This is the ultimate insider’s guide to applying for life insurance in 2020.
Let’s be clear, this isn’t your run of the mill guide about what life insurance is.
Or applying for coverage and what to expect.
I will be providing insider information, pulling the curtain open and bringing you inside.
I’ll provide you with information that I’ve accumulated over the last 7 years I’ve been in the industry.
So if you’re looking to apply for life insurance and get the best price and not waste time up front, you came to the right place.
Here are the section breakdowns:
Table of Contents
1. Complete A Health Audit On Yourself
If this is your first time getting a quote for life insurance or even considering life insurance, get ready.
It gets personal.
Some people will hate this and some won’t be bothered.
If you’re in the first group of people, I would recommend a Simplified Issue Life Insurance policy, where they barely ask any questions if any at all, and you get covered instantly as long as you hadn’t lied about your health.
So either way, completing this health audit on yourself is still a great idea.
What is a Health Audit?
A health audit is a reflection on your life and how your health has been since you can remember being alive.
Yes, that means every sickness, injury, or disease and disorder you’ve ever had, you’re going to want to write it down.
If you are 40 years old, and were diagnosed with Fatty Liver Disorder when you were 29 years old, you better believe it will affect your rates because Fatty Liver Disorder doesn’t go away, it is permanent.
Now you may be wondering, how will the Life Insurance company find out about my condition if I was diagnosed with it 11 years ago?
How do life insurance companies find out my personal information?
Very easily, when you apply for the coverage, the life insurance company will do two things. Review your MIB (Medical Information Bureau) file and talk to your most recent doctors.
They will start with what is called a MIB Lookup and it is when they work with this organization that they will find any and all information that was found when you had applied for life insurance previously.
If you haven’t applied for life insurance in the past, then it is crucial you apply correctly the first time.
Otherwise, you will leave a black mark on your MIB record, believe me, I have seen hundreds of cases over the years of people who accidentally told their life agent something incorrect, then that information went on the application, and Bam!
Now it is in the MIB records forever, unless you request it off. Which is not an easy feat.
The second way they get the information they are looking for which is more practical especially if you are a first time life insurance shopper, is to go to your doctor.
Now if you are like most, you may switch doctors every 3-5 years, and if that is the case, they will talk to your most current doctor, who would have backdated and got all of your previous medical information to ensure they are able treat you properly.
So that diagnosis of Fatty Liver Disorder 11 years ago?
Your current doctor has it for sure since they need to know how to treat you currently, and that will show up when the insurance company is researching whether they will offer you coverage or not.
So in the end, what does this all mean for you?
You need to do a health audit to determine whether or not you have anything that could potentially hurt your application or future applications.
2. Obtain A Copy of Your Medical Records (If Applying For Fully Underwritten)
Now, I know we are all busy people.
We have kids, we have jobs, we have families to keep up with.
And, here I’m asking you to remember all of your health history.
So this section can assist you if you don’t have a photogenic memory about your health history.
Whether you’re applying for a Simplified Issue Life Insurance or a Fully Underwritten Life Insurance policy, it would benefit you to get a copy of your medical records regardless.
In the case of the fully underwritten policy, it is sometimes crucial or at least highly valuable to get.
Now you might be asking, if you’re familiar with the process, “Isn’t the Life Insurance Company going to get my records on my behalf?”
Yes, you’re absolutely right.
But here’s the kicker.
If you wait for the life insurance company to do all of the work for you, not only do you lose time, but you potentially will need to pay additional premium if say for example you gain another age or are six months near your next birthday.
I will go over backdating and the age system of life insurance in an article soon enough, but needless to say, wasting time when it can be saved isn’t the greatest of ideas.
When the life insurance company has to order medical records on your behalf, the company begins a long and sometimes crazy process of convincing your doctor or facility to hand over records.
Believe me, I’ve been in the industry for many years, and you won’t believe the crazy stories I have about different offices.
Some medical providers completely blindsided myself and the company by saying that they just didn’t have time to assist since the request wasn’t coming from the patient.
How insane is that?
No matter how many times we explained that we were acting on behalf of the patient, they wouldn’t accept it until the patient/client called and requested for the records themselves.
Again, it is advisable to get a copy of your records, usually your facility won’t charge you, especially if you have an HMO (Health Maintenance Organization).
The only example where getting a copy of your medical records might not make sense, is if you’re applying for a Simplified Issue Life Insurance policy, and if that is the case and you remember your health history, there’s no need to do this at all.
