 Personal Finance PowerPoint Presentation Life Insurance Application Process Prepare to get financially fit by practicing personal finance Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice, cut once, putting a formal process in place, looking something like set the goals, develop a plan to reach them, put the plan in action, review the results, repeat the process periodically. Most of this information can be found at Investopedia, what to expect when applying for life insurance, which you can find online. Take a look at the references, resources, continue your research from there. This is by Katie Adams, updated April 20, 2022. In prior presentations, we've been looking at insurance in general. Now moving on over to life insurance and we're concentrating in on the application process and what might be needed during that process. So, what to expect when applying for life insurance. Life insurance can help ensure that your dependents have the resources they need to replace your income should you die. That's the purpose of the life insurance, the typical scenario being, I have income, I have the people that are dependent on me and my income. If I died, I don't need the income anymore. So, I'm okay that I'm not earning anymore, but the other people might still need some money. So, we're going to be insuring against something such as that, that's the general scenario. So, but how to, but how do you go about purchasing the coverage? So, and what can you do to get the best possible rate? Understanding the process of obtaining life insurance can help you get the coverage you need at a price you can't afford. That's what I want to see here. Read on to learn about what's involved in buying life insurance from the application process to the underwriting process. This will typically involve filling out some paperwork, submitting to a paramedical exam and providing your and your immediate family's health stories. It's useful to have a general idea of what the insurance company is doing to then think about what the likely things they will be asking for will be. So, obviously when we buy the insurance company, we're trying to insure against us dying prematurely. Hopefully the odds of us dying prematurely are quite low. If you think about the insurance company, they can't really predict whether or not we're going to die prematurely. The odds being quite low for an individual, but if you group us together with a bunch of other individuals, you can start to use your statistics and so on, your actuarial calculations to figure out the likelihood of a percentage of a population dying prematurely, then try to figure out how much you're going to have to pay out in those circumstances using those then to calculate what the premiums will be in a competitive way trying to get the lowest premiums to compete as basically a life insurance company. So that would of course mean that the things that they might ask for are the things that would be likely for us causes to die prematurely, our medical condition, our age, do we smoke and that kind of stuff. So the lower the risk you present to the insurer, often associated with youth and healthiness, the lower you can expect your premium to be, determining your life insurance coverage needs. There are two main categories of life insurance. You've got the permanent life insurance, which provides coverage for your entire life and term life insurance, which provides coverage for a set period of time. A local insurance broker can help you understand more about your options. So we talked a bit about those differences in prior presentations. The term is more like the just classical life insurance coverage. So once you have decided to purchase life insurance, you'll need to determine your coverage amount by considering how much your beneficiaries will need after you die. So now you're going to think, well, if I died, how much would I need to cover the benefits that they will need given the fact that I'm no longer here earning money and how much you already have covered through personal assets or group term insurance. So you could think about it as personal insurance and that you have your own obviously personal savings that could help out in the event that you would die that would go to people to help out to pay the bills in that case, such as policies offered by your employer. So medical questions on the life insurance application. So life insurance, we see this on like the medical insurance where you have these preexisting conditions. You say, well, you can't judge me for preexisting conditions on my medical insurance, even though obviously you could see on the medical insurance side of things, that would kind of make sense for the calculation, right? With life insurance, it's the same kind of thing. Do you have these conditions that might make it so? I mean, are you on your death bed right now? Because if you are, then I feel like giving you an insurance policy to pay you a million dollars, like in the next five days, which your average to die in wouldn't be a good, prudent business decision for the insurance company, right? So you would think they would want to know some stuff like that. So you will need to apply for life insurance. The application will ask for basic information, such as your name, address and employer. It will also ask for the following personal information, your height, your weight. I don't know why they really need your height so much, but obviously the height and weight are important, because that's going to help determine whether or not you have weight problems and whatnot using their stats. Your date of birth, very important. Lifestyle habits, i.e. smoking. So they're going to say, do you smoke? Do you drink? Do you exercise? And so on and so forth. So they're totally going