Life Insurance Eligibility: What You Need To Know

Life insurance is a legally binding contract that promises a death benefit to the policy owner when the insured person dies. The younger and healthier you are, the lower the premiums will be. To qualify for life insurance, you'll typically need to submit medical and lifestyle information. There are two main categories of life insurance: permanent life insurance, which provides coverage for your entire life, and term life insurance, which only covers a set period. The application will ask for basic information such as your name, address, occupation, and employer, as well as lifestyle habits, health history, and financial information. The lower the risk you present to the insurer, the lower you can expect your premiums to be.

Be aware that your eligibility may depend on your age, gender, health, and lifestyle

When applying for life insurance, it's important to be aware that your eligibility may depend on several factors, including your age, gender, health, and lifestyle.

Age is a crucial factor in determining eligibility and premiums for life insurance. The younger you are, the lower the premiums tend to be as life expectancy is the biggest determinant of risk for insurance companies. This means that older individuals may face higher premiums or have a harder time qualifying for coverage.

Gender also plays a role, as women generally have higher life expectancies and thus pay lower rates than men of the same age.

Health is another significant factor. The insurance company will evaluate your current health status, including any pre-existing medical conditions, and family medical history. They will also consider your lifestyle choices, such as smoking, alcohol consumption, and participation in risky activities or hobbies. These factors can increase your risk profile and lead to higher premiums or difficulty in obtaining coverage.

It's important to be honest during the application process and disclose any relevant information. Misrepresenting or omitting information could result in your application being denied or your beneficiaries being denied the death benefit in the future.

Understand the difference between term and permanent life insurance

Life insurance is a complex topic, but the basics are simple enough. The primary purpose of all life insurance is to provide a benefit to people you choose (called "beneficiaries") upon your death. Typically, these are people who are dependent on your income.

There are two types of life insurance: term life insurance and permanent life insurance. Term insurance covers you for a specified time period, such as 10, 20, or 30 years. Permanent insurance, on the other hand, remains in place for your entire life.

Term life insurance is a simple and relatively inexpensive way to get life insurance coverage. If you pass away while the policy is in force, your beneficiaries will receive a payout. Term life insurance is often likened to renting an apartment—it's intended for a limited period, and it's often less expensive than permanent insurance.

Permanent life insurance, on the other hand, is like purchasing a home—you own it for life as long as you continue to pay the premiums. Permanent life insurance is generally more expensive than term insurance, but it can also serve as a financial tool during your lifetime. It holds a cash value that you can withdraw, borrow against, or list as an asset when applying for credit.

Length of protection: Term life insurance provides temporary protection for a set period, whereas permanent life insurance offers long-term or lifelong coverage as long as you continue to pay premiums.

Benefits: Term life insurance offers short-term death benefit protection, with beneficiaries receiving a lump-sum payment. Permanent life insurance, meanwhile, allows you to build cash value, which can be accessed to pay for emergencies or significant expenses like college or retirement.

Cost: Term life insurance is initially less expensive, but permanent life insurance may be more cost-efficient in the long run as it never needs to be renewed, and rates don't increase with age.

When deciding between term and permanent life insurance, it's important to consider your unique circumstances and financial needs. Term life insurance is ideal if you need short-term coverage or are on a budget, whereas permanent life insurance is suitable if you require long-term financial protection, wish to create an inheritance for your heirs, or prefer stable premiums.

Know the application process, including the medical exam and personal questions

The life insurance application process involves filling out paperwork, taking a medical exam, and providing health histories for yourself and your immediate family. The application will ask for basic information such as your name, address, occupation, and employer. It will also ask for personal information, including:

• Lifestyle habits (e.g. smoking, drinking, exercise)
• Health histories of immediate family members
• Financial information, including your annual income and net worth
• Risky hobbies, such as skydiving or rock climbing
• Criminal convictions, particularly moving violations while operating a vehicle

It's important to be honest when answering these questions, as lying about a health condition or lifestyle can lead to your application being denied or your policy being cancelled.

Most life insurance policies also require a medical exam, which is arranged by a life insurance agent who will send a licensed healthcare professional to meet you at your home, office, or a clinic. The medical exam will likely include:

• Recording your medical history, including any medical conditions, surgeries, and prescription medications
• Asking about your family's medical history
• Taking your blood pressure
• Listening to your heartbeat
• Checking your height and weight
• Asking about lifestyle habits that could affect your health

Depending on your age, the type of policy you want, and the amount of coverage you're applying for, you may also need to undergo additional tests, such as an EKG, a chest X-ray, or a treadmill test.

The insurance company will then review your application and medical exam results, and may order medical records from your physician to learn more about any medical conditions you have and the treatment received. This helps them determine the level of risk you represent and how much to charge for coverage. The review process can take days or weeks, depending on various factors such as the completeness of your application and how long it takes to receive lab results.