Or of course if your medical provider is going to charge you a high fee for your records, at that point leave it to the insurance company.
3. Determine Your Needs, Coverage Amount, and Coverage Length
This section can save you loads of money.
No jokes. No gimmicks.
If you know what you want and what you need, for how much coverage and for how long, you will be in a great place when applying for protection.
I’ve had clients apply for coverage with me, and some had no idea what amount they needed or for how long they would need it.
The worst case I had was a lady who was sold a policy and wanted to compare her current rate to what I could offer her.
When I asked her these series of questions I am about to unload on to you dear reader, she was stunned.
She said, “The other agent didn’t ask me this, I didn’t know I should know the answer to these questions.”
So below are the questions you need to know to save yourself money, stress, and buyer’s remorse upfront.
For this, I like to use the Core Foundations.
The Core Foundations
The Core Foundations consists of Debt, Income, Mortgage/Rent, and Expenses.
I call each one of these a Core Foundation of your life, and therefore a huge foundation to why you need life insurance.
Do me and your family a favor, and sit down with a pen and paper and write these out.
Core Debt Foundation
How much do I owe on my credit cards, car loans, and everything you owe on a monthly basis besides your mortgage.
You will want to focus on everything that will stick with your spouse that you may have co-signed or they will be paying on still if you passed away.
Everything else that will absolve after you pass away can be ignored.
For example, public student debt, credit cards that you own by yourself, and personal loans from others.
Everything else would be included in what I call your Core Debt Foundation.
Core Income Foundation
Then discuss with your significant other about how much income they would need if you were to pass away today.
Not tomorrow, not next week, not in ten years. Today.
Life is unpredictable and unfair, if you aren’t thinking of the worst case and preparing accordingly, you will suffer.
Let’s say that your partner decides that they will go back to school and would need at least 3 years to complete the Bachelor’s they started 5 years ago before you both had children.
Great! Write that down.
Make sure that your Core Expenses are kept in mind when this is evaluated.
Other households might only need 1-2 years of income to give a grieving counterpart time to process.
Knowing that you don’t have to worry about working during such a tragic time is stress relieving to say the least.
When you decide on how much income you want to leave behind, this amount is your Core Income Foundation.
Core Mortgage/Rent Foundation
Moving on, let’s say you own a house or rent, wouldn’t you agree that it would be important to cover this in case you passed away?
If you own a home, sit down and decide now whether this house is your forever home, will your family stay here forever or will they pick up and leave?
If they will stay, plan to cover the entire mortgage payment in your life insurance.
If they don’t plan on staying, it might be better on your budget–more on this in the next section–to just cover 5 years of mortgage payments.
The logic here is so your family can get out of a bad real estate cycle and sell when the house value is higher while saving you more on your life insurance payments.
Again, the biggest concern here is covering your beneficiaries’ living situation, if it means paying off your home, great!
If it means paying for 5 years of payments, awesome, if you’re renting, determine how many years of rent you want to cover.
That way if your family is in a great rental and your family didn’t want to go through the hassle of moving and putting up with a new first and last month’s rent and all of that jazz.
Having the money already put aside saves them unnecessary stress.
This is your Core Mortgage/Rent Foundation.
Core Expense Foundation
Let’s say you cover everything else, there’s still the basic expenses of everyday living.
Food, utilities, gas, and finally your funeral.
If you budget monthly, you should already have this number ready to go.
If not, tally up your expenses, and subtract your house payment, income, and debts since we have already paid that off in this scenario with the life insurance.
What’s left over?
Do you want your family to figure out how to pay for this?
For your funeral, make sure you agree with your family about how much you want to spend on your funeral or cremation up front.
Otherwise, this can lead to problems later on with funding if you wanted a cremation and your family wanted to get a funeral, the cost difference is tremendous.
The average cost for a cremation is around $1,000 for just the service and an urn.
The average cost for a funeral is around $15,000 depending on where you are located, some locations will cost more.
What a difference, right?
Lastly, there is your children’s education if that is important to you.
Have you checked what the average cost of an education is nowadays?
For a vocational education it can start as low as $15,000, not bad.
This isn’t the case for higher education.
For a Cal State or UC University, it can be as high as $60,000.
Private University goes even higher.
Plan accordingly. You might want to include this, you might want to only cover half or a quarter of the cost.
Some parents will disregard this section entirely.
Once you have all of your Core Foundations listed and tallied properly, you will have your coverage amount.
