How Long Do You Need a Life Insurance Policy Before You Die?

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An unavoidable part of buying life insurance is the life insurance application process. This process can take up to 6 weeks and sometimes longer if there are extenuating circumstances. The period of time between when you apply for insurance and when it goes into effect is known as the “waiting period.”

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You don’t have any life insurance coverage during this waiting period, so your policy’s beneficiaries won’t receive any life insurance money if you die unexpectedly. 

Most types of permanent life insurance have a waiting period, as does term life insurance. These policy types include whole life insurance, universal life insurance, variable life insurance, and level term life insurance.

Once your application has been processed, and if you’re approved for coverage, you’ll need to pay your first policy premium for the waiting period to end. Once that happens, your coverage is now in effect, and your beneficiaries will receive the payout when you die.

There are steps you can take to make sure you’re covered while your life insurance policy is being processed. Temporary life insurance policies and other types of policies discussed later can provide you with a quicker turnaround time for decisions on your application and will offset the risk of there being a gap in protection. 

What’s the Average Waiting Period for a Life Insurance Policy?

For traditional life insurance policies, which we’ll refer to as permanent life insurance and term life insurance, a waiting period of 4-6 weeks is common. 

Depending on the amount of death benefit applied for, there are typically health questions that are asked, and the life insurance company may request medical records from your doctor if they want to dig a little deeper into the answers you provided. Depending on the doctor’s office, staffing level, and sense of urgency, it can take weeks before the insurance company receives the records from your doctor.

Another delay is when a paramedical exam is required for you to qualify for the life insurance policy. With a paramedical exam, an examiner comes to your home or office, draws a blood sample, records your height and weight, and checks your blood pressure. There’s always a delay from signing the application until your exam is completed and the laboratory gets the results to the insurance company. During this period, your life insurance with that company is not yet active.

This lengthy waiting period is for traditional, fully underwritten life insurance policies. There are other types of life insurance that have shorter or no waiting periods, and coverage can become active when the application is signed and the life insurance agent accepts the check for the first premium payment. These policies have no medical exam requirements, as well as no waiting period.

Many people wonder why life insurance companies have a waiting period. They do this because it allows them time to conduct a thorough evaluation of your medical history and background, which helps them determine if you’re a reasonable risk for them. 

Life insurance companies also have a waiting period to avoid fraudulent death claims. The primary type of fraud they want to avoid is murder committed impulsively for a profit.

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How Do Life Insurance Policy Waiting Periods Typically Work?

When someone dies before the end of the waiting period, no death benefit is paid to the life insurance policy's beneficiaries, even if the life insurance company has accepted money with the application. Once the waiting period specified in the policy has been satisfied, the beneficiaries will receive the death benefit.

To help applicants avoid the waiting period while a life insurance application is being reviewed, insurance companies will sometimes “bind coverage” or “issue a binder.” This means that a temporary or interim policy has been made active by the insurance company until a formal policy is issued. The binder provides evidence that life insurance is now in force and will continue until the policy is either issued or the applicant is declined by the insurer.

In some instances, a life insurance binder does go into effect when the application is signed, and a check is given to the agent. But sometimes things can go wrong, and an applicant thinks they have coverage, but they don’t. This can happen when:

  • The insurance agent doesn’t have the applicant sign the application
  • The agent neglects to collect a check from the applicant
  • The agent loses the application, check, or both

When this happens, the courts have to decide if the coverage was, in fact, in force and a death benefit is owed to the beneficiaries. For this reason, it’s always a good idea to have a copy of the application and a receipt for the money submitted.

It’s essential to have an experienced, professional life insurance agent helping you so this doesn’t happen to you. Your agent can help you find the best life insurance policy and determine how much life insurance you may need.

Are There Life Insurance Policies Without a Waiting Period?

There is a type of permanent life insurance called “guaranteed issue life” insurance that has no waiting period before a death benefit would be paid to the beneficiary. For this to happen, an application with money must be submitted by the applicant. 

Guaranteed issue life is unique. It has no medical questions on the application, and the insurance company will issue a policy to anyone who applies who’s within a certain age range (typically 45 years to 85 years of age), regardless of their prior health history. This means that someone who is 70 years old and has terminal cancer could apply for, and be issued, a life insurance policy.

To prevent this from happening with guaranteed issue life insurance policies, companies will often have a “graded death benefit” as one of the policy’s features. The graded death benefit means that the insurer will only pay a portion of the policy's face amount to the beneficiary for the first 2-3 years that a policy is active. 

For example, a $50,000 life insurance policy could only pay $10,000 in death benefits during the first 12 months the policy was in force, $25,000 then next 12 months, and then pay the entire $50,000 after the policy was in force for 36 months. This is commonly the case with guaranteed issue life, or what is known as “final expense insurance.”

The Waiting Period for Insurance Payouts

In addition to there being a waiting period from when you apply for life insurance until it’s in force, there can also be a waiting period from when your beneficiaries submit a death claim form and when they receive the actual payout from the insurance company. Processing the death claim can take as little as two weeks, or it can be months if the death is being investigated by the insurance company. 

If your loved ones will need immediate financial support when you die, it’s advisable to have money set aside for this in a savings account or money market account where they can have immediate access to the money they need. This will help them immensely while they wait for the life insurance payout.

Survivors often need money immediately for things like:

  • Final medical bills
  • Funeral costs
  • Burial costs
  • Outstanding loans
  • Credit card debt
  • Other expenses

In addition to money set aside in bank accounts, temporary life insurance or a policy with no medical exam can provide a faster payout. 

Making Sure Your Beneficiaries Can Access Your Death Benefit 

To help your beneficiary access your death benefit when you die, be sure they know that a policy exists and that they’ve been specified in the policy to receive the death benefit. Each year, millions of dollars of life insurance proceeds go unclaimed because the beneficiary didn’t even know that there was a life insurance policy in force.

It’s important to know how long you need a life insurance policy to be in force when you die for your beneficiaries to receive a payout, too. Be sure to ask your life insurance precisely what that time period is with their company.

Also, be sure to completely read the terms and provisions that are specified on the application itself. That’s what will hold up in court if the life insurance company contests paying the claim, saying that the insurance never went in force.

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