Life Insurance: Is It Really That Hard To Get?

Life insurance is a legally binding contract between an insurance company and a policy owner, where the insurer guarantees to pay a sum of money to one or more named beneficiaries when the insured person dies. The difficulty of getting life insurance depends on several factors, including age, health, lifestyle, and financial situation.

Generally, younger and healthier people find it easier to qualify for life insurance and pay lower premiums. As people age, the risk of developing health conditions increases, leading to higher mortality rates and insurance rates. Lifestyle choices, such as smoking or engaging in risky activities, can also make it harder to qualify for life insurance or result in higher premiums.

Additionally, individuals with financial dependents, such as spouses, children, or elderly parents, may find it more challenging to get affordable life insurance as the coverage amount needs to be higher to ensure their loved ones are financially secure in their absence. On the other hand, young, single adults with no financial commitments or dependents may find it easier to obtain life insurance, but the coverage amount and associated benefits may be lower.

It is recommended to purchase life insurance as early as possible when individuals are young and healthy to lock in lower rates and ensure coverage for future life stages, such as starting a family or buying a home.

Life insurance for those with financial dependents

Life insurance is a legally binding contract that promises a death benefit to the policy owner when the insured person dies. The policyholder must pay a single premium upfront or regular premiums over time for the life insurance policy to remain in force. When the insured person dies, the policy's named beneficiaries will receive the policy's death benefit.

Life insurance is a good idea for those with financial dependents, such as parents with minor children. If a parent dies, the loss of their income or caregiving skills could create financial hardship. Life insurance can ensure the children will have the financial resources they need until they can support themselves.

The best time to buy life insurance is usually as soon as possible. That's because the younger and healthier you are when you purchase a policy, the lower your premium will generally be. If you're single with no children, life insurance may not be a priority. But if you have a family or are planning on starting one soon, or if you have debt that your estate would be responsible for after your death, you should consider a life insurance policy.

There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance policies are designed to last a certain number of years, then end. Common terms are 10, 20, or 30 years. Permanent life insurance policies are more expensive than term life insurance, but they stay in force throughout the insured's entire life unless the policyholder stops paying the premiums or surrenders the policy.

When deciding how much life insurance to get, consider your financial situation and how much money would be required to maintain your beneficiaries' standard of living. Think about expenses such as mortgage, college tuition, credit cards, and other debts, as well as funeral expenses.

Life insurance for those without financial dependents

Life insurance is generally intended for those who have financial dependents, such as a spouse or children, to protect them from financial burdens after the policyholder's death. However, there are some reasons why someone without financial dependents may still want to consider life insurance.

Firstly, if you have private student loans, a mortgage, or other debts, life insurance can help cover these expenses if you pass away. This is especially relevant if you have a co-signer on any loans, as they may become responsible for paying off the remaining debt.

Secondly, life insurance can also cover funeral and burial costs, which can be substantial. This can ease the financial burden on your family or next of kin.

Thirdly, if you are a small business owner, life insurance can help keep your business running after your death. The death benefit can be used to hire a replacement, allow your partners to buy your remaining shares, or provide for employees.

Finally, if you plan to start a family in the future, it is worth considering life insurance now. The younger and healthier you are when you purchase a policy, the lower your premium will generally be. Locking in lower premiums while you are young and single can be a good idea if you think your insurability may decrease in the future due to health issues or other factors.

Overall, while life insurance is not a necessity for those without financial dependents, there are still some valid reasons to consider purchasing a policy.

Life insurance for older people

Life insurance is an important consideration for older people, especially those who are retired or approaching retirement. While some people in their 60s and 70s may no longer need life insurance, it can still be a valuable tool for financial planning and ensuring your loved ones are provided for after your death. Here are some things to consider when thinking about life insurance for older individuals:

Why Older People May Need Life Insurance:

• Income Replacement: If you are still working and your spouse or family depends on your income, life insurance can provide a safety net in the event of your death.
• Estate Planning: Life insurance can be used as part of estate planning, especially for people with high net worth. It can help pay estate taxes, fund buy-sell agreements, or distribute money to heirs in a tax-efficient manner.
• Final Expenses: Life insurance can cover funeral and burial costs, which can range from $7,000 to $12,000 on average, as well as any outstanding medical or legal bills.
• Debt Repayment: If you have outstanding debts, such as a mortgage or student loans, life insurance can ensure that your family is not burdened with these payments after your death.
• Supporting Dependents: If you have children, grandchildren, or other family members who depend on you financially, life insurance can provide them with financial support in your absence.

Types of Life Insurance for Older People:

• Term Life Insurance: This type of insurance provides coverage for a set period, such as 10, 20, or 30 years. It is generally more affordable than whole life insurance, making it a popular choice for older individuals who may not need lifelong coverage.
• Whole Life Insurance: Whole life insurance offers permanent coverage for the rest of your life and can build cash value over time. While it is more expensive, it may be a good option for older people who want coverage for their entire lives, especially if they are in good health.
• Guaranteed Issue Life Insurance: This type of insurance is designed for older applicants and does not require a medical exam. It offers more expensive coverage but guarantees acceptance, making it an option for those with health issues.
• Final Expense/Burial Insurance: This is a small whole life insurance policy specifically designed to cover funeral and burial costs. It is affordable and accessible for older individuals and can remove that financial burden from your loved ones.