Final Core Foundation Numbers
If it equals $250,000. Done, move on to the coverage length.
If you are concerned that it isn’t enough coverage, add more to one of the Core Foundations.
Remember there is still your budget to consider, but keep this number in mind.
Now onto the coverage length. How do we determine this?
I cover this later in the article, but here’s one way to look at it.
All we have to figure out is how long your Core Foundations will be affected if you were to pass away.
So for example, if you just bought a house, and have a 30 year mortgage, right away you can start with a 30 year term life insurance policy and call it a day.
But, let’s say you wanted to split up your needs and save money.
You should review when all of your Foundations will be met and no longer in need of being covered using life insurance.
For example, going from the top to the bottom, when will your car be paid for? 3 more years?
Okay, when will you retire from work or when will income not be a large issue in your life?
Are you building an emergency fund so that income won’t be such a hardship on your household?
Are you saving for retirement now so that you don’t have to rely on your income in the next 10, 20, or 30 years?
Consider all of the above and also this. How long is your mortgage? What is left on the loan?
If there’re only 21 years left, keep this in mind when picking out a coverage length.
Lastly, when will your expenses not be an issue?
Most likely your month to month bills will always be there, and so will your funeral costs or cremation costs because we are all going to go one day.
Are you going to start buying a plot, are you paying one down now, or are you considering just buying a Final Expense Whole Life policy for this purpose?
There are pros and cons to all three options.
Finally, when will your kids not need you to cover their education costs?
Do you want to include it in case they end up getting student loans?
It is crucial to consider these items.
If this is too much to consider, please feel free to reach out to me and I can assist you in working out a plan that covers your needs.
However, if you’re able to complete this process, congratulations you’re on the way to making a smart financial decision.
Most life insurance agents will tell you to just multiply your income by 10 or 25 and call it a day.
But at that point you might be paying way too much on life insurance or have too little depending on your situation.
For example, if you’re making $50,000 annually, that would mean you would need $500,000 of coverage.
But wait a minute, what if you only need $300,000 or $750,000 after going through the Core Foundations? What happens then?
Yep, you end up spending more money monthly or not enough. Which brings us to our next section
4. Figure Out Your Budget
This is such a simple concept, but it saddens me how many clients or people I’ve spoken to who have told me they cancelled their coverage because of this.
When I asked why, their number one reason?
“It ended up being too expensive for me.”
And I always ask the same two questions. How? Why?
After experiencing this for many years, I decided to take a different approach to assisting clients with their life insurance needs.
Firstly, setting up the Core Foundations, and ensuring the client was crystal clear on that before we moved forward.
Then, I decided to work out a budget for life insurance.
If you think you don’t need a budget or have never had a budget, let’s play a game.
The Milk Budget Game
You go to the supermarket, and you need milk. All of the milk has different prices.
How much are you willing to pay for milk? Do you remember how cheap milk was back in 2004?
Wow, those were good times huh?
Nowadays, some milk gallons are as low as $3.50 others are as much as $6.00.
When do you say, “I’m not paying that much for milk!” Do you stop at the minimum which is $3.50 or do you waver because you have a budget and a value set for certain types of milk?
So you know what you’re getting for that budget? Even if it isn’t conscious to you, we have budgets internally in us.
If I told you the life insurance was going to cost $5 dollars a month, depending on who you are, you would either give me a stink eye or sign on the dotted line.
But wouldn’t you want to know why it’s so cheap?
Now what if I change the price to $1,000 dollars a month.
Some would say, “Why’s it so expensive?”
While others would sign the dotted line seeing that they are able to protect there family with a large amount of coverage.
The reality is if you don’t have a budget with a sense of value tied to it and your Core Foundations in mind, you can end up spending a lot more than you expected or end up being under-insured which can be bad place to be when your significant other calls to file your claim only to find out you only had $10,000 of coverage when you thought you had more.
You get what you pay for, and at the same time, we want to make your budget work wonders for you.
So how do we determine our budget?
Let’s start with a simple number, if you know in your heart of hearts, that you are unwilling to spend more than $250 a month on life insurance, great, that’s a start.
Now, let’s add the Core Foundations, let’s say that you need a 20 Year Term for $500,000 minimum, and that comes out to $132 a month.
Does that meet your budget?
In this example, so far, so good.
But wait, we are missing a huge glaring issue no one thinks about.
What would happen if you missed one or two months of your income?
