So you’ve finally decided to get a life insurance. Congrats! It’s the first step towards securing a financially-stable future for your loved ones. But before you go ahead and look around at your options, it’s best to know what getting a life insurance entails and how the whole process works – and that includes some common questions life insurance companies ask.
Here’s a bird’s eye view of the entire process:
- Decide on the amount of life insurance coverage and the length of the policy
- Get an estimate from an online quote
- Proceed to contact your insurer of choice for the next step
- Depending on the insurance company, they may or may not require you to undergo a pre-medical exam
- Some “Insuretech” companies like Ladder Life and Haven Life, for example, offer a fully end-to-end process that can offer you an actual term life policy in minutes (provided their system does not deem you need a pre-med exam).
- Submit all required documents and necessary payments
- Receive the official life insurance policy documents upon approval
Why do Life Insurance Companies ask a lot of questions?
Here’s how it works. Life insurance companies will guarantee you a specific cash benefit in exchange for regular premium payments. Since they will be taking on a significant amount of risk in guaranteeing your death benefit, they need to pre-qualify you to match you with the appropriate policy.
For example, if you have a pre-existing health condition or your overweight, you’ll most likely have to pay a higher premium, simply because of the higher risk involved. This is why insurance companies take great lengths to ensure a streamlined and accurate underwriting process.
Whether via algorithm or speaking to an actual person, underwriting is the insurer’s way of determining whether or not you qualify for life insurance. If you do, they will then determine how much premium you will need to pay in regards to the results of your underwriting.
Note that not all medical information about you is significant to underwriters. Some are merely asked to check if there are any potential red flags.
For example, say they asked you when was the last time you visited a doctor and why. Your answer: “I visited the doctor last month because I had a cough for more than 2 weeks. It’s gone now though”.
Now, while that may look like a simple case of a cough, underwriters might need to look deeper into your medical history in order to uncover any potential serious reasons why your cough lasted two weeks.
They’re essentially looking for possible red flags that might affect your life expectancy. And, since life insurance is basically all about getting adequate protection in the event of death, it’s crucial for them to uncover all health issues you may have.
What if I don’t tell them about some of the health issues I have?
Here’s my recommendation: Just be as honest and transparent as possible.
Why? Because it’s almost guaranteed they will learn about it anyway. Understand that underwriters just don’t take your word for it.
We’re talking about potentially huge sums of money here after all. This is why insurance companies do their due diligence to ensure qualified individuals are given appropriate life insurance policies.
Insurer’s research a candidate’s MIB, prescription drug history, and MVR. Those 3 alone are enough to uncover your true health history and details, so there’s really no use trying to lie about it. You’re actually risking not getting a life insurance policy if they find out you’re not being truthful about your health.
What are the common questions that life insurance companies ask?
You now know why life insurance companies seem to ask a ton of questions when you’re wanting a policy. The next section will show you the actual types of questions that get asked to potential policyholders.
The following questions are standard in almost all life insurance applications. Remember, they’re doing this to get to know as much information about your health so they can provide you with a matching policy.
- Have you used any form of tobacco or nicotine in the last 3 years?
- What is your gender?
- Have you used marijuana in the last 12 months?
- How tall are you?
- Have you used any controlled substances not prescribed by the physician in the last 10 years?
- Has your weight changed by more than 10 pounds in the last year?
- In the last 10 years, have you been diagnosed, treated, hospitalized, or prescribed medication by a medical professional for any of the following?
- Heart disorder, Diabetes, Anemia, elevated cholesterol, or a clotting disorder, Lung or respiratory disorder, Cancer or tumor, Kidney disorder (other than kidney stones), Depression or anxiety disorder, Stomach or gastrointestinal disorder, Disorder of the brain, muscle, or nervous system, Joint or bone disorder
- Have you been a patient in any medical facility in the last 5 years?
- In the last 5 years, has a physician recommended any test (other than HIV) or treatment that you have not yet completed, or are you waiting to receive results for any tests now?
- Have you ever had an organ transplant?
- Have you been diagnosed by a physician with AIDS or ARC?
- Has a biological parent or sibling been diagnosed with diabetes, cancer, or heart disease prior to the age of 60?
- When were you born?
Whether it’s work-related travel, vacation, or lifestyle, insurance companies would want to know if you have plans to travel outside of the country. Why? It goes back again to our answer earlier: Insurers want to know if you’ll be exposed to any potential risks brought about by traveling to other countries.
Think about it: Your work abroad might involve potential hazardous activities that increase your health or safety risks. For example, you might fancy a trip to the Amazon jungle where you are exposed to various diseases or ailments. Or, you end up visiting a country that is currently experiencing disorder making it unsafe to stay there.
