Applying for life insurance can seem like quite a daunting process. By taking the time to understand what to expect during the application process you can make sure that you obtain the best possible rate, getting the coverage you need at an affordable price.
When applying for life insurance you firstly need to work out what type of policy is best for you. Essentially, there are two main types of policy; term life insurance, which provides cover for a pre-determined length of time, and permanent life insurance, which provides cover basically until the day you die. If you are at all unsure what type of policy is best for you then it often pays to consult an experienced insurance broker or financial advisor. They will be able to suggest the product that best fits your needs and requirements, saving you a considerable amount of time and money in the longer term.
When you have decided on a policy that best suits your particular circumstances you need to think about how much cover is appropriate. The level of cover you choose will depend on how much your beneficiaries would need to cover their living expenses if you were to die. You can calculate the level of cover you require by taking into account a number of different factors including your financial resources, your spouse’s earnings, and the age and number of your dependants.
When you apply for life insurance you will need to complete an application form which can be quite lengthy. Aside from asking you for basic information such as your name and address, and your employment details, you will also be asked for more in-depth information including your height and weight, your date of birth, your lifestyle habits, for example, whether you smoke, drink alcohol, and whether you exercise regularly, and your annual income and net worth.
When completing the application form it is vitally important that you are truthful. It can sometimes be tempting to hide certain health issues, or to bend the truth a little with regard to your weight, or smoking and drinking habits. If you do omit to mention certain health conditions, or misrepresent your lifestyle, this can have serious consequences. Your insurer could increase your premium, cancel your policy, or even refuse to pay out if you die during the policy term. In addition, they may also ‘red-flag’ you which means that other insurers will also be aware that you have lied about your health and lifestyle habits previously.
In order to gain an accurate picture of your current state of health the majority of insurers will ask that you undergo a medical examination. Your insurance provider will arrange for this examination to be conducted at a clinic of their choosing, or in your own home. During this examination you will be asked for your medical history including prior surgeries, medical conditions and prescription medication. You will also be asked about the medical history of your immediate family. They will then listen to your heartbeat, take your blood pressure, check your height and weight, and take both a sample of your blood and your urine. In addition, during the examination they will ask about any lifestyle habits you have that could have a detrimental effect on your health, for example, smoking, drinking alcohol, using recreational drugs, or high-risk hobbies such as extreme sports.
Depending on what age you are when you apply for life insurance, the amount of cover you need, and the type of policy you require, you may also have to undergo additional tests such as a chest x-ray, a treadmill test, or an ECG.
When the medical examination is complete and the results are submitted to your insurer an underwriter will review your application, taking into account your medical results. The underwriter may also ask to see the medical records held by your physician. This combined information will allow your insurance provider to calculate how much of a financial risk you pose to the company, and thus how much they will charge you for coverage.
The whole process of reviewing your application can take a number of weeks. This is dependent upon your insurer receiving lab results, and additional information from your physician if requested.
If cost is a significant consideration there are a number of steps that you can take to keep your premiums as low as possible. If you are a smoker it definitely pays to quit as you are likely to live for less years than your non-smoking contemporaries, and therefore your insurer will have fewer years to collect your premiums. Similarly, if you are overweight it will save you money if you shed a few pounds as weight loss usually results in health improvements including lower blood pressure, lower cholesterol levels, and a lower risk of developing conditions such as diabetes.
Drinking excess amounts of alcohol can also have a negative impact on your health so if you do tend to overindulge again cutting down will result in lower life insurance premiums as you will be seen as posing less of a financial risk. Insurance providers check your medical results and your driving record to gain an accurate picture of your drinking habits so be sure to answer the questions honestly about your drinking habits in your initial application.