Life insurance can be an important part of your estate planning strategy. You can use it to provide money for your children’s education, cover your funeral expenses and leave money to support loved ones. It’s not the most fun to think about, but understanding what to expect and what you need for the application can help make the process easier.
Here’s information about the application, what your medical examination might include, and what to do if you don’t meet the health requirements. As you begin researching, your financial advisor or insurance agent can help you decide which policy best suits your needs and budget.
Information Needed for the Life Insurance Application
If you could simply pick a policy and pay the premium, buying life insurance would be easy. But there are a few more steps to the process. To start, you’ll want to choose between permanent and term life insurance. A permanent life insurance policy covers you for your entire life, while term life insurance covers you for a set period of time.
While we usually recommend our clients buy term insurance that runs through their retirement, there are rare instances where longer term or permanent policies are appropriate. Before you buy a permanent policy or decide to use a more complex strategy, discuss the costs and benefits with a fee-only advisor. Since the advisor will not be selling you insurance, you can be confident that they are recommending products that are appropriate for your situation.
Additional considerations include:
- Calculating how much coverage you need. Here are a few variables to consider:
- Your income
- Your and your spouse’s assets
- Your spouse’s earning potential
- The age and needs of your children or other dependents
- Your monthly expenses
- How to break up the premium payments (annually, semi-annually, quarterly or monthly)
- Other life insurance coverage you may already have. If you already have life insurance or are applying for more than one policy, the insurer may question why you need additional coverage
- Medical Information
Even though you undergo a medical exam as part of the application process, you should still expect medical questions on the application. These questions typically cover:
- Date of birth
- Medical history
- Lifestyle habits
If you smoke, drink or have other lifestyle habits that the insurer considers risky, it may affect your eligibility or increase the price you pay for your policy. When applying for insurance it is important to answer these questions honestly. But be sure you’re answering only the question they ask; don’t give any extra details they don’t ask for. (Note, if you are speaking to a broker who is prescreening you, detailed answers to these questions will help them narrow down coverage options. So, it is important to know who you are talking to and their relationship to the insurance company.)
What Can I Expect During the Medical Exam?
The medical exam may vary from one insurer to the next. However, you can expect to undergo an in-person medical exam at a location approved by the insurance company. For some, this is the most intrusive part of the process.
During the exam, the medical professional will guide you through the requirements, which may include:
- Documentation of your medical history (including surgeries, prescription medications, and other details)
- Details about your family’s medical history
- Current blood pressure
- Current heart characteristics (presence of murmurs, etc.)
- Height and weight
- Blood and urine samples
- Questionnaire or interview about lifestyle habits such as drinking, exercise, smoking, recreational drug use, travel, and certain risky hobbies
With some insurers, these questions will also be on the application and then verified during the medical review process.
There may be other tests depending on your age, the amount of coverage needed, or the policy you choose. These could include a chest x-ray, an EKG, or a treadmill (stress) test.
What If the Insurance Company Denies My Application?
Your options after an insurer denies your application depend on the reasons for the denial. If you were turned down due to health risks, you could seek a policy that doesn’t require a medical exam. These policies, however, usually cost more. You can also seek life insurance through your employer during an open enrollment period when a medical exam is often not required. Additionally, you can wait, improve health conditions under your control and try again.
Your financial advisor can help you choose a policy that works best for you and helps you accomplish your intended financial goals. In the meantime, consider making healthy lifestyle choices. The same improvements that help you keep your premiums down also increase the chance that you’ll be around to support your dependents—and enjoy your life—for a long time to come.
Worried that you are under- or over-insured? We recommend insurance without selling policies, so you can be confident that our recommendations benefit you, not us. Schedule a call today.
This content is developed from sources believed to be providing accurate information and is provided at least in part by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2021 by Practical Financial Planning, Inc.