Let’s assume you selected a life insurance product to buy. Now, you’re ready to apply for coverage. Simple, right? Sometimes yes, many times – no. This article will explain the process of applying for life insurance, provide important tips, and pitfalls to avoid. You could save you A LOT of time, money, and hassle by heeding this advice.
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1. Completing the Application
The application process will depend on the product you choose and where you buy it. You will either complete a paper application or an online application.
The online process is quicker and more efficient. It can speed up the process by several days. Case managers and underwriters prefer the clean, easy to read, typed applications. Hand written applications can be difficult to read and can cause delays. Many carriers offer online applications, but the majority still do not.
We recommend completing a paper application for most people. The applications can be somewhat tedious and some questions are difficult to answer. You can request that your agent mail you the application with a self-addressed, stamped return envelope. Ask that they highlight the sections to be completed.
If your agent outsources this process, then it’s probably because they are more focused on selling new policies.
Ask your agent to help you complete the application. It might be a little time consuming for them, but it could save you a lot of hassle down the road.
Many people like a “fillable” PDF application. This way, you can complete the entire application on your computer. Before you sign the forms, you might want to email the application to your agent to make sure you answered the questions correctly. Some carriers will accept digital signatures. If not, you will need to print, scan and email or fax the signed forms.
Make sure you write neatly and use a dark black pen. Since applications are usually faxed or scanned more than one time, it helps when the answers are clearly legible.
Take your time completing the beneficiary designations. Ask your agent about contingent beneficiaries and whether or not you need a Trust (to be named as the beneficiary).
Fully Underwritten vs Simplified Issue (No Exam) Policies
Before we move to the next step in the application process – The Exam – it’s important to note that some carriers offer simplified issue policies that do not require an exam (blood and urine samples).
For the sake of clarity, we break it down into two types of life insurance products available:
- Fully Underwritten. Requires an Exam
- Non-medical (AKA: Simplified Issue).
There are some term, whole life, and guaranteed universal life policies that don’t require an exam. Many whole life policies with smaller face amounts (usually $25,000 or less) will offer non-medical policies.
If you are in very good health, it’s usually better to opt for a less expensive, fully underwritten policy.
Be careful, because an agent might steer you towards a non-med policy even if it’s not in your best interest. It’s a much quicker and easier process for them and you. However, you might pay a significantly higher premium.
There are exceptions to the aforementioned warning. A growing trend is for carriers to offer streamlined non-medical policies to people who are young (usually under age 60) and healthy. They will usually limit the face amount to under $500,000 or $250,000.
They will offer expedited underwriting that leans heavily on technology. Carriers will check databases (the Medical Information Bureau and prescription drug databases Report) to make sure you are in good overall health. This saves them time and money. They reserve the right to order an exam or medical records if they think it’s necessary (based on your health history or information obtained from the databases).
Also, if you over 40 and haven’t seen a doctor in more than two years, underwriters will usually request an exam.
Ask your agent about simplified issue policies if you do not want to undergo an exam. You can compare prices between fully underwritten and simplified issue policies. Cost could be the determining factor in your decision.
The average time for a fully underwritten policy to get issued is 5 to 7 weeks.
Many agencies take a proactive approach and cut this time down significantly.
2. The EXAM
If you opt for a fully underwritten policy, your agent will inform you that you will need an exam to qualify for coverage. The insurance company wants to know if you’re healthy or not. So, you will receive a call to schedule the exam. First off, it’s important to know that the examiners are not necessarily nurses. Some have much more training and experience than others. This isn’t really a problem, but you might want to make sure of this.
Ask your agent to schedule you with an experienced examiner.
If you have ever had problems with needles (or with a nurse who had to poke you several times before finding a vein), then you will appreciate a good examiner.
Also, an experienced examiner – with a good reputation – usually won’t make mistakes. They need to bring the proper paperwork and complete forms the correct way. Experienced examiners tend to show up on time and are efficient. They know how to put you at ease and complete all the paperwork seamlessly. It’s just a more pleasant, quicker experience.
If you’re interested in knowing more about what the exam entails and how to best prepare for it, please visit this site: https://appslive.com/Agents_Underwriters.aspx
You want to be relaxed and eat well before your exam. Eating high salt or high fat foods can cause be problematic if your cholesterol numbers are borderline.
3. Underwriting Review
After you complete the exam, the lab slips and paperwork are obtained by the life insurance company’s new business department. Before an underwriter reviews your application, a case manager, will make sure everything is in good order. If answers to questions are incomplete or pertinent information is missing, they will go back to your agent for answers.
A good agent will make sure all the questions are answered and any supplemental forms are completed. For example, if you travel internationally, a foreign travel questionnaire is typically required. If you have a history of depression, they will want to know if you are in therapy or have ever been hospitalized for that condition.
An underwriter is assigned to your case.