Factors to Consider:

• Age and Health: Age is a significant factor in life insurance rates, and any health issues can further increase costs or limit your options. The younger and healthier you are when purchasing a policy, the lower your premiums will generally be.
• Financial Situation: Consider your income, debts, and financial obligations when deciding on life insurance. If you have few financial worries and no dependents, you may not need as much coverage.
• Existing Coverage: If you already have life insurance, review your policy to see if it still meets your needs. You may be able to extend or convert your policy to adjust the coverage.

Recommendations:

It is recommended to consult with a financial advisor or insurance expert to determine the best course of action for your specific situation. They can help you navigate the complex world of life insurance and ensure you make informed decisions about your coverage.

Life insurance for those with pre-existing medical conditions

Pre-existing medical conditions can make it more challenging and costly to obtain life insurance, but even those with chronic or terminal illnesses can usually find a policy that suits them if they shop around. The specific policy types one qualifies for will depend on their medical problems, how well their condition is managed, and the insurer.

A pre-existing condition is a medical issue that was diagnosed or treated before applying for life insurance. Examples include high blood pressure, diabetes, cancer, and asthma. Previous injuries may also be considered pre-existing conditions, depending on their severity and any lasting effects.

Due to the added risk that pre-existing conditions create for insurers, they can lead to higher premiums or even disqualification from certain types of life insurance. Insurers typically group applicants into rate classes based on their health, and a serious health condition may result in substandard rates or denial of coverage.

Options for those with pre-existing conditions

Those with pre-existing conditions have several options for obtaining life insurance:

• Group life insurance: Often offered by employers, group life insurance does not consider health conditions and is highly affordable. However, the death benefit is limited, and the policy is only valid while employed.
• Guaranteed issue life insurance: This type of insurance does not require a medical exam or health questionnaire, but it is significantly more expensive and may have a rule that the insurer will only return premium payments instead of paying out the death benefit if the insured dies within a few years of purchasing the policy.
• Accidental death and dismemberment insurance: This type of insurance pays out only in the event of an accidental death, so medical history is not considered. However, the death must be caused by a covered accident for beneficiaries to receive the payout.
• Term or permanent life insurance: While more challenging to obtain with a pre-existing condition, it is still possible to find insurers that offer coverage for specific medical conditions.

Tips for buying life insurance with a pre-existing condition

• Be mindful of when you apply. Insurers are more likely to turn you down if you apply shortly after a significant diagnosis, but you can reapply if your treatment has been effective.
• Take advantage of improvements in your health. If accepted but charged a high rate, you can request a re-rating and a lower premium once your condition is under control and your prognosis is positive.
• Find the right agent. Look for an independent life insurance agent who works with an impaired risk specialist and knows which insurers are more likely to provide good rates for your condition.
• Get quotes from multiple insurers. Different companies may review specific health conditions uniquely.
• Do not conceal your condition from your insurer. Misrepresenting your health could cause the insurer to reject a claim or record the incident in an insurance database, hurting your chances with other companies.

Life insurance for those with dangerous hobbies

Life insurance is generally more expensive for those who engage in dangerous hobbies, as these activities are deemed "high-risk" by insurance companies. This is because the riskier your lifestyle, the more likely you are to die from an accident, and insurers are betting on your longevity. However, not all insurers treat high-risk activities the same, and it is still possible to obtain life insurance even if you do participate in these hobbies.

Insurance companies will consider various factors when assessing the risk of your dangerous hobby, including:

• Frequency and experience: The more often you take part in the activity, and the less experienced you are, the higher the risk.
• Health and medical history: Serious medical conditions, combined with participation in dangerous hobbies, can result in a decline of coverage.
• Training and certification: Obtaining certifications and training can help to keep rates affordable by demonstrating your commitment to safety.
• Aviation: Private aviation, including helicopter and student pilots, is considered high-risk.
• Skydiving and parachuting: These activities are generally deemed dangerous by insurers, but occasional jumps may only result in a modest fee increase.
• Climbing and mountaineering: Indoor climbing walls are not an issue, but outdoor rock, mountain, and ice/snow climbing will likely result in higher rates.
• Motorsports: Drag racing, stock car racing, and motocross are considered high-risk due to the potential for injury or fatality.
• Scuba diving: Casual, supervised, and open-water scuba diving may be acceptable, but frequent deep dives or hazardous types of diving (e.g., wreck, cave, or ice diving) can lead to higher rates or even denial of coverage.
• Snow sports: Skiing, snowboarding, and snowmobiling in resorts or designated areas are typically not an issue. However, out-of-bounds activities or those in high-risk areas for avalanches may result in higher rates or exclusions.
• Hang gliding and paragliding: These activities are often deemed high-risk, and insurers will consider the type of aircraft, frequency of flights, and altitude.

If you engage in any of these activities, it is essential to be truthful on your life insurance application. Failing to disclose hazardous hobbies may result in the denial of a death claim or invalidation of your policy. Additionally, it is advisable to seek coverage with the help of a knowledgeable broker or agent who can guide you to insurers that view your dangerous hobbies more favourably.

Frequently asked questions