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How does a life insurance application work?

life insurance application process

If you’ve spent any time recently, either watching TV or listening to the radio, chances are you’ve heard a couple dozen commercials about life insurance, which means that you’ve probably also heard how easy and affordable getting a life insurance policy without an exam can be!

What you probably…

Haven’t heard is how the top life insurance companies decide who they will and will not insure. And this can impact the type of life insurance you’re applying for, which also determines the type of life insurance application you will need to complete when applying.

This is why…

We here at IBUSA wanted to take a moment and discuss what a typical life insurance application will look like and how a life insurance application can differ based on what “type” of life insurance policy you are looking to purchase.

In doing so…

We’re also going to mention some of the “other” tools a life insurance company will use in addition to their written application to help them decide who they will and won’t insure as well as what “price” one might have to pay for their coverage.

Questions that will be addressed in this article will include:

  • What type of questions will a typical life insurance application ask?
  • Will different life insurance policies have different types of applications?
  • Aside from the application questionnaire, what other “tools” will a life insurance company use to determine who they will and won’t insure?
  • What can I do to improve my chances of qualifying for the “best” life insurance policy for me?

So, let’s dive right in!

What type of questions will a “typical” life insurance application ask?

When most folks think of a “typical” life insurance policy, they’re usually thinking about a traditional term or whole life insurance policy where one will first have to complete a written application, then take a medical exam.  After that, they’ll usually need to wait few weeks to find out whether or not they have been approved for coverage and at what health rating.

Historically…

This is how most life insurance policies have worked for decades, which is why we want to first discuss how these “types” of applications will work. Then once we have a “basic” understanding of how these “types” of life insurance applications work, we’ll then turn our attention to some of the newer “types” of insurance policies that exist.

Policies such as a No Exam Life Insurance Policy or a Guaranteed Issue Life Insurance Policy.

Traditional Term or Whole Life Insurance Application Questions

If one chooses to apply for a traditional life insurance policy, common questions you likely find will include:

  • Date of birth?
  • Gender?
  • Height and weight?
  • Have you ever been diagnosed with any pre-existing medical conditions?
  • Are you currently taking any prescription medications?
  • Has any of your immediate family members (mother, father, brother, or sister) ever been diagnosed with cancer, heart disease, or diabetes?
  • Have you ever suffered from a heart attack or a stroke?
  • In the past two years, have you been hospitalized for any reason?
  • In the past 12 months, have you used any form of tobacco or nicotine products?
  • In the past 12 months, have you used any form of marijuana products?
  • Have you ever been treated for alcohol or drug abuse?
  • Have you ever been convicted of a felony or misdemeanor?
  • Do you have any issues with your driver’s license? Issues such as multiple moving violations, a DUI, or a suspended license?
  • In the past two years, have you filed for bankruptcy?
  • Do you have any set plans to travel outside of the United States within the next 12 months?
  • Do you actively participate or plan on participating in any dangerous hobbies or activities such as sky diving, hang gliding, bungee jumping, etc.?
  • Are you currently working now?
  • In the past 12 months, have you applied for or received any form of disability benefits?

Be aware that…

Since each life insurance company will have their own rules and regulations that they will use to help them determine who they will and won’t insure, not every insurance company will feel the need to ask each of these questions.

Additionally…

Not every life insurance company is going to consider each of these questions as “significant” as another might, which is why many experienced life insurance agents will choose to ask a client many of these same questions so that they can determine which insurance company may be the “best” for you before actually applying for coverage.

So…

Now that we’ve covered some of the basic questions that a “traditional” term or whole life insurance policy will cover let’s now shift gears a bit and discuss how some “alternative” life insurance policies will differ.

Will different life insurance policies have different “types” of applications?

Yes, different types of life insurance policies will ask different questions during their application process.

Typically, you will find that the more AMOUNT of coverage you are seeking, the more thorough your application process will be.

This is why traditional life insurance policies that can provide a significant amount of coverage will tend to ask a lot of questions.

In contrast, small burial life insurance policies may only request a few health questions, if any at all.

For example…

Many Guaranteed Issue Life Insurance Policies which will “cap-out” at about $25,000 in coverage will commonly only ask the following questions:

  • Your Gender?
  • Your Age?
  • U.S. Citizen?
  • What State Do You Reside In?

Now assuming that you are a US citizen living in a state where these “types” of life insurance policies are offered AND you meet the required age requirements, you should be able to qualify for coverage regardless of your current health status (or existence of any pre-existing medical conditions).

“Which is great!”

However, note that these types of policies do tend to cost more than other types of life insurance policies, and they will most likely contain a Graded Death Benefit, which is a clause that will limit exactly when your Guaranteed Issue Life Insurance Policy will begin covering an insured for NATURAL causes of death.

The last “type” of life insurance…

That we want to take a moment to discuss is commonly referred to as a “Simplified Issue Life Insurance Policy.” These “types” of life insurance policies will usually only provide up to about $50,000 in coverage, and typically ask less invasive questions than a traditional life insurance application would.

Common questions for no exam life insurance applications may include:

  • Have you ever applied for or received any form of disability benefits?
  • Have you ever been diagnosed with any serious medical questions such as diabetes, cancer, or heart disease?
  • Have you ever tested positive for HIV or been diagnosed with AIDS?
  • Do you suffer from any cognitive impairments?
  • Have you ever been diagnosed with kidney disease?
  • In the past two years, have you been admitted into a hospital for any reason?
  • Are you currently working?

