What Requirements do Life Insurance Companies Have?

All life insurance companies have requirements, which are usually similar. Below is a further explanation of these requirements.

Insurable Interest and Insurable Person

Simply put, an insurable interest exists in life insurance if a person gets any type of benefit, including the financial benefit from the continued existence of the insured individual. This means that if the surviving individual will suffer a financial loss among other hardships in case the policyholder passes away. It is not possible to take out an insurance policy on any individual and when buying a policy from any given company, there must be an “insurable interest”. An insurer should have an insurable interest in a policyholder’s life. 

Also, when purchasing a life insurance policy, an insurable interest should be presented as proof. This is because not all people’s intentions are genuine, and some people would be tempted to buy a policy on a random individual just to benefit after their death. The purpose of insurable interest is to ensure that life insurance is not purchased for the wrong reasons. So, you cannot do away with it, and if not present, your policy might be rendered void.

For example, if a person x wanted to buy a policy with person y as their beneficiary, both individuals will need an insurable interest in x’s life to purchase the policy. 

The insurance company needs to present proof of the insurable interest during the beginning and the end of the policy. 

An insurable interest exists in an individual’s life’, enabling them to buy insurance on themselves making them the insured and the policyholder. However, the insurable interest is also considered to exist in the policyholder’s relatives, spouse, and direct dependants; eg brothers and sisters, husbands and wives, children, and grandparents and grandchildren. 

Apart from blood relationships, insurable interest can also be present in the business. If an individual depends financially on the insured, then an insurable interest exists. For example, a business owner who employs a person to run their business is said to have an insurable interest in the life of the employee. If the employee dies, then the business owner will suffer loss/profits for the business. In life insurance, this is usually known as business life insurance. 

What Goes Into Qualifying You

When buying an insurance policy, a carrier looks into several factors that go into determining whether you qualify for coverage and which coverage you qualify for. The following are the top factors that help insurance companies to help determine if an individual qualifies for coverage;

Gender

The gender of the applicant goes a long way to determining the kind of coverage they can qualify for. Generally, men will pay higher premiums than women for the same coverage. This is because they are riskier to insure when compared to women. Men are more likely to engage in dangerous lifestyles and occupations, and they are also considered to have shorter life spans considered to women. 

For instance, if two people, a man, and a woman want to purchase a life insurance policy worth $5million in coverage, the man is likely to pay higher premiums when the woman pays lower. So, if you are male then it is good to know that while you may qualify for a policy, chances are that you are going to pay high monthly premiums. 

Occupation, Hobbies, and Lifestyle

Occupation is also an important factor of consideration for determining the qualification process for life insurance policies. Some occupations and hobbies involve dangerous activities that make an individual risky to insure. For instance, people who indulge in activities like skydiving, mountaineering, and deep-sea diving and occupations like fire brigades, defense forces, and mining machine operators, among others. 

People in such occupations and fields are high risk and hence end up paying higher insurance premiums. Also in some cases, such individuals will not qualify for certain life insurance policy packages. 

Your lifestyle is a huge factor of consideration since it plays a big role in your health, wealth, and general wellbeing. Does your work entail a lot of traveling? Or do you love traveling for vacations? How is your credit score record? Or have you ever been bankrupt before? Your lifestyle is a great way for life insurance companies to know if an individual is trustworthy or not. 

Age

Age is one of the major factors of consideration for different life insurance packages. Most policies have age limits and an increase in price with the increase in years in terms of age. With many policies, young people are the easiest to qualify for while older people are getting trouble to qualify for most packages. 

The older an individual is, the riskier they are to the insurer since their life expectancy is lower. However, most people have the notion that old people cannot qualify for insurance, which is not true. The most common age bracket to apply for life insurance is 15-85, with 15-17years old eligible for young adult life insurance. 

It may be expensive to acquire life insurance at an older age which is why most experts recommend purchasing insurance at a younger age. This way, premiums will be cheaper and the death benefits will be high. 

Family Health History

Your carrier will also want to look into your family’s medical history because it contributes to your gene pool. They will want to know if there has been someone with chronic illnesses, heart-related diseases or other medical issues that may be hereditary. 

It is always good to give correct information about your family health history even if it is not the best. Some life insurance companies carry out genetic tests that may or may not affect your premiums, depending on the results. But it may benefit you if you don’t carry a genetic marker as a family member who had a particular disease if any included in the family medical history. 

Tobacco Use

To qualify for any life insurance policy, any carrier will want to know if an individual is a smoker or not. Continuous tobacco use is fatal smokers are high risk, which is why premiums tend to be different and higher for them compared to non-smokers. 

