There’s a lot of misinformation when it comes to life insurance — especially for customers with pre-existing conditions. Learn what to expect when applying for a policy so you can get the best deal.
Popular life insurance myths
There’s a lot of confusion around life insurance. While it can be a complex product, it has a simple purpose: to provide for your loved ones when you’re gone.
These are some of the most common myths about life insurance.
1. It’s too expensive
Most Americans think term life insurance costs three times as much as it actually does, according to LIMRA’s Insurance Barometer Study. When the respondents were asked to estimate the cost of a $250,000 policy for a healthy 30-year-old, over half of them said $500 a year or more. The average cost is closer to $160 a year — or approximately $13.30 a month.Each provider has its own underwriting standards, so rates can vary. If you’re ready to purchase a policy, be sure to compare providers to get the best possible deal.
2. Everyone has to take a medical exam
Traditionally underwritten policies require a medical exam, but they’re not your only option. If you need coverage quickly or want to avoid a medical exam for whatever reason, you can look into no-medical exam life insurance.
There are two main types: simplified issue policies ask you to fill out a health questionnaire of yes or no questions, while guaranteed issue policies forgo both the questionnaire and medical exam. However, since the insurer can’t get a complete picture of your health, these policies are typically more expensive.
If you decide to go with a cheaper policy that requires a medical exam, you can choose to take it at your home, office, or another place where you feel comfortable.
3. The life insurance I have through work is enough
Many employers offer free or cheap life insurance as part of their employee benefits, which is a great perk. While it’s convenient, there are a few caveats to this coverage.
Firstly, it’s usually not portable — so if you change jobs, you’ll lose your coverage. Secondly, group life insurance usually capped at a small amount, like $50,000 or $100,000. To put this into context, the rule of thumb is to buy a policy worth five to ten times your annual salary. If you have debt, a mortgage, or loved ones relying on your income, the insurance offered through your workplace may not be enough.
In that case, you might want to take out a separate life insurance policy to make up the difference, or ask your employer about supplemental policies.
4. The choices are too complicated
While there are a range of life insurance policies on offer, term life insurance is the best choice for most people. And it’s the cheapest and most straightforward policy.
Term life policies provide coverage for a set period of time, like 10, 20, or 30 years. You get to choose the term, as well as how much coverage you want to buy. The premiums stay the same, so you know exactly how much you’ll pay each month. And when you die, your beneficiaries will receive a payout. If you outlive the term, you can purchase another policy or simply let your coverage lapse.
If you’re looking for lifelong protection, there are three main permanent policies: whole life, universal life and variable life. Like term life, these policies pay a death benefit, but they also build cash value over time. As a result, permanent policies are more of an investment — and they have a higher price tag to match.
5. I only need life insurance to cover funeral costs
In the US, the average funeral and burial costs $7,360, according to the National Funeral Directors Association.
That’s why many insurers offer final expense policies. Usually marketed to seniors, these policies are designed to cover end-of-life expenses, and coverage typically starts at $5,000 and tops out at $25,000.
If that’s all you can afford and you don’t want your family to pay for your funeral, this policy checks those boxes. But if you have debts or loved ones who rely on your income, you might want to take out a larger policy that covers those financial obligations. This will ease the financial burden on your beneficiaries if you die.
6. It’s hard to qualify for
If you’re overweight or dealing with a health condition, you might think you’re not eligible for coverage. But the key is to shop around and compare rates from a few insurers. Each insurer has its own set of underwriting standards, and some are a lot stricter than others.If you’re still struggling, consider working with an independent broker who specializes in high-risk applicants. They’ll be able to guide you towards lenient insurers, and help you with your application.
7. I can’t get life insurance with a pre-existing health condition
Some insurers won’t cover people with a history of heart disease, cancer or diabetes, and others will hike up their rates. While a pre-existing condition can create a barrier, it doesn’t mean you’ll automatically be denied coverage.
If you have a health condition working against you, be honest and upfront in your application, and apply with a few insurers. You might also consider asking an insurance broker to pair you with a provider who specializes in your condition, and can better assess your risk factors.
8. I have to die for people to benefit from my policy
Permanent policies have “living benefits,” which means you can benefit from them while you’re alive. This comes down to the cash value component. When you pay your premium each month, a portion is invested to give your policy a cash value. Once you accumulate enough cash value, you can start to take out tax-free loans against your policy, and use the money to fund large expenses like home renovations or college costs.
You can also surrender your policy and collect the cash.
9. Stay-at-home parents don’t need life insurance
If a stay-at-home parent passes away, the family won’t lose an income — but they might have to start paying someone else to help out with things like cooking, cleaning, childcare, and chauffeuring the kids around. The money from a life insurance policy can take care of all the labor the stay-at-home parent did for free.
10. Single people don’t need life insurance
It’s true that life insurance mostly benefits people who have financial dependents. But if you’re a single person who has student loans, a mortgage or other debts, a life insurance policy can cover those expenses when you die so they’re not passed on to your family.
On the same note, if you have children or aging parents, a policy can give you the peace of mind they’ll be taken care of when you’re gone. And finally, if you want to pay for your own funeral, the death benefit can cover those costs.
11. Young, healthy people don’t need life insurance
This might be the perfect time to buy coverage. Here’s why: Young, healthy applicants are less likely to die or develop health conditions. Therefore, they’re less risky to insure, so providers charge lower premiums. If you foresee a need for life insurance in the future, you’re better off buying it now. The older you get, the more you’ll pay for insurance.
Does being right- or left-handed affect my life insurance rates?
No. Though insurers may ask about your prominent hand, it shouldn’t impact your life insurance rates.
The only exception is if you’re left-handed and work in a high-risk profession that involves manual labor, like logging or roofing. Standard equipment and tools are often designed for right-handed people, meaning left-handed workers may be more prone to accidents — which may raise your premium. But those who work in dangerous jobs pay more for coverage anyway, so this won’t make much of a difference.
Myths about life insurance if you have a pre-existing condition
If you have a pre-existing condition, there’s a lot of additional misinformation floating around, like:
- I won’t be able to get insurance coverage. Many people with pre-existing medical conditions are able to get coverage — though you can expect to pay more.
- If my application was denied, I’ll never get coverage. Each insurer has its own underwriting standards, and some are more lenient than others. If you’re denied a policy by one insurer, that doesn’t mean all insurers will assess you the same way. You can apply again, but you may want to consider working with an agent or broker in case you’re questioned about the denial.
- I don’t need to tell my insurer about a condition that occurred a long time ago. Insurance applications are legal documents, so it’s essential that you make your provider aware of any condition that may affect your application. Otherwise, you could be denied coverage, or your insurer may deny your loved ones a payout when you die.
What happens if I don’t tell my insurer about my pre-existing medical condition?
In the event that a claim is made, insurers go to great lengths to ensure that the claim was not a result of any known conditions that should have been made clear during the application.
If it’s found that information was withheld during application, the insurer will reject the claim and there will be no payment made or refund of any premium payments.
Can I get life insurance if I was recently hospitalized?
Possibly, but if your application is accepted you’ll likely pay more. Insurers are more likely to offer policies and competitive rates to customers who have not been hospitalized in the past year.
Compare life insurance for pre-existing conditions
Bottom line
There’s a lot of misinformation floating around when it comes to life insurance, especially if you have a pre-existing condition. It is possible to get coverage, but you may have to put in a little extra work to find the right policy.
If you’re ready to get started, compare life insurance companies to find a policy that fits your needs and budget.
