyone else.
The person insured by the policy is who goes through the underwriting process. If you're buying insurance on yourself, that would be you. If you're buying a policy on someone else, like your spouse or business partner, they would go through health underwriting.
What Are the Steps?
While each company has its own life insurance underwriting process, here's a rough idea of what the steps will be like if you buy coverage for yourself.
Application Review
You will fill out an application listing your Social Security Number, medical history, family medical history and hobbies. Dangerous habits or hobbies like smoking, frequent drinking or skydiving can increase the cost of life insurance. The underwriters will then review your application and call if they have any questions.
Medical Record Review
The underwriters will review your medical records from any past life insurance applications, which are stored in a national database. They could also ask to check your prescription records and medical records from your doctor. You will need to sign a form to give them permission to do so.
DMV Record Review
The underwriters will check your driving record, including whether you've had any past tickets. A history of dangerous driving, including numerous accidents or many speeding tickets, could increase your premium.
Health Exams
Finally, you'll need to go through medical testing. This may include submitting saliva, blood and/or urine for lab testing as well as seeing a nurse or doctor for a physical. It could also involve other medical tests, like an EKG to check your heart. The insurer will tell you what you need to do and how to schedule.
It typically takes an insurer about five to six weeks to complete life insurance underwriting. At the end of this process, they will tell you whether you qualify for life insurance and, if so, at what cost.
Does the Type of Life Insurance Matter?
Yes, it can. There are guaranteed acceptance life insurance policies, which don't require medical underwriting. You can qualify even with serious medical issues because they don't check your health. However, these policies charge much higher premiums. They can also limit how much insurance you can buy and restrict when payments are made. For example, a policy might state that it won't pay the death benefit if the insured dies within three years of signing up.
For other types of life insurance, like term life and permanent life, the underwriting process is based more on the amount of coverage you buy. If you buy a smaller, five-figure policy, the health testing could be much easier and might only require a review of your medical records. On the other hand, a larger six- or seven-figure policy would likely involve much more serious health underwriting.
How Should You Prepare for Life Insurance Underwriting?
Be honest with all your answers on your application. Dishonesty could lead to a denial of coverage. Additionally, even if someone qualifies based on false information, the insurance company could later deny paying the death benefit if they discover the incorrect information.
Since qualifying for a policy is based on your health, maintaining good health will help you get a better rate. Eating properly, cutting back on alcohol and regularly exercising may help. If you're on the fence about buying life insurance, keep in mind that the longer you wait, the higher the chance you develop a health condition that makes it harder to qualify.
A life insurance agent can help you decide what type of coverage to buy, prepare your application and plan for the underwriting process. By understanding what the underwriting process is like, you can prepare and give yourself the best chance of qualifying at a reasonable rate.