If you are a smoker looking to apply for a life insurance policy with low premiums, then you will have to quit smoking. Also, for smokers to qualify for non-smoker policies life insurance companies often require individuals to completely quit smoking for at least a year. This period will vary from company to company as other companies set time periods of up to 5 years. 

Current Health

Your carrier will also examine your current health to establish if you are healthy or not. This involves a full medical check to see if you are in good health. Chronic illnesses and some medical conditions are high risks, resulting in higher premiums. While carrying out the medical examination, some of the things to be checked include cholesterol, height, weight, and blood pressure. The medical examination process may also require you to fill in some medical questionnaires. The whole process is also referred to underwriting a life insurance policy that may, or may not be compulsory, depending on the kind of product. 

Driving and Criminal Record History

Late ticket payments and vehicle insurance, bad driving history and any record incriminating you is not to sit well with your carrier. These records may not necessarily bar you from applying for a life insurance policy, but they will impact the amount of coverage you get and the number of premiums you get. For obvious reasons, a bad record translates to higher premiums, mark you, some companies will check records of up to the past three years. So you need to ensure that your records are good to avoid limitations when purchasing life insurance. 

When Companies Deny Coverage

Sometimes, insurance companies will deny the insured individual coverage. While this does not happen every time, it can happen to you if you have not been doing the right thing. The following are some of the incidences when you can be denied coverage;

Lack of Relevant Personal Information  

When purchasing a life insurance policy, it is good to provide all the information needed. You may get away with lying about something, for example, a conviction for driving while intoxicated, but it will be difficult to deal with the consequences later. 

Every information required is important as it helps to gauge the risk of any given life insurance policy payout. 

However, some information presented as inaccurate may not be enough grounds for denial. These are classified as misinterpretations that don’t necessarily imply that the insured intentionally lied during applications. For instance, the wrong license number may not be enough for an insurance company to deny you information. 

Death Occurs During the Contestability Period

With every life insurance policy, there is always a contestability period which usually lies between the date of the insurance purchase up to two years. If the insured dies during this period, then the insurance company has the right to deny coverage. 

If your carrier finds out that you lied during application then they may use that against you and deny coverage. Even if you die via a car accident but lied about a medical condition then that may be an authentic reason for denial. However, misinterpretations may not be enough reason for the life insurance company to deny coverage. 

Unpaid Premiums

If your premium payments were left to lapse, then your carrier may deny you coverage. In fact, if unpaid premiums reach a certain threshold, you risk getting your policy canceled. The best way to avoid missed premium payments is to have the amount automatically deducted from your checking account. Optionally, you can borrow against the cash value of the policy, if it is whole life, to make the payments.

The good thing is that most policies usually have a 30-day grace period to pay any premiums due before interest is charged. 

The Policy Didn’t Cover the Type of Death

The type of death may also be a consideration for coverage denial. For instance, in the past, most insurance companies would deny coverage if an individual died while skydiving or in war. Some of these dangerous activities that increased the risk to insure an individual would be used to deny coverage. As of today, companies will pay claims when death occurs during such a scenario. A common exclusion is a death through suicide, which in some cases is paid for. 

What to Do When Denied

If your insurance company denies you coverage, don’t accept it yet. The first action to take is 

to try to find out why it was denied. This is because your insurer collects different data to assess your risk before accepting or denying your claim. If the risk is high, this could be a valid reason for denial or postponing. The insurance company should be able to provide in-depth information regarding their denial. When presented with the information, make sure to confirm the results, if the denials were medical-related, as such information is prone to errors. When cross-checking the date, make sure to consult with your initial physician, they will be able to identify included results that may not have been included.  

How to Get Approved

If your life insurance company does not get back to you within a reasonable period of time, you may want to contact your lawyer. Alternatively, you can contact your attorney general or the department of insurance in your state and skip paying legal fees. 

Avoid waiting for too long and make sure to contact your lawyer as soon as possible. 

An experienced attorney will help you reverse the denied claim because most carriers are usually unwilling to do so. Also, they tend to take petitions seriously which is why you will need a good lawyer once the claim is denied. 

Work With A Pro

Working with someone with many years of experience in the industry will save you time and money. Your agent understands the process is knowledgeable about the different players involved. So it will be easy for them to advise you and guide you whenever you hit a wall. Also, you are more likely to get discounts through an agent than when working alone.  

Above all, having someone to do all the heavy lifting for you will provide you with peace of mind. You are assured that your agent has your back and will help you through to the end. Having everything together translates to protection for both you and your family.