Life insurance is there to help protect your loved ones when you die. The unknown factor—for everyone—is when it will happen. However, age and health are two factors that weigh into when it might.
That’s why when you apply for a typical life insurance policy, both term and permanent, the insurance company will want to know about both those things, among others, in order to determine if they will issue a policy and at what price (called the premium).
If you’re young and healthy, your life expectancy is long and therefore your premiums can be less expensive. (That’s why you hear so many people saying, “Get coverage in place while you’re young and healthy!”). As you age, or begin to have various health issues, your premiums may increase. The underwriters at the insurance company bring these factors, and a number of others, into consideration when you apply for coverage. At its most basic level, this is what is considered underwriting.
For the underwriting process with a typical policy, your insurance agent will obtain some basic information on the application, including your age. Then, to get a clearer picture of your health, the insurance company will set up a paramedical exam. This can take place at your convenience, at home or work, depending on what you choose.
A certified medical professional (paramed) will come and ask you a series of questions about your medical background, such as doctors you currently see and any medication you’re taking, as well as your family health history and your lifestyle (for example, Do you smoke?), among others.
They typically measure your height and weight, take your blood pressure and a blood sample, and ask for a urine sample. This takes about 20 minutes. The samples are sent to a lab and then the results, along with the questions you answered, will be analyzed by the underwriters at the insurance company to determine your rating.
While age and health are important factors that underwriters will consider, there are others they may think about as well, some include:
Gender (women statistically live longer than men)
Heavy alcohol use
Dangerous hobbies (i.e. skydiving or car racing)
Travel to certain foreign destinations
A history of driving under the influence (DUIs)
This may seem like a complicated process, but it ensures that you get your coverage at the
best possible price. There are some people, however, who don’t want to wait for coverage or simply don’t want to go through a paramedical exam or a longer underwriting process. So, some insurance companies are now offering what’s called simplified underwriting for policies. That means you answer a few questions—age, gender and typical health questions—and if approved, you can often get coverage immediately.
But there are two things to know. Most life insurance policies that are issued with simplified underwriting have a cap on the amount you can get, say, $250,000. Plus, you will typically pay more for this type of policy than you would for the same amount of coverage issued after going through the more extensive underwriting process, as the insurance company is taking on more risk. That said, this is a great option for those who want it.
The easiest thing to do, though, is to talk to a life insurance specialist about all this. Remember, they’ll sit down with you at no cost and walk you through your options.
Smart financial planning today can leave your family with a debt of gratitude.
At any stage in life – if anyone depends on you – there is a good chance that you need life insurance.