Life Insurance 101 – Learn How it Works to Get Your Best Rate!
We wrote our life insurance 101 guides to help smart consumers better understand the life insurance process!
After all, if you haven’t been through underwriting before, it can be intimidating and confusing.
With RiskQuoter, you’ll know exactly what to expect before you apply.
Table of Contents
Life Insurance 101
You made a great decision. You know you need life insurance but want to ensure you get it right.
The first thing to do is ask yourself is How Much Life Insurance Do I Need?
After you’ve read the above, how long do you need life insurance?
And while most of our clients choose term life insurance, there are other types of life insurance, including universal and whole life policies.
And while term lengths run from 1 – 40 years, statistics show that a 20-year term is the most common duration purchased.
You may also have some life insurance riders, such as spouse riders, child riders, or accidental death.
Life Insurance Underwriting Process
Underwriting evaluates your medical history, personal background, height, and weight.
In addition, other factors below are used to determine the life insurance underwriting classes available.
How’s your current health?
With some life insurers, you may qualify for accelerated underwriting or no exam policies, while other companies may require you to take a paramedical exam.
We also have several life insurers that offer $500k life insurance – no medical exam required, and others that may offer $1 million or greater.
With accelerated underwriting, life insurers review your application, credit history, prescription databases, the Medical Information Bureau (MIB), and motor vehicle records.
Some companies have cognitive testing as part of underwriting if you are a senior.
Life Insurance Underwriting Continued
If you are in good overall health, you may get approved quickly with no further exams, etc.
As part of the underwriting process, underwriters want to know about any medical conditions you’ve had.
Underwriting requires details about your history before approving you if you’ve had a high-risk medical condition.
High-risk health conditions include:
- Cancer History
- Diabetes and Endocrine Disorders
- Heart Conditions
- HIV Positive
- Mental Health
- Prostate Disorders
- Brain Disorders
- Other Medical
Do you use any tobacco products?
While cigarettes get smoker rates, the following may qualify for non-tobacco rates with the right companies.
Insurers will get copies of your records from your doctors or use Human API to obtain records electronically.
If you’ve been denied life insurance previously, let us know. Many times it’s just a matter of getting to the right company to get approved.
Family Medical History
You may not know that life insurers consider your parents’ and siblings’ medical history when underwriting you.
Our guide – Don’t Let Family History Ruin Your Life Insurance Rate! Shows you what to look out for.
Most occupations do not have a problem with underwriting.
Commercial divers, professional athletes, marijuana workers, and miners may require an additional expense called a flat-extra, but others, like police, fire, etc., typically do not.
Income and Financials
Life insurance carriers want to ensure the amount of coverage you seek is justifiable.
Underwriters may ask about the following:
- Annual Income
- Household Income
- Unearned Income
- Net worth
- Credit History
Underwriting may request a copy of the loan agreement if the coverage is for your business SBA loan. After the policy is active, the lender will want a collateral assignment on your policy.
A survivorship life insurance policy is an excellent option for estate planning needs.
For unique situations when you need more life insurance than would typically be expected, a good cover helps.
An example of this might life insurance in divorce settlements if the amount of coverage sought seems excessive.
Bankruptcy may have to wait until it is discharged.
Ownership and Beneficiaries
As part of underwriting, you will indicate who will be the owner and beneficiary of the life insurance policy.
It’s an important decision, so take a few minutes to read about life insurance beneficiaries.
Other Factors Continued
Life insurance companies may charge you more if you participate in any of the following activities:
- Scuba Diving
- Rock or mountain climbing
- Motorized racing
- Private Pilots
Some companies will allow an aviation exclusion rider for private aviation.
Commercial airline pilots are not affected unless they also participate in private aviation.
Do you travel internationally?
Countries on the U.S. State Department travel warnings site may result in additional premiums…
Or postponement of life insurance until your return.
Life insurers use a points system to determine if your motor vehicle record will negatively affect you.
A single violation, such as a speeding ticket, is usually a non-factor.
Multiple moving violations within a 2-3 year period of time may result in higher premiums.
Reckless driving and DUIs typically follow criminal rules.
The most common history we see is for drunk driving arrests.
Most rates are based on the time since your DUI arrest and court outcome.
The availability of life insurance depends on the crimes committed, your convictions, and your current status.
The following are the most common questions we receive.
Depending on the various types of underwriting available, it may take several days to a few months. It depends on the policy type, chosen insurance company, medical history, etc.
Each life insurer has general life guidelines to determine your eligibility and price for life insurance.
Fully underwritten life insurance requires the most comprehensive review compared to other underwriting types mentioned later.
No medical life insurance is an excellent option if you are in good health, like convenience, do not like paramed exams, and are in a hurry to complete your life insurance.
With guaranteed issue life insurance, few, if any, questions are asked. Any health questions are mainly asked to determine if you will receive a level or graded death benefit.
After reviewing your file, the underwriter determines your eligibility for life insurance and at what rate.
Approved As Applied – You received the price you were expecting.
Approved Other Than As You Applied (AOTA) – You may receive approval at a more or less favorable rate class.
Postponed – If you were recently diagnosed or just completed treatment, you may be postponed for some time.
Denied – The life insurance company may reject you. When this happens, we’ll discuss the next steps.
Are Life Insurance Offers Negotiable?
Yes and No.
If a health issue is involved and you receive a table-rated offer, we should discuss it.
Sometimes, we can get the company to reduce or eliminate the rating.
If not, we can move to another company for a better rate.
We can point out other positive factors to underwriting as that will help.
If you are applying for coverage thru niche programs like Costco Life or AICPA life insurance, it’s hard to negotiate a better deal.
The same goes for group life insurance.
Will you qualify for the preferred best rates?
Remember that 20% of all applicants qualify for the preferred best life insurance rates.
If you meet the criteria, you’ll get the rate.
Will my upcoming birthday affect my rate?
Most life insurers consider you to be the next age once you are within six months of your next birthday.
Companies allow you to “backdate” your policy for the younger age, but…
You’ll need to pay premiums from the backdate forward.
Do medications affect life insurance rates?
It depends on the medication and the control of the medical condition.
Many companies still allow their best rates if you take blood pressure or cholesterol medication.
The best way to get started is to submit your quote request today.
When we receive your request, we’ll provide accurate quotes from the best companies.
We’ll show you each term company’s life insurance conversion privileges.
There is never any pressure or obligation with our service.
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- Life Insurance for Marijuana Smokers
- Police Officer Life Insurance
Michael J. Horbal
Owner of RiskQuoter
Too many people overpay for life insurance because they have the wrong life insurance company, agent, or both. That’s why I started RiskQuoter – To help you get the best life insurance rates available.
As an independent insurance agent, I’m licensed in all 50 states and the District of Columbia and offer 40+ life insurance companies to ensure you get your best rate!