And while simplified issue life insurance policies will still be quite “selective” with who they will and won’t insure, comparatively speaking, they do tend to be “easier” to qualify for.

That said…

One should note that only Guaranteed Issue Life Insurance policies will rely 100% on a written application.

Traditional life insurance policies and Simplified issue life insurance policies, on the other hand, are simply going to use one’s answers to the written application as one “piece” of the overall application process.

You see…

In addition to the life insurance application, most insurance companies are also going to use a variety of other “methods” to obtain information about you and your health to help them determine whether or not you should be considered acceptable risk to them as a client.

This is why we now want to take a moment and discuss some of these other “methods” an insurance company will use to learn more about you.

What Insurance Companies Consider In Addition to Your Application

Assuming that you are choosing to apply for a traditional or simplified issue term or whole life insurance policy, it’s safe to say that most life insurance companies are going to utilize a variety of different means to learn more about you other than just relying on a life insurance application.

These methods can vary but will usually consist of the following:

A prescription database check.

Each and every time your doctor prescribes a medication to you, this information is recorded within a prescription database.

Its purpose is to provide a record of what medications you have been prescribed in the past and presumably help protect you from being prescribed two medications at the same time (which could potentially harm you as a patient).

That said however…

This report will also create a record of what medications you have been prescribed in the past, which can be used by a life insurance company to learn more about your health.

Now if you’ve…

Been prescribed a pain killer ten years ago after having your wisdom teeth removed, you’re not going to have all that much to worry about.

However, if you’ve been taking prescription pain killers for the past ten years due to a back injury, and this injury wasn’t discussed during your written application, chances are most life insurance companies are going to want to go back and ask you some additional questions about your injury before they will make any decisions about your life insurance application.

A Department of motor vehicle check.

Aside from just asking an applicant whether or not they have any “issues” with their driving record, most life insurance companies will also order a DMV report so that they can get an “official” recording of how safe of a driver you are.

Additionally, within this report, it will also state whether an individual has had their license suspended for any other reasons aside from just driving dangerously.

You see, individuals may also have their license suspended for other reasons such as being behind on child support payments, which will affect one’s eligibility for insurance with some (if not most) life insurance companies.

Criminal background check.

Most insurance companies will run a criminal background check as well. In this report, they will want to make sure that you haven’t been convicted of multiple felonies or misdemeanors or aren’t currently on probation or parole.

In cases like these, insurance companies will vary on what they will and won’t consider acceptable, however, it’s safe to say that most insurance companies won’t insure anyone currently on probation or parole, and most will want to avoid insuring anyone that has been convicted of a serious crime of violence or sexual nature.

A credit report.

Some insurance companies will order a credit report on its applicants as well—particularly those who aren’t interested in insuring someone who has recently filed for bankruptcy.

Studies have shown that the better your credit score, the lower your mortality risk. So, those with a low credit score have a higher mortality risk. Source

Medical records.

In some cases, insurance companies may also request copies of one’s medical records before deciding the outcome of one’s life insurance application.

Now, one shouldn’t automatically assume that the insurance company is “concerned” about them as an applicant because these records have been ordered.

In fact, many times, ordering medical records is simply a standard procedure.

In our experiences here at IBUSA, oftentimes, these medical records will often provide additional support that the applicant SHOULD be approved for coverage.

This is especially true if an applicant has been diagnosed with some type of pre-existing medical condition because these medical records will often provide evidence that one is “insurable”.

Labs.

All traditional life insurance applications will include a medical exam that will require an applicant to submit a blood and urine sample for analysis.

Now, as you can see…

There are many factors that can come into play when determining who will and won’t qualify for coverage.

Additionally, each life insurance company will have their own “quirks” when it comes to what they “perceive” as acceptable.

This is why it’s very important that before you do decide to apply for coverage, you get a better idea about “which” company might be right for you. Which is why we now want to shift gears a bit and discuss….

What can I do to improve my chances of qualifying for the “best” life insurance policy for me?

Now, throughout this article, we’ve mentioned several times how each life insurance company is going to have their own unique rules and guidelines when it comes time to determine who they will and won’t insure.

And while many of these guidelines may be the same when it comes to purchasing a traditional or simplified issue life insurance policy (can’t qualify for coverage while in prison), sometimes they won’t!

Which is why…

Probably the “best” thing that you can do to help ensure you find the best life insurance policy that you can qualify for is to first work with an agent who has access to dozens of different life insurance companies and then find one that understands how important it is to ask a lot of questions before recommending one of those companies to you!

Because…

Unless the life insurance agent is willing first to find out what you’re hoping to “achieve” by purchasing a life insurance policy and willing to do the “work” to determine which company is going to be the “best” for you, all he or she is doing for you is helping you fill out paperwork which is probably something you would prefer doing on your own.

The good news is…

That here at IBUSA, we understand that our job isn’t to try and “sell” you a life insurance policy.

Instead, our only role is to help you find the best life insurance policy you can qualify for.

Which is something that we believe we are REALLY good at!

So, what are you waiting for? Give us a call today and experience the IBUSA difference!

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