The Importance of a Life Insurance Application
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UPDATED: Aug 13, 2020
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You have decided on a life insurance policy that seems perfect for you and your family’s needs and goals. Now it is time to fill out the life insurance application! You will be asked questions about your age, occupation, activities, and medical history. Depending on the amount of the death benefit and the type of policy for which you are applying, you may even be required to take a medical exam.
TIP: Being open and honest on your application for life insurance is the best way to be approved. It is also the best way to ensure that when you die, the life insurance claim is not denied by the insurance company for any misstatement on the application or material omissions.
Filling Out Multiple Life Insurance Applications
You should not fill out more than one life insurance application or apply at several different companies. Every time you fill out a life insurance application it is recorded, and every company considers the practice of filling out several applications to be an indication of risk and raise your premium payments accordingly. If you fill out multiple applications you risk being denied coverage or paying a higher premium rate. Therefore, make sure you know what you need out of a life insurance policy before you fill out an application.
TIP: Filling out more than one life application or apply at several different companies is a red flag. Stick to one company and make a wise choice up front.
Personal Information Life Insurance Application and Exam
The first requirement on your life insurance application is to answers questions about your health, occupation and sometimes financial information (have you every declared bankruptcy, your salary, etc). Depending how you answer these questions and the insurance company’s underwriting criteria, you may be required to take a physical examination. If an exam is needed, the company should arrange a convenient time and place for you to meet the doctor or paramedic at no charge to you. Usually, the exam will involve only basic medical tests and medical history.
In addition to the life insurance medical exam an insurance underwriter could check your credit, your motor vehicle report, get authorization and pull your medical records and pull a report from the Medical Index Bureau (MIB). The MIB is an insurance industry organization which helps provide accurate medical information concerning your medical history. It helps an underwriter to check the accuracy of some information you provided on application forms.
For certain policies where the death benefit is $20,000 or less, the life insurance application may just consists of a few questions about gender, age, weight, smoking history and health history. If the answers indicate a greater health risk, then additional underwriting is necessary such as the requesting of medical records or a medical exam. Do not mislead or get tricky with your answers to avoid a medical exam or thorough underwriting. It will not benefit you in the long run.
The Medical Exam
A basic medical exam could consist of drawing blood for HIV test, swap of the mouth to check for smoking, blood pressure check and recording your weight. If you are applying for large amounts of insurance, then you could be required to take a complete physical because companies have learned that an inappropriately large amount of life insurance is sometimes associated with an increased risk of suicide, hidden health history, or the possibility that the applicant may be murdered.
High Risk Questions on your Application for Life Insurance
If you fall in the category of high risk life insurance then your insurance will be more costly, but it is not worth it to be dishonest in an attempt to save money. You need to honestly disclose any illnesses, injuries, or high risk occupations / activities that you participate in as the application asks. This does not mean that you will necessarily get denied insurance, but it could just mean that you will not get a preferred rating and therefore pay a little more.
The Consequences of Dishonesty
Do not lie on your application to avoid higher premium rates. Normally, life insurance policies can be voided or canceled if the insurance company finds inconsistencies on the life insurance application. Life insurance policies have a contestability clause, that sets a period of time during which the life insurance company can void a policy if the person would not have qualified had they provided truthful information on their application. If you make an important omission by neglecting to tell the company about a major health problem which could have led the company to deny you insurance, then you risk your policy being worthless during the contestability period.
If after the life insurance contestability period has passed an error that would not have led to denial of coverage is discovered, such as misstatement of age or sex, the company would normally adjust the amount of coverage to coincide with the correct age or sex.
TIP: Not being honest on your life insurance application can make your policy worthless if you die during the contestability period. If you die after that period, there is a chance your coverage will be adjusted to reflect what your beneficiaries would have received had you been honest. You gain nothing by lying.
To recap, the most important things to consider before you fill out a life insurance application are:
- Shop and compare quotes before you find a policy and only fill out one life insurance application!
- Be prepared to give personal information about your work, financial, and medical history.
- Know what to expect from the medical exam
- Be honest! If the life insurance application asks if you have used tobacco in the last year, and you smoked one cigar then the answer is Yes! Answer honestly to the literal interpretation of the question at all times!
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