to be judging you, and you're going to be like, okay, I smoke, but what do you mean by smoke? I mean, I work out sometimes, like on occasion, financial information including your annual income and net worth. So then while it may be tempting to lie about your weight or other health issues, I'm not, I'm six foot tall. What are you talking about? I'm not five one. Can't you see height? It's important to tell the truth. So obviously you want to be honest on the application. If you lie, then that could cause problems for the, I mean, if you die of lung cancer, it's clearly through smoking, you know, that could be an issue if you said you didn't smoke or something like that. So if the company discovers you lying about a health condition or lifestyle, it can increase your premium, cancel your policy or deny a beneficiary's claim to the death benefit. I saw that guy at the bar and he was smoking a cigarette. I know, I know it was him. I got it on my phone here. I took a picture. Some insurance companies will accept your answer to health related questions such as which medications you take or any surgeries you've had on the application. These no exam life insurance such as guaranteed, such as guaranteed issue life insurance and simplified issue life insurance are usually more expensive and have a lower face value than insurance that requires a medical exam. So obviously if they can't really get an exam for you or anything like that, they have less assurity on their side. So if you're getting life insurance without the medical exam, they're taking on more risk on their side. So you would expect it would be more costly. So the life insurance medical exam, most companies and policies require an in-person medical exam. They're going to actually check you out. You say you're six, seven, but it's the major in stick here says you're five, five. So a life insurance agent will arrange for a paramedical, a licensed health care professional contracted by the insurance company to meet you at your home, office or a clinic selected by the insurance company. During the exam, the paramedical will likely take your medical history, including medical conditions, surgeries and any prescription medications. Ask about your immediate family's medical history. Take your blood pressure, listen to your heartbeat. So when you're taking your blood pressure, you got to be calm. So don't let them stress you out because that could raise the price. Don't be like, hey, if my blood pressure is high at this particular moment, I won't be able to afford it. It's going to be crazy. No, stay calm, low pressure. So they're going to take your height and your weight, draw some blood, get a urine sample, ask about lifestyle habits that could affect your health like exercise, smoking, drinking, recreational drugs, use frequent travel, high risk and all that kind of stuff. So there are many additional tests you need to undergo, depending on your age, the type of policy you want and the amount of coverage you're applying for. Additional tests could include an EKG, a chest x-ray or a treatment test. Oh, you don't smoke, huh? Look at this x-ray. We can see your lungs right there. They're not looking right. They're not, okay. It's just social smoking. Next, an underwriter at the insurance company will review your application and medical exam results. They may order medical records from your physician to learn more about any additional conditions you may have and any treatment received. This information helps them determine what risk you represent to the company financially and how much to charge for your coverage. Once your application and medical exam have been reviewed, the company will either approve or deny your request to purchase coverage. That process can take days or weeks, depending on whether you submitted a complete application, how long it takes to receive lab results and if the company requests information from your physician so on. So if your coverage is denied, what if they deny me because my heart pressure was up? It was only up because they were stressing me out when they were taking my heart pressure telling me it was gonna cost me money and I might get denied. My heart pressure, do it again. Give me, test me again. If you fail the medical exam and the insurance company declines to cover you or it offers to cover you at a higher rate due to results of your exam, you have a few options at that point. You can pursue group term life insurance through your employer, which often doesn't require a medical exam. Ask your insurance broker if there is a company that will work with your medical status or try a no-exam policy. If you are offered a policy that aren't happy with the rate, you can purchase it for now and then ask to be reevaluated at the future date. You might try to get another test possibly later and maybe aim to improve your health condition. I'll exercise more if you... I stopped the smoking and of course you can inquire with more than one insurance company to try and find the best possible life insurance. Oh, you don't like my health condition. I'll take my business elsewhere to the next insurance company possibly. You can try that. Ways to reduce your life insurance premium. While you can't do anything about about two of the three main factors affecting your insurance premium, age and family medical history. Those are kind of factored in. My medical history is what it is. There's heart disease in my family. What do you want from me? And then obviously your age is what it is. But there are steps you can take regarding the third, the lifestyle choices. You could lower your insurance premium if you quit smoking. There's the number one. It's always with the smoking. It's always with the smoking. You're not even defining what smoking is. It's