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be rescinded which is a technical term for cancelled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. |