The medical underwriter will several items before rendering a decision:
- Check your application for inconsistencies. They want to make sure you’re not hiding anything
- Check the MIB and RxList databases. They want to see if you were ever declined or rated up by an insurance company. They also want to see what medications you were prescribed as that can indicate certain medical conditions.
- Check your motor vehicle report. They want to see if you have had any recent DUIs or more than 3 moving violation in the past 5 years.
- Check your lab results. If all of your numbers are in the normal range, you’re in good shape. However, an underwriter can choose to assign a higher risk/rate class based on abnormal numbers. Request a copy of your lab results. It’s yours for the asking.
- Check your medical history on your application. If an underwriter wants more information on your medical history and current health, they will often request medical records. This part of the process deserves it’s own section, so….
4. Ordering Medical Records
Many times, medical records are not needed. If you are in good health, see your doctor regularly for check-ups, and your exam results are good, then records won’t be necessary. Also, if your application is completed thoroughly and there are no “hits” on the database checks, then insurance companies won’t waste money ordering medical records.
Let’s say you recently were diagnosed with high blood pressure or have a history of anxiety. Well, the underwriter will need to know more about your health status, so they will usually order records through a third party.
This part of the process is what can cause the longest delays and the most frustration!
50% of the time the process of obtaining records is quick and simple. Your doctor’s office receives the request and their payment, so they fax the records within a few days. This happens about half the time.
25% of the time there are some hassles and delays. Perhaps your doctor uses a record service and they only send out records once every two weeks. These record-keeping services can be very slow and difficult. If often takes multiple requests and follow-ups to receive the records. The delay can add another two, three, or four weeks to the entire process.
25% of the time – more often than we would like, there are additional delays or problems. Perhaps your doctor referred you to a specialist that you just saw one time. For example, if you had persistent headaches or chest pain several years ago and your doctor referred you to a neurologist or cardiologist. Subsequently, after one visit with the specialist, you decided further testing wasn’t needed. Maybe you were under a lot of stress and then the symptoms faded over time.
Red Flags for the Underwriter
You might not consider that anything serious, but it will raise red flags for the underwriter. They will request records from the specialist. If they see that certain tests were recommended, but never done, then you might be declined. The underwriter might decide to postpone the application until the recommended tests are completed.
Other times, record-keeping services just mess up. They send partial records or simply don’t respond to multiple requests. Maybe you saw a doctor many years ago that retired and now your medical records are in limbo.
There are many situations that can cause very long delays, so it’s best to be open with your agent and ask them to be proactive. There is no reason to wait two weeks after your application is submitted if it’s certain records will be needed. Additionally, let your doctor know the request is coming and ask their office to expedite the request, if possible.
5. Decision / Offer / Policy Delivery
Once the underwriter receives all the pertinent information – including medical records – they will make a decision. They might decide you are an excellent risk with no lifestyle or family history risk. So, you are approved at the best possible rate. Other times, they might decide you present a significant risk and offer you a much higher rate. Your agent will then inform you of the offer.
You can accept it, decline it, appeal it or shop it.
Most of the time, your agent will simply state that you were approved at a higher rate and explain why. Usually, the decision is valid and there isn’t anything to appeal. Other times, the underwriter might not have all the facts straight.
On more than one occasion, we found that a condition was overstated by an underwriter.
Sometimes, doctors will write something in their notes without informing you. It can be for insurance or liability purposes. You might need to do talk to your doctor and ask him or her to write a clarifying statement. An experienced agent can help you with this.
Don’t Settle for an Adverse Offer
If you receive an adverse offer that cannot be successfully appealed, it’s time to shop.
If your agent doesn’t offer to shop your case with other carriers, then you should let him or her know that you will do this with another agency. It’s possible that another insurance company will offer you a better underwriting class. If you are approved at a better rate class (from Standard to Standard Plus, for example), you could save hundreds of dollars each year. For an example of the potential savings, read this article.
The last step (after you have accepted the offer) is to review the policy and sign delivery papers. Check the beneficiary designations to make sure they are correct (including the percentages). Make sure the policy date is correct. Put your policy in a safe place and make a copy of the policy summary page. Additionally, let a couple of family members or close friends know that you have the policy.
Applying for Life Insurance – What You Need to Know – Conclusion
Most people don’t think much about the application process. They select a policy and then just follow the lead of their agent. As you can see, most of the time you will get approved without much of a hassle. However, approximately 25% of the time, there will be unusually long delays. When things don’t go as intended, you need an advocate to advise and help you.
You want your agent to be a bulldog during the underwriting process. Keep them accountable and ask for updates. If there is an issue with obtaining records, ask how it can get resolved quickly. If needed, call your doctor’s office and ask them to expedite.
Most importantly, don’t settle for an unfavorable underwriting decision. Sure, you can probably handle an extra few weeks to the application process. However, settling for a premium that is much higher than you were originally quoted isn’t acceptable.
We are happy to help you select and apply for life insurance, so please call us for a free consultation.