Research policy options and compare quotes from different providers

Once you have decided on the type of life insurance you want, it's time to research policy options and compare quotes from different providers. Here are some steps to help you through the process:

• Determine your coverage needs: Consider your financial obligations, such as income replacement, debts, mortgage payments, child care, and college tuition. Subtract any existing resources, such as emergency savings, retirement savings, or existing life insurance policies. This will give you an estimate of the coverage amount you need.
• Compare quotes from multiple insurers: Life insurance rates can vary significantly between companies, so it's crucial to compare quotes to find the best price and coverage for your needs. You can get free quotes online, by phone, or through an agent or broker. Make sure to provide the same personal details and coverage amount for each quote to ensure an accurate comparison.
• Evaluate life insurance companies: In addition to comparing rates, it's important to consider the financial strength and reputation of the insurance company. Look for companies with high financial strength ratings from agencies like AM Best, and low customer complaint ratios. Also, consider their customer satisfaction scores and the range of policy options they offer.
• Understand the application process: The application process may vary depending on the insurer and the type of policy you choose. Be prepared to provide detailed information about your health, lifestyle, family medical history, and financial situation. If required, you may need to undergo a medical exam as part of the underwriting process.
• Review the policy details: Before making a decision, carefully review the policy terms and conditions, including the coverage amount, premium payments, and any additional benefits or riders. Ensure you understand the policy's limitations and exclusions to avoid surprises later.
• Seek expert advice: Consider consulting an independent insurance agent or financial advisor who can help you navigate the different options and find the best policy for your specific needs. They can provide valuable insights and guidance throughout the process.

Consider ways to reduce your premium, such as quitting smoking or losing weight

Life insurance premiums are based on risk. Providers will charge more for policies that they are more likely to pay out. Therefore, your overall health, including your weight, can play a role in how much you pay or make it hard to find coverage in the first place. Life insurance companies use build charts to determine the ratio between your height and weight, which are then compared against mortality rates within your build type to determine your risk rating. If your weight is under or over the preferred ratio, you will likely be considered a riskier applicant, pay higher premiums, and, in some cases, be denied coverage altogether. Obese individuals are at an increased risk for serious health complications, including hypertension, type 2 diabetes, stroke, heart disease, and cancer. Being underweight also comes with its own health risks like anemia, osteoporosis, and decreased immune function. These health conditions can lower your life expectancy and will appear as risk factors to life insurance underwriters.

If you need life insurance to adequately protect your loved ones, finding the right policy as soon as possible may be your best choice, regardless of your plans to lose weight. A term insurance policy might make sense if you plan to begin a comprehensive weight loss program in the future. Once the weight is off, you could then purchase more robust permanent life insurance or a second, or replacement, term policy with potentially lower premium rates.

Keep in mind that while there is no single type of coverage that is the best for weight loss, term insurance, as the name suggests, offers coverage for a limited term. Waiting until you lose weight before you apply for coverage may leave your loved ones in financial distress if you were to die in the interim. A weight reduction plan might take several years before leaving you at a comfortable weight. A term policy could serve as a stopgap measure until your weight loss regimen is complete, and you can then either purchase a new policy or ask your current insurer for a rate class reconsideration.

Before purchasing a policy, discuss the potential for future re-evaluations or ratings if you think a life change like weight loss may apply to you. While every insurance company will have a different policy on the re-evaluation process, most life insurance companies will need to see significant and healthy weight loss that is being maintained before they will lower your premium. It is also likely that a crash diet undertaken without medical support will not help lower your rate. Most insurers want to see a lower weight maintained over the course of at least a year before considering a premium reduction. Some carriers may split the difference between your current and past weights to determine your rate. After weight loss, insurance reapplication will consist of a new medical exam and an evaluation of your medical records. Be sure that your records show that you have not only lost significant weight but have been able to keep it off.

To qualify for a re-rating, consider the build chart in which you were first evaluated. If you have just lost a few pounds, many insurance companies will not feel that your risk factor has changed. However, if you have gone from clinically obese to a medically healthy weight, your weight-to-height ratio may change enough to lower your risk rating and, in turn, lower your premium. When asking for re-evaluation, note that you will need to back up your weight loss claims with solid evidence. If your company will not let you apply for re-evaluation, you may want to start over and apply for a new policy with a different company.

In addition to losing weight, quitting smoking can also help reduce your life insurance premium. Life insurance companies will ask about tobacco, alcohol, and drug use, along with other risky habits like dangerous hobbies or professions. If you are able to quit smoking and lose weight, you can significantly reduce your life insurance premium.

Frequently asked questions