What would happen if you over spent on Christmas presents in December and were shot for your premium during December and January?
Consider these problems now, not when you are in the situation.
Whether it is with me or another agent, at the end of the day, you’re hurting no one but yourself by cancelling any life insurance.
Think about it.
You paid for 7 months and now you cancel it either voluntarily or by missing 2 months of payments?
What was the point?
Going back to the example, let’s say that you run through these scenarios and decide that $132 is actually too much for you if you missed two months of income.
What number would be within your budget if you missed income or overspent one or two months? Let’s say that it is actually $85 or less.
Great, now we go to the actual life insurance, let’s say we tweak the numbers and move the coverage down, for now, and in the future you can always increase it assuming your health hasn’t worsened or that you haven’t passed away before making changes.
So now we change the coverage amount to still cover the higher priorities in your Core Foundations, and now we find that you will only need about $300,000 minimum.
The cost drops to $72 a month.
More reasonable now that you think about it, and yes, it doesn’t cover all the things you want, but at least if you passed away you have something to leave versus nothing like those who canceled their policy and then passed away uninsured.
Work out a budget, not for the life insurance company, not for the agent, but for your family and for your finances.
Now if you are well budgeted and you actually minus items like cable or coffee from Starbucks out of your monthly budget so that you can afford the $500,000 all the more power to you, but it has to feel right from your perspective, not from anyone else’s otherwise, you won’t keep the coverage.
Again, the point of getting life insurance is to keep it, not to cancel it 6 months or 6 years from now when you need it for 30 years or longer.
5. Find Out What Type Of Life Insurance Makes Sense For You
Now onto the easy sections.
There are so many life insurance products out there, it is crazy.
It’s like they keep coming up with new ones every decade.
The reality is when you boil it all down, there are only two types of life insurances: Temporary or Permanent.
You either get a policy that lasts for a temporary amount of time at the same cost and then that price expires or you get a policy that lasts forever (hopefully) or permanently and you just pay a higher premium from the beginning.
Which one you get is not based on what I, the agent, wants for you or what the company wants no matter how much bias you hear.
Some companies love temporary policies others love permanent and won’t offer the other to you until you persistently ask for it.
In my opinion, it comes down to what makes sense for you.
When all else fails, get the easiest policy you can get, which is a temporary policy otherwise known as a basic term life insurance policy.
You can get a 10 year term simplified issue with no blood or urine testing, and it can be done and approved in 3-5 days.
It’s like magic.
Imagine having your family covered so fast that you strike off that worry for the time being.
But let’s say that you are having difficulty figuring out what would be more sensible for you.
Let’s break it down.
There are three main Temporary life insurance policies out there.
Accidental, Basic Term, and Return of Premium Term.
There are pros and cons to each option and I’ll go through each one briefly here, however I encourage you to read further on my breakdowns on them in their own articles.
Accidental Death & Dismemberment
Accident insurance is just as it sounds, in case you pass away due to an accident you are covered.
Note that not all companies have the same guidelines so it is important to review the guidelines and be comfortable with what you’re buying.
Most accident policies end at either age 65 or 75 most policies end at 75.
Accidental deaths usually occur before age 45, keep this in mind.
I wrote an article about why Accidental Death & Dismemberment may not make sense for you here.
Fully Underwritten Basic Term Life
Basic Term Life is the bread and butter of any person’s life insurance portfolio.
It is simply a full spectrum life coverage that covers you from one term period until the end of its period.
When I say full spectrum, I mean it.
Any type of death is covered within reason and based on the guidelines of the company.
But in most cases, you will be covered for deaths by accidents, cancer, heart attack, crime, and so on.
There are only three usual declines to claims that could occur.
Misrepresentation, suicide, and death in active military duty.
Again refer to the guidelines of your policy to ensure that you are getting what you want from your policy.
Return of Premium Term Life Insurance
Return of Premium Term Insurance is a unique term policy that acts like a base term but at the end of the period if you’re still alive you get all of your monthly payments back.
Some companies offer 25%, 50%, 75%, and 100% of your money back and of course your premiums will differ depending on which option you choose, 100% being the most you pay but giving you back the most at the end of the period.
Think of this option like a savings account with a life insurance policy attached to it.
There are so many different Permanent policies that it is hard to keep up with them since they can go by different names depending on the company or purpose of the policy.
It’s fair to say that with permanent life insurance there are three main types of policies: Cash Value Permanent, Whole Life Burial, and Guaranteed Universal Life.
