Frequently Asked Insurance Questions

How much coverage will I qualify for?

Typically, an individual can get up to 20 times his or her annual income in coverage. The total coverage amount a person will qualify for often decreases with age, as retirement draws nearer. For those who are not currently employed, it’s still possible to get $50,000 to $100,000 of coverage for items such as final expense needs. Unemployed individuals will have to provide information on the application to prove that they can afford the premiums, such as disability or retirement income information.

It’s possible to get more than 20 times your income for coverage, if you have additional assets to protect over and above your income. It is also possible for homemakers to qualify for the same amount of coverage their spouse has, even without a separate income.

Group life vs. individual life insurance

Group life insurance is offered by an employer, whereas individual life insurance policies are purchased outside of work. Sometimes group insurance can cost less, depending on a person’s age or pre-existing health conditions. The downside is that group life insurance isn’t always portable. That means if you leave your employer — or your employer leaves you — you could find yourself with no life insurance coverage.

As with investments, it’s a good idea to diversify your insurance plan. In other words, don’t put all of your eggs in one basket. It’s important to secure your own individual term life insurance policy before something unexpected occurs, such as a change in your employment, or your health. In the clip below, Dave Ramsey explains this concept further:

How much will it cost to apply for a policy?

There is no cost to apply for a policy. An application is required to get a firm rate quote. If a physical exam is required, the insurance company will pay for it. When you apply, you have no obligation to take out a policy. Once you’re approved for coverage, you can change the term of the policy and the coverage amount to fit your budget if the rate comes back higher than expected because of health-related issues.

How can I get the best results from my physical exam?

Medical Exam Tips – Q and A
Q: What is a paramed exam?
A: A paramed exam is a personal interview to collect information about your medical history. This information allows the insurance company to perform a comprehensive evaluation of your current health. The exam usually includes the recording of height, weight, blood pressure, and pulse. It may also include the collection of blood and urine.

Q: What happens when the exam is complete?
A: The results of the exam are sent to the insurance company. Any specimens obtained during the exam are sent to the laboratory, and those results are also sent to the insurance company for assessment.

Q: How should I prepare for my paramed exam?
A: To obtain accurate information, we recommend that you:

  • Fast for 8 hours before the appointment
  • Have a picture ID
  • Limit your intake of salt and high-cholesterol foods 24 hours before the exam
  • Avoid strenuous exercise 12 hours before the exam
  • Refrain from drinking alcoholic beverages for at least 12 hours before the appointment
  • Limit caffeine and nicotine 1 hour before the appointment
  • Drink a glass of water 1 hour before the appointment
  • Provide the names and dosages of medications you are currently taking
  • Have the names, addresses, and phone numbers available for any doctors or clinics you’ve visited in the last 5 years
  • Get a good night’s sleep before the exam

This video describes how to get the best results from your blood pressure reading:

Should I replace my current life insurance policy?

That depends on your needs, which can change over time. Most term life insurance policies have a premium that increases each year after the initial guaranteed level term period. If you are nearing the end of your initial term period and want to lock in a rate that won’t change for another predetermined number of years, it might benefit you to apply for a new policy and replace, or surrender, the old one.

Best practices when it comes to replacement:

1) Always apply for and secure the new policy before canceling the old one, as some people find they are no longer insurable while applying for a new policy. For instance, changes in your health since the last time you applied for a life insurance policy might make it more challenging to obtain a new policy.

2) If you already have a policy, you will need to indicate how much coverage you have and what company the policy is with, You will also have to indicate whether you intend to replace your current policy. Individuals can normally get up to 20 times their annual income for a total coverage amount. If you replace your current policy, the new company will not consider the coverage amount of your current policy as part of your total coverage amount. If you keep your current policy, the coverage amount of your current policy will be included in the calculation.

Example: A person who makes $50,000 per year can get up to $1,000,000 of life insurance. If that person already has a $500,000 policy and wishes to keep it, he or she will only qualify for another $500,000 policy, as the two will total $1 million of coverage. If, on the other hand, that person wants to replace the current policy for $500,000, then he or she can apply for $1,000,000 of coverage with the new carrier.

3) Most insurance companies are not concerned about your group life insurance coverage through work, as those plans are usually not portable. What that means is that most group term coverage cannot go with you if you leave the employer that is providing the coverage. So, when you are asked about your current coverage on the application, the insurance company wants to know about the policies you’ve taken out on yourself, not about your group coverage of 1 to 10 times your annual salary at work.

Replacements in the state of New York:

If you live in the state of New York, there’s an additional process to go through, called Regulation 60, any time you replace a policy or begin a new policy within 6 months of canceling an old one. This can delay approval of the new policy for up to a month or so, because the new carrier has to notify the old carrier of your intentions to replace the policy. All states have replacement procedures much like this, but the state of New York has an additional paperwork procedure to be sure that all parties understand your intentions. This is done as an added consumer protection. It’s basically just an extra “hoop” to jump through with regard to replacing life insurance policies, only in the state of New York.

