Waiting Periods: What Are They?
Getting life insurance is a smart move; you’ll feel better once you’ve done it, knowing your loved ones will be financially protected and cared for if you pass. Life insurance can pay for a funeral and burial and other end-of-life expenses, it can pay off the mortgage on a house, and it can make up for the loss of income. Having an insurance policy that covers these expenses gives your family members one less thing to worry about during a difficult time.
Don’t expect that policy to become effective right away, however. It can six weeks or longer for an insurance company to approve your application and issue your policy. If you need life insurance right away, you might have options, but they aren’t usually preferable to the standard policies that make you wait. Let’s have a look.
Why the Wait
When you apply for life insurance, you’ll submit a detailed application that covers your personal and family medical history in an extensive questionnaire. You’ll also provide details about your occupation, hobbies, habits and other activities that could make you a lower or higher insurance risk. On top of all that, the insurer will require at least a basic physical examination. They’ll take all this information into consideration when deciding whether to offer you a policy and, if so, how much to charge you.
Some companies offer same-day coverage through accelerated underwriting. Obviously, this type of policy doesn’t require an exam and doesn’t have any waiting period. You’ll still have to complete a detailed personal and family health history. If you’re in good physical and financial shape, not to old (under 60 usually), and haven’t been turned down for insurance before, you might be able to take advantage of accelerated underwriting. Keep in mind this is for term life insurance only, which is only good for as long as you keep paying premiums and doesn’t build any cash value.
If you are applying for traditional life insurance and going through underwriting, you might be able to obtain a temporary policy to cover the period until your permanent insurance becomes effective. Your odds of dying during this brief period may be low, but we never know when we are going to go, and that’s the whole point of life insurance, isn’t it? Companies that offer permanent life insurance often will be more than happy to sell you a temporary policy too.
Final Expense Policies – Guaranteed Issue and Simplified Issue
If you want a whole life policy without a waiting period, you’ll need to look for either a guaranteed issue or a simplified issue policy. These policies don’t require a physical exam so there is practically no waiting period, and as their names suggest, getting coverage is practically guaranteed, or simple.
Guaranteed issue life insurance is available to people who don’t qualify for traditional whole life policies due to their age or health, including if they have a serious medical condition or terminal illness that would keep them from getting through traditional underwriting. Guaranteed issue plans don’t ask health questions or require a medical exam, but the benefit is smaller. A guaranteed issue policy is a type of final expense policy, meaning that is what it is intended to cover. Benefits tend to max out at around $25,000, which should be enough to cover a funeral service and burial, pay final medical bills and ease the transition after the loss.
Not only is the benefit smaller, but premiums are typically more expensive compared to regular whole life policies. Also, these policies don’t carry any cash value as whole life plans do. Benefits for guaranteed issue plans also typically have a two-year period before full benefits kick in. If you die during that period, the company will refund 110% of the premiums paid but won’t pay the policy benefit.
Simplified issue is a similar type of plan that is available to older individuals (45-80) who would have a hard time qualifying for traditional insurance based on the detailed medical questionnaire required. These individuals might be considered a health risk, but they don’t have cancer, a terminal condition or other serious health issues. Simplified issue is cheaper than guaranteed issue, and the maximum benefit is somewhat higher, usually up to $50,000. Like guaranteed issue, simplified issue plans usually don’t have a cash value and typically come with a graded benefit, making you wait out a two-year period before the full benefits kick in.
Waiting Periods Are not Contestability Periods
Even if you go the traditional route and wait the five or six weeks it takes for the insurance carrier to issue your policy, your policy might go into effect immediately, but it will still be subject to a contestability period. If you die during this period, the insurance company has a right to rescind the policy based on any material misrepresentations they find were made during the application process. When insurance companies deny claims either inside or outside the contestability period, it’s worthwhile to review your case with an experienced insurance law attorney. The insurance company might not have followed the law in your state, or they might have been acting in bad faith, in which case you can sue them for your benefits and other damages they may be liable for.
One Final Waiting Period – Waiting to Get Paid
As a beneficiary on an insurance policy, you can also expect to endure a waiting period when you file a claim before you receive the payout due under the policy. You’ll need to present proof of loss when filing a claim (such as a death certificate) and any other documentation required by the policy. Depending on the circumstances and the company, it might take them two weeks or two months to process a claim and issue a check. This period can be extremely frustrating if you have a funeral to pay for, a mortgage payment to make, and lost the family’s wage earner while there are still groceries to buy and bills to pay.
If the insurance company takes an unreasonably long time to pay, or if they use this time for an improper motive to find an excuse to deny your claim, they could be acting in bad faith. If you think this might be the case, talk to an attorney who practices insurance law and routinely fights bad faith delays or denials. You could be able to recover the benefits due under the policy plus additional money damages their delay or denial has cost you.