Most of us do anything we can to avoid the topic of life insurance.
And even though we know we need it, most of us are also scared of the entire approval process because it used to be very tedious.
But here’s the truth: you’ve probably talked to your friends and read some personal finance advice, and now it’s time to face it—you need to buy life insurance.
But so many questions!
Do I need a licensed agent? How long does it take to get a new policy approved? What is the waiting period?
What kind of life insurance design is best for someone like me? Do I need a medical exam or to send medical records? What types of benefits will different policies provide my family?
Trust me; I had the same questions over 12 years ago before becoming an agent, so keep reading to find out what you need to know to get started and get approved.
Life Insurance Approval Time
The life insurance new policy approval process can take as little as 24 hours or as long as three to six weeks.
The application approval’s duration depends on the type of coverage you choose and the underwriting process.
Other factors may also apply, such as how you answer specific application questions, as well as your medical history.
Remember, life insurance companies want to assess the risk of insuring you thoroughly before they approve your policy and determine a premium.
However, you can choose a coverage type and underwriting process that will fast-track the approval process if you qualify.
The Life Insurance Application Process
Start the life insurance application process by deciding what kind of coverage and death benefit you need and choosing a licensed insurance agent or a reputable company.
You will submit a detailed application either in person or online that may require a paramedical exam and additional health information.
The insurance company will review your application and begin the underwriting process.
What is Underwriting?
The underwriting process is the step that usually takes the longest when you apply for a life insurance policy.
The underwriter looks at all of the information you provide and compares it to the lifespans of other people who have similar backgrounds.
Their goal is to set a price-point that allows them to collect premiums for a maximum amount of time before you die.
As you will also see below, some underwriting situations won’t require a manual review, and you could get approved instantly for coverage.
What Factors Do Underwriters Consider?
Your underwriter will look at a wide range of factors to determine your risk profile. Your ability to provide complete and accurate information will shorten the process. Therefore, be prepared to document any of these activities.
- Personal and family health history
- Occupation (a dangerous job means a higher level of risk)
- Lifestyle habits, such as smoking, alcohol, or drug use
- Hobbies (if you knit, your risk is low; if you skydive, your risk is high)
- International travel (your risk may go up if you’re a frequent flyer or you routinely travel to countries in conflict)
Underwriters typically look at documents such as:
- Paramedical exam results (Medical Exam)
- Attending physician’s statement (APS)
- Medical Information Bureau history (MIB)
- Prescription medication history (Intelliscript)
- Motor vehicle report (MVR)
- Actuarial tables to assess body mass index (BMI) and mortality.
Different Types of Underwriting
Several different types of life insurance policies are available. Each requires a specific underwriting process—some, faster than others.
Guaranteed issue life insurance policies are available to any eligible applicant regardless of their health status.
The face value of a guaranteed issue coverage is usually less than $25,000. You can take advantage of this type of coverage if you are in poor health and want to provide end-of-life or final expenses.
The underwriting process requires no medical exam, and you won’t have to answer any health-related questions.
You can typically complete the application process in just a few minutes. The downside is that your premiums will be relatively high, and the death benefit will be minimal.
A guaranteed issue policy should be your last option.
Simplified issue life insurance requires a little longer to complete the underwriting process. You’ll have to answer some basic health questions, but you can still skip the medical exam.
You can benefit from this type of policy if you’re in a hurry and need a plan to cover you temporarily or if you want a fast process.
The underwriter will use your answers to health questions to determine your final premiums.
Simplified issue processing typically takes less than a week. The issuing company will only have a surface knowledge of your health. Therefore, the premiums might be higher than a traditional fully-underwritten policy.
Accelerated underwriting policies require no medical exam or medical records, so the process is much shorter. Also, they don’t cause an automatic premium hike and typically cap out at $1,000,000.
You’ll be required to fill out a comprehensive health questionnaire, usually online, and depending on the company, you could get instant approval.
Accelerated underwriting is the newest form of analysis for life insurance; however, more issuing companies will probably go this route due to the current pandemic.
Traditional (Fully Underwritten)
Traditional underwriting includes the most comprehensive and lengthy evaluation process. You’ll have to submit to a paramedical exam and provide blood and urine samples.
The underwriter will pull an exhaustive medical history, request your medical records, and even dig into your social media accounts (depending on the company) to verify your health status.
The main benefit of traditional underwriting over accelerated is that you can obtain a life insurance policy with a much higher death benefit and, if you are in good health, usually lower premiums.
Choose this option if you are young, healthy, and want a safety net for your family if you die unexpectedly.
Your choice of policy design determines who long it takes to get a new life insurance application approved.
Accelerated underwriting can provide instant approvals, and traditional processing will take anywhere from three to six weeks or longer.
If you need coverage as soon as possible, accelerated or simplified issue underwriting (also known as no exam) may be your best choice.
However, if you don’t mind the wait and want the lowest premium, a traditional policy may be the best option for you.
Either way, don’t wait around. Get covered as soon as possible.