Applying for life insurance is a crucial step in planning for your family’s future financial security. But before you start filling out a life insurance application, there are some things you should know.
Read on to learn eight essential things you need to know before you apply for life insurance, plus how to apply for life insurance and some common life insurance questions.
What you should know before applying for life insurance
1. Your coverage needs
When getting ready to apply for life insurance, one of the first things to decide is how much life insurance coverage you need. There’s no magic amount that’s right for everyone, so take time to consider your family’s needs.
Key considerations include:
- The cost of funeral arrangements
- The number of dependents you have, and their ages
- Your annual income, including hidden income like insurance through your workplace
- Whether your family will need the death benefit to pay for significant expenses, like a mortgage or your children’s college tuition
Some experts advise getting coverage based on your annual salary — often between two and six times what you make in a year. However, each family’s needs differ, and general recommendations don’t account for your circumstances.
Calculate how much your family will lose in income after your death and what expenses they’ll face to determine how much coverage to get. You can speak to an insurance agent if you need help calculating your coverage needs.
2. The types of life insurance policies available to you
Another important determination is the type of insurance you need. There are two main categories of life insurance — term and permanent — and it’s important to understand the characteristics of each. Both options have advantages and disadvantages, but you must determine which is best for you based on your needs, budget and goals.
Here’s an overview of policy type:
Term life insurance
- Most affordable
- Lasts for a set amount of time, often between five and 30 years
- Guaranteed death benefit if you die within the policy term
- Doesn’t accumulate cash value
Term life insurance is ideal if you want an inexpensive policy to cover time-sensitive expenses for your loved ones, such as a mortgage or school tuition payments.
Permanent life insurance
- More expensive than term life insurance
- Lasts until death or the policy's maturity date, usually at age 95 or 100
- Guaranteed death benefit so long as you pay your premiums
- Accumulates cash value
Permanent life insurance is a good choice if you have a little more to spend and want a policy that provides a death benefit while building a cash value.
You can learn more about the different types of life insurance in Money’s guide to life insurance for beginners.
3. The policy's terms, conditions and exclusions
Every policy comes with terms, conditions and exclusions, and it’s crucial that you understand them before completing the purchase. You can usually find these in the policy contract and disclosure statement.
For example, confirm whether the policy has a contestability period and how long it lasts. The contestability period is the time following the purchase of the policy when the insurance company can review your application and investigate the cause of death to determine whether the claim is legitimate — often two years.
After this time, the company must pay the claim as long as your policy is active and you didn’t give false information on your application.
Other terms, conditions and exclusions you might find in your policy documents include:
- Free look period: The lenght of time after purchase you can cancel the policy and get your money back.
- Claim payment: The length of time the company has to pay out claims after they’re filed.
- The grace period: The number of days your premium can be late without the policy lapsing.
- Exclusions: The reasons for which the company can legitimately deny paying the death benefit, such as if you die by suicide druing the first few years of the policy.
4. Your medical history
The requirements for life insurance vary among providers, but most use your health status and medical history to determine eligibility. If you apply for guaranteed acceptance life insurance, you’ll be approved regardless of your health, so long as you’re of eligible age.
However, with most guaranteed acceptance plans, life insurance rates are high and coverage amounts are relatively low. Most plans also have graded benefits, which means that if you died within the first few years of the policy, your beneficiaries would receive a reduced death benefit amount.
For all other policies, expect questions about your medical history to be part of the life insurance qualifications. Generally, you’ll need to provide information like:
- Your healthcare provider’s name and contact information
- Current medical conditions
- Health history
- Prescription medications
5. The life insurance medical exam
Depending on the insurance company, the type of policy you’re applying for and your health history, you may need to undergo a medical exam. The exam could include:
- A biometric screening, like height and weight measurements
- Check of vital signs, including heart rate and blood pressure
- Lab testing, such as blood work and urinalysis
- Specialized testing, like an electrocardiogram and cognitive screening
6. Life insurance riders and policy enhancements
Most life insurance plans offer optional riders to enhance and customize your policy. Available riders vary by insurance company and policy. Sometimes, riders are only available in certain states, so confirm their availability beforehand.