How long does it take to get a life insurance policy?

This depends on what kind of policy you apply for.

Typically, it takes approximately 2 business days to apply for a no medical exam policy, get it approved, and have it put in force. These policies are available to people up to age 60 or so, depending on the insurance company. The coverage amount you can apply for with a no medical exam policy is limited because of the greater risk the insurance company is taking. (When there’s no physical exam involved, the insurance company has less health information about the applicant.) For healthy applicants, these policies can cost up to twice as much as a medically underwritten policy. But, for people who don’t like needles, the no medical exam option is great.

A medically underwritten, or traditional, term life insurance policy will typically take about 3 weeks from start to finish. This process can take longer when applicants have health issues and the underwriter orders medical records from their doctor. If this occurs, we let our clients know that they can call and ask their doctor to expedite the submission of the medical records to the underwriter. Sometimes that can speed up the application process.

What kind of payment options are available?

Most carriers have the same rules when it comes to paying premiums on life insurance policies. The only way to make monthly payments these days is to authorize a monthly automatic draft from your checking or savings account. If you prefer not to make automatic payments, there are some other options. You can receive a bill by mail if you elect to pay quarterly, semi-annually, or annually.

Most people choose to make automatic payments for their life insurance for the same reason they do for other bills, such as car insurance: they don’t want their policy to be canceled because of non-payment.

Do I have to send a down payment with my application?

You do not have to send a payment with your application — unless you want to be covered during the underwriting process (which typically takes about 3 weeks). Most people choose to wait until their application has been approved before making a payment and starting coverage. Once an approval has been made, if the rate that comes back is different from the one you applied for, you can make changes to the policy to fit your budget. Also, most people want to know the exact cost before making a payment to begin coverage.

You do not have to provide billing information on the application, either. You can provide that information after an approval has been made and you’ve decided that you want to begin coverage under the terms of the policy.

If you want to secure temporary insurance and be covered during the underwriting period, you can include a payment for 2 months’ premium. It’s refundable if you decide not to take out a policy based on the final approved rate.

How can I increase the coverage amount on my current policy?

Normally, this is not possible. Usually when someone wants more coverage, a new application and physical exam are required. So, it’s best to apply for the most amount of coverage and the longest term length you want to be considered for. Once we have the approval information, you can make changes to the coverage amount or term length before beginning the coverage the policy provides.

Typically, changes that involve an increase to the coverage amount or term length can only be made within the first 30 days of the policy. However, you can choose to decrease the total coverage amount or the term length at any time, which will result in a lower premium.

What if I have pre-exisiting conditions? Can I still get life insurance?

It depends on the pre-existing condition. For example, it’s difficult to obtain life insurance when you’ve had cancer (skin cancer is the one exception), or within 5 years after having a heart attack. On the other hand, it’s fairly easy for people who have high blood pressure, high cholesterol, or high blood sugar (such as those with type 2 diabetes) to obtain coverage — as long as they are under a doctor’s care and the condition is under control.

There are graded benefit and final expense policies available for people who have greater health risks. The premiums for these policies most likely will be higher, depending on the severity of the pre-existing condition. It’s often beneficial for people who have pre-existing conditions to discuss them with an agent before applying for coverage. Doing so may increase the chances of a more favorable approval.

I have type 2 diabetes. Can I still get life insurance?

It’s fairly common for people who have type 2 diabetes that’s under control to get a Table 2 health rating (which is slightly higher than a standard health rating) from most of the larger insurance companies. If you have additional health issues, or if your diabetes is more complicated, it could cost more because of the increased health risk.

Your best bet is to speak with a licensed insurance agent about your particular situation. An application will be required, as each person’s health situation is evaluated individually. Once you find out what kind of coverage you can get for your money, then you can decide if you want to proceed.

I’m pregnant. Should I wait until after I have my baby to apply for life insurance?

Since most women quit smoking and drinking while they’re pregnant, and as a result their health improves, it can be one of the best times to apply for coverage. Underwriters take pregnancy weight gain into consideration, so additional baby weight won’t increase the premium you’ll pay. Complications during pregnancy are looked at a little more closely and could increase your rate, depending on the particular health risks involved.

How much coverage can a homemaker get? Does a homemaker need life insurance?

Homemakers qualify for the same amount of coverage as their spouse, even without independent income of their own. Insuring homemakers is important because of the role they play in raising children. If something were to happen to the homemaker, the spouse who’s the income earner would have to take on an additional burden in terms of childcare and extracurricular activities. That’s the main reason for having life insurance on a homemaker. If the coverage is sufficient, the working spouse may be able to become the stay-at-home parent as a result in the change in wealth the life insurance benefit has created.