If there is demand I will cover each product type in more detail.
However, no matter what the company will tell you, the permanent life insurance policy they offer will fall into one of the three categories above. So let’s break it down.
Cash Value Permanent Life Insurance
Cash Value Permanent Life Insurance policies have been around for a long time and many people will either love them or hate them.
If positioned correctly, they can be great, but if you view them like an investment, they will disappoint you immensely compared to investing in the market or in real estate.
Essentially, the premise is that the life insurance company will offer you a policy with a death benefit that is permanent, and some of your money will be invested either with a guaranteed interest rate or via investing in an index fund.
The negative to this policy is if you are a savvy investor, then these types of life insurance policies might not make sense.
The big benefit with the Cash Value Permanent Life Insurance policy that is known as an Index Universal Life policy is the life insurance company guarantees no losses if the market crashes which is nice, but again, if you are investing, you should be prepared to weather these storms.
The second benefit from these policies is for individuals who will not invest no matter what, and they want to have someone do it for them, and in that case by all means, the Index Universal Life policy is fantastic for growing your money, protecting your life, and not losing it in a crash.
Whole Life Burial Life Insurance
Whole Life Burial Life Insurance is just as it sounds, a policy that is designed to pay for your cremation or burial when your time comes, most of these policies start at $1k and move all the way up to $75k in coverage amount.
These are great for someone who will not be buying their own plots, caskets, services, and putting a deposit on their reception hall and food prior to their death.
Again, the life insurance gives a lump sum to cover all of that.
Guaranteed Universal Life Insurance
Guaranteed Universal Life Insurance is a fantastic permanent option whereby you get a guarantee by the life insurance company that no matter what happens to the company or to the stock exchange, your rates will not change, and your coverage and monthly premium stays the same.
What a deal.
Easy, cut and dry permanent life insurance.
My personal favorite if you’re going to take this route.
You even have the option to pay it off early in what is called Paid-Up Life Insurance or known by the amount of time you pay (10-pay, 15-pay, and so on), where you only need to pay for 10 years and then the coverage is paid up until you pass away, saving you thousands in premium if you had paid until your death.
With this option, you also can do what is known as a Single Premium Life Insurance policy whereby you make one large lump sum, and the insurance company will increase the amount of coverage in the policy when you pass away as a result.
If you needed to pass wealth over without paying taxes on your money, this would be a wise way to do it.
This type of policy is versatile and safe in my opinion.
Okay, so now that we got all of the different coverage options out of the way, how do you determine which one(s) are the right one(s) for you?
You use the Genetics Crystal Ball Method.
The Genetics Crystal Ball Method
If we all knew when we were going to pass away, getting life insurance would be much easier right?
Like having a crystal ball.
Well, it would be creepy first of all, but in reality, we do have something like that.
Our family history and health history speaks volumes on what is most likely going to happen to you.
Don’t believe me?
Stop for a second and think back.
How did your grandfather pass away?
For example, was it a heart attack?
If so, does your dad currently take high blood pressure medication?
Genetics Crystal Ball Method in action, you get a picture, a forecast of your future, not with 100% accuracy, but with more accuracy than making a random guess, or closing your eyes and flipping a coin.
So now, look at your family history for your gender first, because what happened to your family members who shared your gender will most likely happen to you, then consider what your opposite gender family members passed away from or had before passing.
This will reveal volumes for you in this process.
Once you have this mapped out.
Figure out what the maximum age your family members lived till and the minimum age they lived till.
Let’s say that it was 74 for maximum and 61 for minimum.
And for the sake of simplicity let’s say you are 49 years old.
You have two options, you could play your cards right and play it safe and get a Guaranteed Universal Life policy to hedge your bet, or since you know that your family doesn’t have longevity–sorry about that.
You can get a 30 year term to cover you until age 79 effectively covering you in case you outlive your family’s maximum age.
Again, this is more of an art than a science, but trends and statistics have their place.
6. Shop Different Companies
There are hundreds of life insurance companies operating in California, let alone the United States, which makes determining the one you want to go with an interesting predicament.
You could go for the cheapest option, and skip this step, but you would be missing out on some great companies offering interesting options.
It makes more sense to determine what is important to you when it comes to picking a company.
There are companies that offer the best rates possible, and this good, but keep in mind other factors like: Claim Processing, Customer Service, Exclusions on Coverage, Coverage Options, and Underwriting Guidelines. All of these play a role in making the best choice. Let’s review them:
Some companies are well-known for taking forever to approve a claim.
