Life Insurance: Medical Check-Ups And Their Importance

Life insurance is a contract between an insurance company and a policy owner, where the insurer agrees to pay a sum of money to the policy's beneficiaries when the insured person dies. Most life insurance policies require a medical exam, but no-exam policies do exist and are usually more expensive and offer lower payouts. The time it takes to receive the proceeds from a life insurance policy depends on several factors, including the insurance company's processes, the completeness of the claim, and any necessary investigations. In general, it can take anywhere from a few weeks to a few months to receive the payout.

Medical exams and health history

Most life insurance policies require a medical exam as part of the underwriting process. A paramedical (a licensed healthcare professional contracted by the insurance company) will be arranged to meet you at your home, office, or a clinic selected by the insurance company. They will record your medical history, including any medical conditions, surgeries, and prescription medications, as well as taking your blood pressure, listening to your heartbeat, and checking your height and weight. They will also ask about your immediate family's medical history and any lifestyle habits that could affect your health, such as exercise, smoking, drinking, recreational drug use, frequent travel, and high-risk hobbies.

There may be additional tests required depending on your age, the type of policy you want, and the amount of coverage you're applying for. These could include an EKG, a chest X-ray, or a treadmill test.

The results of the medical exam and your health history will be reviewed by an underwriter at the insurance company, who will determine the level of risk you represent to the company financially and set your premium cost accordingly. Be aware that lying about your medical condition or lifestyle could result in your beneficiaries being denied the death benefit.

If you are denied coverage or offered a higher rate due to the results of your medical exam, there are several options available to you. You can ask why you were denied and whether there is a company that will work with your medical status, or you could apply for a "no-exam" policy, although these usually cost more and have a lower face value. You could also purchase a policy for the time being and then ask to be re-evaluated at a future date, or look into group term life insurance through your employer, which often doesn't require a medical exam.

It's worth noting that your premium costs will also be affected by factors such as your age, gender, smoking status, lifestyle choices, driving record, and family medical history.

Premiums and costs

The cost of life insurance depends on several factors, including the type of insurance, the insurance company, and your overall health, wellness, and family history. The younger and healthier you are, the lower the premiums will be. However, older people can still get life insurance, although it will be more expensive.

Term life insurance tends to be cheaper than permanent life insurance but does not accumulate cash value. Permanent life insurance offers added benefits such as cash value accumulation, which can be used for various purposes, including taking out loans or paying policy premiums.

The cost of life insurance can also be affected by lifestyle characteristics. For example, quitting smoking, losing weight, reducing alcohol intake, and improving your driving record can lower your insurance premium.

When purchasing life insurance, it is important to consider the coverage amount, the type of policy, and the premium cost. You may also want to add optional coverages known as riders, which provide additional benefits but increase the premium.

Most life insurance policies require a medical exam, although "no-exam" policies are available at a higher premium cost. The application process may also involve submitting personal and family medical history, financial information, and details about lifestyle habits and risky hobbies.

Life insurance premiums are typically paid monthly, and finding the policy that best fits your needs can save you a significant amount of money over time. It is recommended to compare quotes from multiple companies and consider the policy features, company rating, and premium cost before making a decision.

In terms of payout, life insurance companies usually pay within 30 to 60 days of receiving the required documents, although this may vary depending on the company and state laws. The payout process may be delayed if the insured's death occurs within the policy's contestability period or if there are issues with the paperwork.

Coverage needs

The amount of life insurance coverage you will need depends on several factors, including the age of your dependents, your spouse's earning ability, any outstanding debt you have, and your family's combined financial resources.

Financial experts often recommend purchasing at least 10 times your annual income in coverage, although your personal number may be higher or lower. This is known as the "years-until-retirement method". Another way to calculate your coverage needs is to multiply your annual salary by the number of years left until retirement. For example, if you are 40 years old and earn $20,000 per year, you would need $500,000 in life insurance coverage.

Another factor to consider is your debt. Life insurance proceeds can be used to pay off outstanding debts, including student loans, car loans, mortgages, credit cards, and personal loans. If you have any of these debts, your policy should include enough coverage to pay them off in full, plus a little extra to cover any additional interest or charges.

