3 Life Insurance Application Hurdles
I bought a pack of gum yesterday, and the transaction was simple. I didn't have to release my medical records or describe my family history to the vendor. When you buy life insurance, though, matters are different, and here's why: when a company sells life insurance, the economic impact on the company depends on the longevity of the person being insuredwhereas a pack of gum costs the people at BubbleYum 12 cents regardless of who ends up chewing it.
Probably the only bump that could take place in the gum-buying process is to be interrupted by a convenience store robbery. When you apply for life insurance, though, a number of things can upsetbut hopefully not derailthe process.
---1. Denial of Coverage---
There's no moral law in the universe which compels people to conduct business with each other. If a man on the train demanded you sell him your cufflinks, you'd probably feel no compulsion to complyunless it were profitable for you to do so. Just so, life insurance companies don't have to sell you anything, and if they deny coverage, it's not because they're bad. It's because they can't afford to sell you insurance profitably. People with higher-than-average mortality risk are often denied coverage or simply don't bother applying. But by working through an independent agencyparticularly one that specializes in placing hard-to-place casesmost of these people could find coverage.
Insurance carriers (the companies that actually create insurance policies) have naturally gravitated toward niches where they can find economic advantages. Some are better at covering smokers. Some are better at writing policies for deep sea divers. Almost everybody can get coverage somewhere. Most shoppers can even find a decent selection of companies willing to insure them. (Just make sure that you work with an ethical agent who has experience with a large number of companies, though. Otherwise, you'd be nearly as well off on your own.)
---2. Wrong Rate Class---
In response to your application, the insurance company will either deny your request for coverage or extend an offer to you. Your coverage can begin as soon as you sign the offer and make your first payment. But there's a chance that the offer you receive won't be the same price as you were quoted. What should you do then?
In life insurance quotes, there is room for error because quotes depend on the shopper to choose a rate class for him/herself. A rate class is an evaluation of the insured's life expectancy, and this classification is used to calculate cost of insurance. Every life insurance company makes its own criteria for these classes, and said criteria are fluctuable, so how can the customer know if he's accurately indicated his/her own rate class?
The truth is that the customer can't be certain. If you get an offer that you did not expect, you have two options: you can accept it and pay the new price, or you can get your life insurance agent on the phone and have him/her go to bat for you. (Ideally, your agent should have been familiar with the underwriting practices of any company where you chose to apply, so he/she could have helped you guess your rate class as accurately as possible. Knowing that, you might opt to seek out a new life insurance agent.) Load your agent up with information that was not on your application but that represents your life expectancy in a good light. Do you exercise? How's your diet? Do you have pets? The underwriters at the life insurance carrier may be persuaded to change your rate class.
They say the most time-consuming step in the life insurance application process is the transfer of medical records. The underwriters at the insurance company will request a copy of your records in order to better evaluate your life expectancy. Apparently, it often takes weeks for this task to be carried out. In all, the life insurance application process usually takes a month or two.
I used to work in medical records, before I worked in life insurance, and I must say that filling a medical records request is actually a pretty simple processat least by the time we received the records request. I'd run off some copies or faxes, and the response would be on its way in just a few minutes. It could be on it's way in less than a minute. Even if the response were sent by post, it would only take a few days, tops, to reach its destination. I don't know where the delay really lies, but the take-away is just to be prepared for a long wait.
This lengthy step doesn't qualify as a "delay" in my mind because it's planned into every application process. Nevertheless, I'm told that customers tend to think of it as a delay.
by: Mark Manderson