Others have an expedited process established where if everything fits certain guidelines, they will pay out, no issue.
It is important that your beneficiaries aren’t sitting on their hands (or the street) waiting for the check of $500,000 that was promised to them 4 months ago.
There are companies that operate in California that close their customer service line at 2pm in the afternoon.
Isn’t that wild?
Most working folk like myself don’t stop working until 5pm most of the time, and sometimes I’ll be working up until 7pm.
So I don’t know about you, but having a customer service line unavailable when I get off work is a red flag for me.
If that doesn’t matter to you and you prefer using email, this may not be so much of a problem for you.
Exclusions on Coverage
This varies from company to company.
Personally, I think it is so crucial you know what your policy excludes that this would be my number one concern.
For example, if you’re a pilot, there are companies I offer that are super lenient on your personal flying, and will cover a death by pilot accident.
I have other companies I offer that will not even offer coverage to the same person or worst yet, include an exclusion for this type of death. It is crucial to know what is included and what isn’t.
Some companies specialize in offering the best permanent options while others focus on offering the best term options.
If you know what you need, you can get better coverage with the right company who offers a term policy that won’t increase after 10 years or do some wacky thing to you after a certain period.
I’ve had clients complete a policy review with me, only to find out that the reason their coverage was going up was because they bought a Cash Value Universal Life policy that would need to increase it’s premium after age 55.
They bought their policies at age 32.
Maybe they weren’t told or the agent didn’t know better. (More on that in the last section)
Either way, they decided to cancel their coverage with this company that was well known for term policies not universal life policies, and switch to what they could afford with me.
Keep in mind that in the future if you want to convert your term life insurance policy into a permanent life insurance policy, some companies don’t allow this, while others do.
Of course there will be a slight increase in premium, but if this is important to you, now’s the time to determine it.
I’ve spoken with clients who paid exorbitant amounts monthly for life insurance because they went with a company they thought was the best.
Only to find out that it wasn’t, mainly because of their health conditions.
They had diabetes type 2, and the company they went with is strict and harsh when underwriting against those who have diabetes type 2.
I offered them three companies who were way more affordable since they are more lenient with diabetes type 2, and they were shocked to find they were paying so much for two years.
Your health and situation plays a large role in what company you should get coverage with, and just because your best friend who is a triathlon has Company A and it is super well known and all that jazz, doesn’t mean you who has high blood pressure and diabetes type 2 should go with them if they underwrite negatively against you compared to Company B, C, or D.
7. Start An Application
After you’ve done all of the above, and found the company or several companies you want to consider.
Now it is time to put in an application.
It is super simple.
All you need to do is make sure you have your driver’s license, social security number, and the social security numbers of your beneficiaries, your billing information, and all of your health information.
Put in the application, and the underwriting begins.
This is where people can make huge mistakes as you have read so far in this guide.
If you say you have a condition and you don’t, it’s like shooting yourself in the kneecap, and forever being disabled when it comes to applying for insurance.
Do not. I repeat. Do not recklessly apply to every company and say whatever you want to them.
You need to have a plan of attack when applying.
As much as you want to get coverage and protect your family.
The life insurance company wants to avoid as much risk as possible and this can be in the form of a straight up decline to a major price increase on your life insurance based on how you go about this.
Remember at the end of the day, a life insurance company is a business and you are a customer of said business.
Therefore, allow me to provide a quick example of how this can go bad and how to avoid it.
I had a client who we will call Joe.
Joe wanted to get life insurance but he had anxiety and depression or so he said.
Here’s the thing, he had been dealing with it for years, but in his medical records, they only had him down for anxiety, and with just one anxiety medication.
Not bad, but depression can be problematic when applying for coverage with an anxiety diagnosis as well.
So I asked him to provide me his medical records so I can determine how much of a risk it would be for him to apply with the company I was representing at the time.
I don’t know if it was because he didn’t want to reveal what was in his records or if he simply didn’t have the time to do it.
Either way, I warned him of the possible outcomes, and he nonchalantly said whatever happens, happens.
Not my ideal situation when I’m trying to get the best outcome for my clients.
In the end, the underwriting team declined him because he had admitted to the depression, but since the medical records didn’t show it, they believed he was refusing treatment for the condition.
A huge issue in life insurance.
He needed to go to a doctor or psychiatrist to get a diagnosis, and he told me it was a mild depression and he wouldn’t do it since it was “not that bad.”