One of the main purposes of life insurance is to replace lost income. If you are the sole provider for your family and bring in $40,000 per year, for example, you will need a policy payout that is large enough to replace your annual income, plus a little extra to account for inflation. Life insurance experts suggest having enough coverage to replace at least 10 years of your salary. In this case, a $500,000 policy would be reasonable.

You should also consider the future needs of your dependents. For example, if you have young children, you may want to factor in the cost of their education. Additionally, if you have a stay-at-home spouse, you should consider the economic value of the work they do in the home. According to Salary.com, the economic value of a stay-at-home parent is equivalent to an annual salary of $184,820.

Finally, don't forget about "hidden income". This includes any amounts you receive through employment beyond your base pay, such as 401(k) contributions or the employer's share of your health insurance premium. The cost of replacing these benefits can be significant, so make sure to include them in your coverage calculations.

Beneficiaries

A beneficiary is a person or entity that receives the benefits from your life insurance policy or other financial products when you die. Choosing your beneficiaries is an important part of owning life insurance. While it is not mandatory to name a beneficiary, it is usually the primary reason people buy life insurance in the first place.

There are two types of beneficiaries: primary and contingent. A primary beneficiary is typically your spouse, children, or other family members. In the event your primary beneficiary dies before or at the same time as you, you can name at least one backup beneficiary, called a secondary or contingent beneficiary, who will receive the death benefit.

When choosing your beneficiaries, you can select anyone you trust and who holds a financial interest in your life. This can include your family members, a legal representative, or an institution or bank. You can also name charities or organisations as beneficiaries.

It is important to keep your beneficiary designations up to date, especially when you experience major life changes such as marriage, divorce, or the birth of children. You can change beneficiaries at any time, and it is a straightforward process. However, remember to be specific when naming a beneficiary, providing as much information as possible, including their full legal name, mailing address, and relationship to you.

If you do not designate a beneficiary, it may be unclear who is entitled to the funds, which can delay the benefit payment. In such cases, most life insurance policies have a default order of payment. For individual policies, the death benefit will be paid to the owner of the policy if they are different from the insured person. If the owner is also deceased, the benefit will be paid to their estate. For group insurance policies, the order typically starts with your spouse, then children, then parents, and finally, the estate.

Claims and payouts

Life insurance is a financial safety net for families, providing a death benefit payout that can help with anything from funeral expenses to unpaid debts. The claims process is likely to be unfamiliar to many, but it is straightforward.

There is no time limit for claiming life insurance, but it is recommended to do so as soon as possible to alleviate financial stress. If the policy death benefits are not claimed after a few years, the insurer turns the funds over to the state government. However, beneficiaries can still file a claim for the money through the state's unclaimed property program.

To file a claim, the following steps should be taken:

• Gather Documents: The insurance company will require a few documents to start the death claims process. These include a certified death certificate, a claim form, and the policy document or policy number. Sending them all at once helps speed things along.
• Contact the Insurance Company: Once you have gathered the documents, call the insurance company or your agent to notify them of the death. They will explain the rest of the claims process and update their files.
• Wait for Claim to be Processed: The insurance company will review your claim, confirm the policy was in force at the time of death, and verify your identity as a beneficiary. If the insured died within two years of buying the policy, the company may investigate the original application to ensure no fraud was committed. Insurance companies typically have up to 30 days to review a claim but are motivated to pay quickly due to interest charges.
• Receive Payout: Life insurance death benefits are usually paid out as a lump sum or in installments. Lump-sum payments are the default option, and most beneficiaries choose this as they can use the funds immediately and decide how to invest them. With installments, the insurance company invests the death benefit and pays out the interest, with the principal remaining untouched.

There are several reasons why a claim may be rejected:

• Contestability: If the insured dies within the policy's contestability period (usually two years), the insurer can deny claims due to fraud or false application information.
• Suicide: If the insured dies by suicide within the first two years, the death benefit will not be paid.
• Homicide: If the insured's death is under investigation, the insurance company will not pay any claims until the beneficiary is cleared of any wrongdoing.
• Policy Lapse: If the policy premiums have not been paid and the grace period has passed, the policy is invalid.
• Died While Committing a Crime: If the insured person dies while participating in illegal activities, the insurance company may deny the claim depending on the circumstances.

Frequently asked questions