In today’s world, life insurance is a must have for most parents. Given its relative low cost and ease of purchase, a simple level term life insurance policy should be a part of most Americans financial protection plan at some point during their lifetime.
Unfortunately for most consumers there are so many different types and kinds of life insurance available it can be confusing. On top of this, the process to procure life insurance is different depending on what type you choose to purchase.
In this short article we will explore the process to purchase a type of life insurance known as Fully Underwritten Term Life Insurance. Fully underwritten refers to the fact that the life insurance is completely reviewed by an underwriter and may involve a paramedical exam at your place of work or home. Fully underwritten life insurance policies hopefully will allocate you to one of four underwriting life insurance health classes. These four life insurance health classes are: Preferred Plus, Preferred, Standard Plus, and Standard.
Term Vs Whole:
Term life, as opposed to Cash Value life insurance policies, such as Whole and Universal, is a simple form of pure insurance. Term carries no cash value and is thus relatively simple to procure. It is usually sold in bands of time. These bands of time are ten, fifteen, twenty, twenty five, and thirty years.
Whole life, is often ten times, or more, more expensive per year. It carries a type of cash or investment account together with the insurance.
The Fully Underwritten Term Life Process in the United States:
It is important to note that life insurance underwriting can be different in various countries. This is the typical process for a term policy in the US. It may be significantly different in your locale.
Here is a Quick Highlight of the Process:
- Consumer Searches for a Term Life Quote.
- Consumer Speaks with an Agent/Broker and Asks Questions.
- Consumer Chooses a Proposed Insurance Company, a Death Benefit Amount, and a Term Life Length.
- Consumer Applies for Life Insurance and Signs Application.
- The Insurer Requests Medical Records, Driving History, Pharmaceutical Reports, among others.
- Insurer and Applicant Set a date for a Paramedical Exam, either at the clients home or office.
- Paramedical exam takes place at set time.
- A period of time occurs, while the Potential Insurer fully reviews the Case File.
- The Potential Insurer, either Offers Up a Proposed Insurance Policy or Declines to Offer an Insurance Policy. The Insurer will Choose a Life Insurance Health Class and hence a Price to offer the policy at.
- Applicant / Consumer chooses to either purchase this Proposed Life Insurance Policy at this price, or declines. If the client declines they can begin the process again with a new proposed insurance company. If the applicant agrees to purchase they will have to sign documents and pay almost immediately.
Variants of this Process:
There is really no hard rule to say that the underwriting in all cases has to occur just like this. Each insurance company has their own set of underwriting regulations. And in the age of the internet many of the insurers are seeking to make the process much faster. For example many insurance companies, may opt to skip the paramedical exam altogether, if the candidate appears to be in top notch health and is seeking life insurance below a certain amount of coverage.
There is also a type of provisional life insurance coverage that can in some instance take place to temporarily insure the applicant during the underwriting process. Ask your agent.
Often when a term life insurance policy is proposed at a life insurance health class that is more expensive than was originally hoped for, applicants may be given the opportunity to change the term life length or benefit amount in order to make it more affordable. In other words if a life insurance policy was proposed at $2MM, 25 year term at Preferred plus, but came back at a Standard rate, a client may opt to change it to a $1.5MM, 20 year policy in order to lower the yearly premium.
There are also more than the four health classes discussed beyond the Preferred Plus, Preferred, Standard Plus, and Standard. These include ratings that are more expensive than these called Table Ratings. These table ratings are used for less healthy, people viewed as living more dangerous lives, or that present other more exposed situations.
Another consideration is smoking. Smoking is such a serious health issue for Life insurers that they break it into its own category.
What to Do with this Information:
Now that you understand the life insurance process for a fully underwritten policy, it may be time to put it to good use. There has probably never been an easier time to purchase life insurance in the United States. Knowing the process may assist you in determining if it makes sense to go ahead and purchase this type of life insurance or a different type of insurance sometimes called “No Medical Exam Term Life.”
Always speak with a licensed insurance agent in your jurisdiction whenever making these decisions.