So guess what?
No life insurance for Joe since he made this mistake and didn’t want to do the extra work required.
And to top it off, now he has that depression tag stuck to him on his records for life insurance until he resolves it, when in reality he didn’t even really have it.
Remember section 1? Joe has his MIB black mark because of that.
So how does this apply to you.
Well, if you did the health audit from before, we are already three steps in the right direction, when your agent knows what’s in your health history they are better equipped to tell you which company or companies are worth applying to and which ones are better to avoid altogether.
If you believe you have a condition, but it isn’t in your medical records, then you have two choices:
- Go get it diagnosed
- Don’t mention it since your doctor didn’t determine it to be an issue
Telling the life insurance company all of a sudden you have a condition that isn’t listed is the worst possible thing since A. they can’t find records for it, and B. they won’t know how to trust you if conditions aren’t listed properly.
What’s to say that what you mentioned prior is all wrong or that you’re hiding something else?
My rule of thumb in this situation is to go based on what the medical records indicate, anything else can be ignored since it most likely won’t be a problem.
8. Evaluate The Results Of Application
Once everything is received by Underwriting, they can go on and make a final decision on whether or not you get an approval or if you get a decline.
We obviously want you to get approved, but unless you skipped your health audit and don’t have your medical records, you might end up like Joe.
Now let’s say you’re approved.
Great news! Fantastic.
Now you have some options, you can either take the option you originally wanted, or you can make changes to the coverage amount, length, or the entire plan.
This will require a one to three business days so that they can review your underwriting information again to make sure you qualify for the changes.
If all goes well, you’ll be approved for these changes if that is what you wanted.
Hopefully, we don’t need to keep making changes if we ironed that all out in the beginning.
If for some reason you were declined, now we will have to work out another option.
You usually have two options when you are declined.
If the decline is a “soft” decline, that means you can review other companies that are more suitable for your health and situation.
A soft decline just means that the company that we applied with originally will not write your policy, and that is not good, but it isn’t the end of the world.
It will still show on your Medical Investigative Bureau (MIB) report, but they will just see why they declined you, which is something you will disclose anyways.
You can avoid this, if it is a concern, by buying a Simplified Issue Life Insurance policy instead where a blood and urine test as well as a full medical check is not required.
A “hard” decline is another story.
A hard decline means that no matter who we go to, your odds of getting coverage are going to be really tough unless we go and buy a Graded Whole Life policy otherwise known as a Catastrophic Whole Life policy or a Guaranteed Issue Whole Life policy.
It is known as this because only people who can’t get regular life insurance due to health or certain situations can get these policies and it is guaranteed to be issued.
If for example you were declined because you had two felonies within the last 5 years, a Catastrophic Whole Life policy would be the way to go since it will be guaranteed to issue.
The only problem is that most of the time you can only get up to $50,000 of coverage with these types of policies, they are pricey, and they have a 2 year waiting period.
Again, if you don’t have any other options, something is always better than nothing.
Now that you’ve reviewed your options, now is the time to make a final decision on whether you’re going to move forward or politely resign from your life insurance search.
If it makes sense and everything fits right, move forward, don’t buy a policy only for it to make no sense, and later cancel it in two months.
You’re only hurting your pocket and everyone who is involved. Now if you decided to buy, let’s look at the next steps.
10. What To Do After Buying, After Year 1, & Beyond
Right After Buying
After buying and finalizing the application, you get to decide on payment if you haven’t already done so.
I am a fan of paying annually because you get a huge savings on your premiums if you do this.
I use a credit card with no interest if I want to pay it off slowly or if I want to get cash back I use a card with great cash back reward programs.
Either way doesn’t matter, and there is always the traditional paying with cash.
Whichever method you decide, saving money and paying it annually is your best bet.
From here, you’ll receive a copy of your policy, and this is important, review your paperwork and make sure it is what you want.
I can’t tell you how many times I had a client come in with their paperwork from a different company and when we reviewed it, they shook their head with confusion.
They didn’t realize half of the things their policy stated.
They didn’t know that their policy was for 10 years, when they thought it was for 20 years.
That it was for only $250,000, when they thought it was for $350,000.
The list goes on. I’ve seen it all.
Make sure it is what you want it to be.
Companies are not operated by robots.
They are operated by people, and people make mistakes.
We all do.
So it is crucial to review this important purchase every step of the way.
With payment, and policy details out of the way, now it is time to inform your beneficiaries that you have a policy.