Adding a rider to your policy generally costs extra. Nevertheless, some insurers sell policies with riders already factored into their cost. Some of the most common riders include:
- Accidental death benefit rider: Increases the death benefit if your death is caused by an accident.
- Children’s insurance rider: Provides term life insurance coverage for minor dependents.
- Long-term care rider: Helps cover long-term care expenses if you’re diagnosed with a qualifying illness.
- Living benefit riders: Allow you to access a portion of your policy’s death benefit if you’re diagnosed with certain chronic, critical or terminal illnesses.
- Guaranteed insurability rider: Gives you the option to increase your coverage in the future without undergoing a medical examination or testing.
- Disability waiver of premium rider: Waives your monthly premium if you become disabled while insured.
7. Your premium payment schedule
When applying for life insurance, you must decide what premium payment schedule fits your budget. You may be able to pay premiums monthly, quarterly or annually. Some companies will give you the option of how often to make payments, while others have a set schedule you’ll need to follow.
If you prefer a particular payment schedule to ensure it fits within your budget, you might need to shop around to find a company that offers it. Be sure you understand when you’ll need to pay your premiums before deciding on a policy.
8. The underwriting process and application approval
During the underwriting process, the insurance company will evaluate the level of risk involved in insuring an applicant. Life insurance underwriters typically review the medical history questions from the life insurance application. They also obtain the applicant’s medical records from healthcare providers or medical databases to verify the information they provided in the application.
Besides the applican't self-reported information and their medical record, the underwriter will also use the results from the physical exam and lab work — if applicable — to make an approval decision and calculate their premium payments. Underwriters often use the assistance of specialized software when weighing the risk each applicant poses.
Common life insurance application questions
Life insurance application questions very by company, yet common ones include:
- What is your date of birth and Social Security number? These pieces of information help the insurance company verify your identity.
- What’s your annual salary and net worth? Your financial information helps the insurance provider determine how much life insurance coverage you qualify for.
- What types of locations do you typically travel to? Traveling to dangerous destinations increases your risk and could affect your coverage and premiums.
- How’s your driving record? A history of moving violations makes you a higher risk to the insurance company. It could indicate reckless driving and a higher risk of early death.
- What's your current occupation? If you have a job that puts your life in danger, you may be denied coverage or charged higher premiums.
- What are your hobbies? Some hobbies, like bungee jumping and scuba diving, put you at a higher risk of early death, even if you’re in good health.
How to apply for life insurance
Once you decide on the policy, coverage amount and enhancements that best fit your needs, you’re ready to complete your life insurance application.
One option is to apply directly through the life insurance company. The company’s website will typically guide you through the sign up process. Some let you apply online, although this is more common for term life insurance applications than for whole or universal policies.
Other companies require you to call and speak with an agent for all life insurance applications. Often, the agent will fill out the life insurance paperwork and send you a copy to sign electronically.
You can also work with an independent insurance agent who’ll guide you through the process. Because independent agents don’t work for a specific insurance company, they can present you with different options and help you find the best life insurance policy.
Life insurance application FAQs
Who is not required to sign a life insurance application?
How long does it take to get life insurance?
The time it takes to get life insurance varies based on the company and the type of policy for which you're applying.
It's possible to be approved in as little as 24 hours when applying for a simplified issue life insurance policy. If you're applying for a fully underwritten policy, it may take up to six weeks to get an approval decision.
Why is an applicant's signature required on a life insurance application?
Why do life insurance companies ask if you have other insurance?
When you apply for life insurance, the agent might ask if you have any other active policies. This helps the company understand your overall financial and insurance profile. The agent wants to ensure you have enough coverage but prevent you from being over-insured.
There are situations where it makes sense to have more than one policy, like supplementing a permanent policy with additional term coverage or buying a new term policy before your current one expires. But purchasing multiple policies or much more coverage than you really need can be a red flag to companies that an applicant may be attempting to commit insurance fraud.
Summary of Money’s 8 things to know before submitting a life insurance application
Before you apply for life insurance, there are some key things you need to know. These include:
- Your coverage needs
- The types of life insurance available to you
- Policy terms, conditions and exclusions
- Your medical history
- The life insurance medical exam
- Life insurance riders and policy enhancements
- The underwriting process and application questions
Once you’re ready to apply, you can work directly with the life insurance company or an independent agent.