Insurance companies take these into consideration so they can assess how much of a risk it will be if you’ll be traveling abroad. They will factor this in choosing a policy for you.
Another important thing to remember is that even if someone answered “No” to the sample questions above but died outside his/her country within a couple of years the policy was issued, the life insurance company can open up an investigation to deem if the death was caused by risks brought by traveling to a dangerous country or by contracting diseases on foreign lands. If they’re a frequent traveler to those areas and lied about it in during their application, the insurer can revoke the claim which means their beneficiaries won’t get paid.
Here are some of the most common questions life insurance companies ask with regards to travels:
- Do you have plans to engage in any of the following activities within the next 2 years?
- Are you planning to travel, live, or work outside of the country within the next 2 years?
- Do you own a business or residence outside of the U.S.?
Why do insurance companies need to know about my finances? Simple: They want to know if you are financially capable of paying premiums for the amount of policy you are applying for.
It really doesn’t have anything to do with your health and other risks. So when companies ask about your annual income, assets and liabilities, and net worth, understand they need this information to correctly assess your application and match you with the appropriate insurance.
Here’s an example. Say someone earns $100,000 annually. However, instead of applying for a $2 million policy (which is 20 times his yearly income) he opts to get a $20 million policy. What do you think the insurance company will do?
They will check his financials based on the information you provided. Upon seeing that his making $100k per year, they will likely ask—why do you need a $20-million policy? Your net worth does not match that amount.
Remember, the primary reason why we get a life insurance is to provide the same level of income (ideally) to our beneficiaries in the event of death. That’s why insurers ask about income. They want to know if it “matches” the face value of the policy you’re trying to buy.
- Provide details of income received and expenditures from all sources for the last 2 years
- Details of assets and liabilities.
- Information about your dependents (if applicable)
- Do you have any existing inforced insurance coverage on your life?
- Have you or any business that you have been associated with ever been declared bankrupt?
Why do they need your personal info? It’s mainly for accessing your medical records. Remember I mentioned earlier (Health questions section) why it’s not a good idea to lie about your health condition since insurers will likely find out anyway? Well, this is how they do it. Also, they need it to check if a candidate is of higher risk i.e. if they may have had some run in’s with the law.
- What is your SSN?
- What is your phone number?
- Are you a U.S. Citizen or lawful permanent resident who has lived in the U.S. for more than 2 years?
- Where were you born?
- In the last 5 years, have you been convicted of a misdemeanor or felony, have you served in a probationary or parole program, or do you have any criminal charges pending?
- In the last 5 years, how many moving violations or convictions have you had?
Okay, now you know why life insurance companies ask all these questions and what I should expect. Now what?
The next step is preparing for the phone interview.
Life Insurance Phone Interview Questions
The phone interview is a necessary step in applying for life insurance. The primary goal of insurers is to verify the information you’ve provided so far is accurate. This helps them verify that the application is legit and everyone is on the same page with regards to your request.
- Social Security Number
- Driver’s license number and state
- Medical history including:
- Names, addresses and phone numbers of doctors, hospitals or clinics you went to in the last 10 years
- Reasons for and dates of medical treatment
- Names of any prescription medicines you have taken or currently taking
- Lifestyle questions and activities (exercise habits, travel, or high-risk activities)
- Use of tobacco products
- Information on your other life insurance policies (if you have any)
- Policy number
- Insurance company name
- Financial information
- Household net worth
- Annual income
- Employment information (Occupation, employer name)
After talking with the life insurance professional, you’ll be asked to sign the application which they will send electronically (or via mail). Essentially, it’s required as proof of your acknowledgment that the application is legit and all the information you provided is accurate.
Depending on how they assess your application, you may or may not be required to undergo a paramedical exam. If you have to, make sure to schedule it at a convenient time and at a date you’ll be able to prepare for.
Some quick tips for the medical exam:
- Have your personal and medical information handy
- Get enough sleep the night before the test
- Avoid any heavy exercise prior to the exam
- Wear something comfortable, preferably something with short sleeves
- Advise the professional if you are currently taking any prescribed medication
- If by any chance you are ill or stressed during the day of the exam, notify the insurer right away so you can reschedule
To recap, there are two main reasons why life insurance companies ask a lot of questions during the underwriting process:
- They want to know your health and living details/condition to estimate your life expectancy and come up with a matching life insurance policy
- They want to know if you are financially justified for the life insurance coverage you are trying to apply for
The telephone interview is an important part of the whole process, it’s done to verify the information you provided and get your acknowledgment on the details of the policy.
Applying for a life insurance doesn’t need to be a daunting process. By setting the right expectation and making adequate preparation using the tips above, you will have an easier time completing all the steps and getting the policy you want.