Posts tagged Application

Let’s be frank. The term life insurance application is not exactly a fun process. We rank it slightly worst than health insurance application but considerably better than mortgage application. Somewhere in the nasty middle. Let’s take a look at some pitfalls and problems to avoid on the dreaded term life application.
The biggest concern is to leave off medical information or history on the application. Some applicants will say “well that’s not very important” and they dismiss some issue and do not enter it on the application. Let the life insurance underwriter (person at insurance carrier that determines eligibility) make that determination. If you do not include information on the application, your insurance can be rescinded which is a technical term for cancelled after the fact. This is bad in that it usually comes up when there is a claim and the carrier finds that health history was not made apparent to them during the application process. It defeats the purpose of securing term life insurance protection if that protection is made void by missing information. This also goes for people who intentionally leave information off in order to secure coverage or get better rates. What’s the purpose of obtaining coverage that might not be valid when the need actually occurs to trigger benefits. It’s a losing game and after seeing the negative consequences in the past of missing information, we strongly recommend against it.
Another problem that occurs is entry of vague or incorrect information, especially in the life beneficiary section. We wrote an entire section just on beneficiaries to drive home the point that this is a crucial part of the application. A quick refresher… Be specific as to the person (don’t use words like “spouse); as to how the benefit will break down (use percentages instead of dollar amounts); as to secondary and other beneficiaries (in the event the primary beneficiary is unable to collect or as passed away). You want to avoid the benefit going through probate and the accompanying estate taxes/conflicts that can result.
If you have any questions as all on selecting the right plan options on the application, please consult with us as your licensed term life insurance agent. Once we go through the underwriting process and they come back with a decision, we may have to completely re-apply to change the plan choice. It’s best to avoid this and also make sure you select the coverage you think you are buying. The carriers have many options (not to mention that there are many carriers) so it’s best to be sure that you have selected the right option. This goes for life riders as well. We’re not sold that insurance riders are the best use of your premium dollars (as described in our term life insurance riders article) but if you do decide to go this way, make sure you have selected correctly…with our help of course.
It’s also very important to keep information up to date. Do not assume you can always change it later (which of course you can) as things may change or the benefits may be triggered. We have seen situations where people figure they will update the information next year and the unforeseen occurs which can throw all types off problems into the mix.
These are some common issues to avoid when completing your term life insurance application. We would be happy to help you with an questions you have during the process.