like one cigarette a week really smoking. I mean, give me a break, man. I like a cigar like a little few times sometimes. As a non-smoker, you're likely to live longer. Meaning the life insurance company will have more years to collect your premium payments before having to possibly pay out on the policy when you die. Lose your weight. Oh, here we go with the number two one. With the weight thing. So weight loss often leads to lower cholesterol levels, lower blood pressure, and lower risk of developing chronic diseases like diabetes. All of these improvements to your health can make you a better insurance rick. Reduce or eliminate your alcohol content. Oh, and now with the alcohol. Okay, you've gone too far. Drinking can pose a potential health risk. Life insurance companies will check your application, driving record, and medical exam to get a picture of your drinking habits. Drinking less alcohol or stopping entirely makes you less of a risk for the company and therefore you're likely to be rewarded with a lower premium. This is just too much. Improving your driving. Insurance companies can hike your premium if you have multiple moving violations. Well, I'm all upset because now I can't smoke to calm down and I've stopped eating and I can't even relax with a cup of wine in the evening. So my driving got a little crazy, okay? But now, so those are the things. Other non-lifestyle related ways to reduce your premiums include switching from permanent to term life insurance. So we talked about the difference between permanent and term and prior presentations. Depending on your age and how long you expect to need life insurance coverage, you may want to consider switching to term policy. Check the cancellation policy on your current coverage before making a change. Switching insurers. You may be able to get similar or better coverage less money for less money. I've had enough of this insurance company in their prying ways. I'm going elsewhere. Eliminating riders. Riders are optional policy provisions that pay additional money to you or your beneficiaries. Types of riders include the following. Accidental death benefit rider pays your beneficiaries if your death was the result of an accident. So you got the children's term life insurance rider pays if a child covered under your life insurance policy dies. You got the waiver of premium rider pays your policy premium if you become permanently and totally disabled. Living benefits rider pays a portion of your death benefit payment in advance if you are diagnosed with a terminal illness or if you require long-term care or nursing home services. Pay your rider. Waves premiums if you die or become disabled before a covered dependent child reaches a certain age. Looking for no load or low load policies. These policies are often less expensive because insurance agents charge a flat fee rather than a steep commission asking about payment discounts. You may get a discount for paying your bill in full annually rather than paying monthly. So you got the good old discount option possibly insurers may also give a discount for having your payment automatically withdrawn from your checking account. Just draw it out of me like blood out of my vein. So you have the reviewers your credit report reviewing your credit report. Insurance companies can review your credit report when determining your premium paying your bills on time which is noted on your report assures the company you are likely to pay your premium on time and in full. So credit ratings can be useful as well. Choosing a company that has experience covering people with your condition if you have a medical condition a broker can help find a company that is likely to work with you and may provide a better rate. So if you already have a medical condition you might try to kind of customize your policy. Obviously it might be a little bit more difficult and you might find some insurance companies given it's a free market out there that specialize with people with more conditions in play. So reviewing your medical information a bureau file ensure or share information on applicants medical conditions through the medical information bureau the MIB request a free copy of your file from the MIB website and review it incorrect information could negatively infect your premium. When does my doctor fill out the life insurance questionnaire for me? Many life insurance companies will contact your doctor's office and obtain medical records after you have given permission to do so. The doctor's office will office also complete a medical questionnaire the doctor may also be required to sign an attending physician's statement asserting the veracity of this information. Why is an applicant's signature required on a life insurance application? It is considered insurance fraud if you lie or knowingly represent information on a life insurance application so obviously you're signing off saying the stuff I said on here is true on the thing. By signing the policy you affirm that everything included in the application was accurate and truthful. So what is the minimum age at which a person can sign a life insurance application? This will vary by location but the minimum age at which someone could sign a life insurance application in most states is 18. In Washington state those aged 15 and older must sign any life insurance application someone takes out on them. What are the requirements for taking a life insurance policy on someone else? In order to take out a life insurance policy on someone else you need to be able to show that there is an insurable interest in that person. So you have to have kind of an insurable interest. A reason this requires proof that an individual or entity would experience another hardship as the result of the death of a person.