Yes, the scary encounter everyone dreads for some reason.
Whenever I offer this service of calling clients’ beneficiaries to inform them on their behalf, they get nervous.
The life insurance was purchased for a specific reason to protect these individuals, but we shouldn’t tell them about it, should we?
It is bizarre behavior in my opinion. But so it goes.
Whether it is your agent or you, someone, for the sake of all that is good, should tell your beneficiaries that if you pass away that they have this benefit.
I remember a client who told me that her son bought a policy way before he got into the army.
When he retired and passed away young, she didn’t have any of the paperwork, didn’t know the company name, how long the coverage was for, or even what type of coverage it was.
All she knew was two things.
The two things he told her.
“Hey Mom, I got life insurance for you and Dad, if I die. I got about $400,000.”
They knew it was for them, and they knew of the coverage amount.
Not a lot to go on when searching out for it.
The worst part was when he passed, the apartment he lived in was cleaned out within days and they didn’t have time to go and inspect his stuff.
He was single when he passed away.
To this day, I bet the mom and dad still haven’t figured out what company has the policy and they haven’t claimed it or who knows, maybe the son cancelled the policy a long time before his death and never updated his parents.
If you need help finding out if you are due life insurance benefits from someone, please review this website that will try to locate the missing policy: https://eapps.naic.org/life-policy-locator/#/welcome
I hope this story illustrates why you should keep your beneficiaries in the up and up about your life insurance decisions.
Please inform them about the name of the company, the agent’s information, the amount of coverage (optional, unless you are splitting between them and another and it would be awkward to explain why one gets more than the other), and what type of coverage it is.
With this information at the very least they can file a claim to get the benefit.
Make sure your policy is in a safe place that you can find later, because if you can’t find it, you’ll have to request a copy and that requires time, if you need it right away, that would be inconvenient.
1 Year Later
After a year, you need to review your situation and health again.
If you had rates based on high blood pressure and you planned on reducing your blood pressure and weight by starting a lifestyle change.
Now is the time to talk to your life insurance broker to see if you might qualify for a better rate on your life insurance.
Some companies offer it while others don’t.
It is called a Rate Reduction Application.
Simply put, you will have to undergo the process of buying a policy all over again but this time, instead of getting a new policy, we are crossing our fingers you get a better rate on the existing policy.
If the company you have doesn’t offer this, then we shop another company with your brand new health status.
Again, if you don’t allow us to help you in this regard, you will never qualify for it.
Many of my clients are surprised to hear this is an option.
They never knew that the life insurance company would offer a lower rate, ever.
But look at it from the company’s perspective, you’re healthier and more likely to live longer now, so why not give you a better rate for that?
Another item to do annually besides looking into getting the best possible rate is to make any necessary updates to your policy.
This can range from changing payment information, changing beneficiaries, increasing or decreasing coverage, converting your policy type, or simply getting a refresher on what your coverage is for, what it does, and how long it is for.
As a veteran life insurance agent, I am working with life insurance all day, you on the other hand don’t review your life insurance contract every other week to remember it.
It might be smart to get a review once a year to keep wise on your life insurance.
You don’t want to be like some people and realize after 10 years that your policy will be up in two months when you get the 60 day warning letter informing you of cancellation.
Beyond Year 1
Like I’ve said, keep reviewing every year, cards expire, children grow up, and needs change.
Make it a habit to keep your life insurance in the forefront of your mind once or twice a year.
Have a plan when you want the coverage to expire, and if that plan needs to be updated since your plans have changed it is better to do so earlier than later.
Maybe in the future you might need more coverage, or you might need less.
You can save money or hassle later in at least reviewing it once a year.
That’s it when it comes to buying life insurance.
This comprehensive guide will make it easy for you to navigate your way to getting and maintaining your life insurance policy.
I recommend reviewing your needs every year, and if you need life insurance now or at least are considering life insurance, speaking to a life insurance broker is valuable since you’re able to review the Core Foundations, the different life insurance options out there that you might qualify for, and you can apply for coverage right there and then.
With California Life Coverage, there’s no hard closes, and it is all about making sure we find you the right coverage and right price for you.
Remember that when looking into how much coverage you need vs. want, review your Core Foundations and if you don’t know how long you want the coverage for, try out the Genetics Crystal Ball Method to forecast your lifespan.
And for the sake of everyone involved, please do a Health Audit before you start the process, you will save yourself and everyone involved so much heartache.