What happens when you apply for life insurance?

When clients call me for a life insurance quote, they often don’t know what all the process of getting a policy entails. My goal here is to help the average person understand the process they will go through, from quoting all the way through to policy delivery.

Step 1: Quoting

When you call your agent for a quote, she may ask you for your date of birth, whether or not you use tobacco, your height and weight, and as much health information as you can give her. The reason for that is, the more health information you provide, the more accurate she can be in quoting the right carrier and rate class. She will also discuss term vs. whole life insurance, coverage amounts, duration of the policy, and what risk you are specifically trying to insure, i.e. to cover income replacement, mortgage payment, funeral expenses, etc. This will help her identify the correct product to apply for to meet your needs. After she has obtained quotes, she should present them to you with a recommendation as to the best one for your needs.

Step 2: Application

A life insurance application will ask for your personal information and contact details, what product and face amount (death benefit) you are applying for, and will have a series of questions about your health and lifestyle. It’s important to answer honestly, because if you do not and there is a claim within two years and it’s found you gave fraudulent information, the company may deny the claim. You will be asked to provide all contact information for physicians and hospitals that may have treated you in the past.There are also release forms for medical information and HIV/AIDS testing, and you may be asked at that time to provide details for making payments if you wish to enroll in EFT; this may also be done later. There is a rider that is standard on most policies called the Accelerated Death Benefit rider. This rider enables the policyholder to withdraw some or all of the death benefit prior to the insured being deceased if the insured is diagnosed with a terminal illness. There is a form that needs to be signed acknowledging the tax ramifications of this rider. Some agents will collect the initial premium at this time.

Step 3: Submission and Underwriting

Once you have completed your application with your agent’s help, she will then complete her agent’s report and submit it to the insurance company. When the company accepts the application, it moves into underwriting. Underwriting is the process by which a company gathers further information to make a determination if they can offer coverage, and at what rate. This process may take several weeks or longer, depending on the cooperation of the proposed insured and the physicians in getting records to them. During this period, the company may come back to the agent and client with follow up questions on parts of the application.Part of the underwriting process may include a paramedical examination of the proposed insured. This exam is no cause for alarm! It is done at the convenience of the client, in their own home, and includes a detailed blood panel that can, in most cases, be taken to your regular physician in lieu of having them perform their own tests. This is not a pass or fail test! It is merely a tool to help determine the correct rating class. In some instances, paramedical exams have uncovered previously undiagnosed health issues, and while this may be bad for buying life insurance, it can be very good for staying healthy. Completing underwriting requirements in a timely fashion will help the process move more quickly.

Step 4: The Offer

Once the underwriting department has completed its work of gathering information about you, it will make a determination if it can offer you coverage, and at what rate. This may be higher or lower than the rate your agent quoted you, and you may choose to accept or reject this offer. If you accept, then the company will issue the policy and send it to your agent.

Step 5: Policy Issuance, Delivery, and Paying Your First Premium

After the offer is accepted, the new policy arrives at your agent’s office, where she will handle updating her records and set up an appointment with you to deliver the policy. When she meets with you, or if you do this virtually over the internet and she mails you the policy, there will be more things to sign. At the very least, you will sign a delivery receipt, acknowledging that you received the policy. If anything was changed in the application or policy parameters during underwriting, you will also sign for those amendments. At this time, if you did not submit a payment with your application, your agent will ask for either a check for the first premium or authorization to do an EFT withdrawal from your bank account. She will also ask you to set up how you want to pay future premiums.

Step 6: Reviewing Your Coverage and Conversion

Life insurance is often viewed as a “set it and forget it” type of insurance, as the premium does not typically increase over the years, but it should be reviewed by the client after the first year and periodically thereafter to make sure there have been no changes to the insured’s needs. One thing people do not realize is that if there has been a positive change in the health of the insured, for example, if they have quit smoking or lost weight and have medical records to prove the changes are sustained, or have sought or maintained treatment for a medical condition disclosed while in the application process that was a factor in underwriting the policy, it is possible to ask the company to review new information and re-rate the policy to make the premium go down. Another thing to consider if you have purchased term life insurance is conversion to whole life. Most term policies offer the option to convert to whole life based on the current age and original underwriting. This means that if you qualified for term life insurance when you were younger and healthier, and are approaching the end of the term and have more health issues, you can still get permanent insurance without those issues affecting the rate. Make sure to discuss conversion options with your agent.

Applying for life insurance does not need to be intimidating. Make sure your agent is on hand to help you and answer all of your questions.