Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.



Life Insurance 105


How to get Approved for Life Insurance

To get approved for life insurance, you must complete an application and undergo the underwriting process. Depending on different factors, the underwriting process could be as simple as filling out an application and waiting a few minutes for your approval or a more lengthy process that requires a paramed exam and ordering your medical records by the insurance company.

How Do I Buy Life Insurance?

The first step to buying life insurance is to speak to a licensed life insurance advisor. Depending on the type of policy you need, the approval process could be as simple as filling out a short application with your agent.

However, most policies require that you go through the underwriting process to get approved.

Life Insurance Underwriting

Fully Underwritten

Fully Underwritten policies are almost always your least expensive option, but they typically take at least 2 - 6 weeks to get approved for your insurance coverage. Fully Underwritten policies will require that you visit with a paramed examiner. Once your exam has been completed, the results and your application will be sent to the Underwriter at the Insurance Company. The Underwriter will order your driving record from your State’s Secretary of State, a report from the Prescription Database (Rx Reports), and a report from the Medical Information Bureau (MIB). Based on your health history, the Underwriter may also order medical records from your doctor(s). Once the Underwriter has all the reports and records requested, it usually takes about a week for the policy to be approved.

Simplified Issue - No Exam

Simplified Issue - No Exam policies are approved without requiring the paramed exam. These policies are typically approved within a few minutes to a few days. In the past, these policies would usually cost more money. Instead of possibly being approved at the best rate class (Preferred Plus), applicants who qualify for Simplified Issue No Exam Underwriting would at best qualify for the fourth best rate class (Standard). This was due to the insurance company taking on more risk because they could not access the information a paramed exam would provide. Thanks to black box underwriting technology, more and more companies are approving policies without requiring a medical exam, and they are approving them at the best rate class an applicant would qualify for with a fully underwritten policy.

Though the exam is not required, these policies are still otherwise fully underwritten. The insurance company will order your driving record, Rx Report, and MIB Report.

Guaranteed Issue

A guaranteed issue policy can be approved if you meet the age requirement, which varies from company to company. The only requirement will be filling out the application with your agent. These applications do not ask any health or lifestyle questions, and since the policy is approved immediately, a payment method will be required.

Most Guaranteed Issue policies have a graded death benefit, meaning the full coverage amount will not take effect until 24 - 36 months. If the insured dies before the policy benefit kicks in, the beneficiary will get back all the premium payments made plus an additional percentage that varies from company to company.

The benefit amount is typically limited from $5,000 - $25,000.

Life Insurance Approval

When the Underwriter has finished the Underwriting Process, there will be one of 5 possible outcomes.

Approved as Applied for

Your policy is approved at the rates you and your life insurance advisor previously discussed.  

Approved Better than applied for

Your policy is approved better than applied for. The cost of your policy will be less than the quotes you received during your application.

Approved Other than applied for

Your policy was approved, but the rates will be higher than what you were originally quoted during your application.

Postponed

The insurance company can not approve the policy at this time. A postponement typically happens when the insurance company either did not get all the information they requested in a timely manner or requires the applicant to go for further medical evaluation before they will approve the policy.

Declined

The Insurance company declines to offer life insurance protection. When your policy is declined, you may still have options. It is best to reach out to your life insurance advisor as soon as possible to discuss your potential options.

How to get Approved at the Best Price

How is the Cost of Life Insurance Determined?

  • Life insurance costs are based on age, gender, health, and lifestyle.
  • Based on your age and gender, every company has about 20 different rate (risk) classes that you may qualify for based on your health and lifestyle. Twelve non-nicotine rate classes and six nicotine rate classes.
  • All rates and rate classes are published with the life insurance state commissionaire, and the qualifications for each rate class are published in the company's underwriting guidelines.

How to find the Best, Lowest Life Insurance Rates?

  • Every Life Insurance Company Publishes its rates, rate classes, and underwriting guidelines with your state’s life insurance commissionaire.
  • Your Licensed Advisor uses state-of-the-art software that tracks the rates for all 40+ companies we work with based on your age, gender, and the company’s published underwriting guidelines.
  • We customize the quotes based on your criteria to narrow down the company that will offer you the lowest rate.

How to find the Best Value?

  • Your Licensed Advisor will ask questions to determine which company and policy are best for you and your family’s situation.
  • Many companies offer unique riders that might make sense for your particular situation. All companies offer a death benefit to protect your family, but the value may come from what these companies provide. One company offers up to 95% of the benefit if you are diagnosed with a chronic, critical or terminal illness. Other companies offer waivers of premium riders if you become disabled or unemployed.
  • To ensure you get the protection you and your family deserve at the lowest rate or best value, we strongly suggest contacting one of our experienced licensed advisors today.

Understanding The Underwriting Process

Life Insurance Underwriting is the process insurance companies use to determine an applicant’s risk of dying prematurely. Underwriting aims to assign an applicant a risk level known as the rate class. The rate class is determined by the applicant’s health, lifestyle, occupation, and family history. Each life insurance company has published underwriting guidelines explaining how they access all the risks they consider.

The price of a life insurance policy is based on the rate class, age, and gender of the applicant and the type of policy being applied for.

Rate Classes

Preferred Plus - The very best rates class. This rate class is for those few individuals that have almost zero risk. Roughly about 20% of people will qualify.

Preferred - The second best rate class. This rate class is for individuals with very good health and very little risk. Roughly 20% of people will qualify for this rate class.

Standard Plus - The third best rate class. This rate class is for individuals at a better than average risk but who do not qualify for a preferred risk.

Standard - The fourth best rate class. This is rate class is for individuals that are of average risk. The majority of applicants will fit into this guideline.

Substandard Rate classes - These rate classes are known as table rates. Usually, you will fit into a table listed either A - H or 1 - 8, depending on the company. Substandard rates for people that are below average risk. For most companies, each table is 25% more expensive than Standard. So table A (table 1) is 125% times standard. Table B (table 2) is 150% of the times standard. Table C (table 3) is 175% more than Standard. Etc.

Tobacco Rates

Tobacco users are considered a greater risk to insurance companies because their average lifespan is not as long as nonsmokers, everything else being equal. The good news is that some companies specialize in this risk, and their rates are much lower than most of their competitors.

Preferred Tobacco - Risk is similar to Preferred non-tobacco rates, but the individual uses tobacco.

Standard Tobacco - Risk is similar to Standard non-tobacco rates, but the individual uses tobacco.

SubStandard Tobacco - The person is less than the average risk and uses tobacco.

Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.