Applying for life insurance is an important step, but with all the questions during the application process, it can start to feel a bit intrusive as well. You might expect to be asked a few simple questions about income and health, but it's unlikely that you'll expect the deluge of questions about your hobbies, lifestyle and net worth.
These may seem like unnecessary, even prodding questions, but rest assured, these are likely typical life insurance questions. The purpose of which is simple: to help the life insurance company identify your life expectancy and overall risk. Like most things in life, when you understand the purpose of their questions more clearly, they'll become less alarming. So let's take a few moments to demystify the questions on the life insurance application.
Why is the life insurance company asking me for personal information like my social security number?
We're taught and reminded constantly not to give out our personally identifiable information. Identity theft is a growing problem, and one that we should all be vigilant against. That being said, providing your social security number, birth date and other similar information on your life insurance application is necessary to the process.
A life insurance policy is a written contract that formalizes the agreement between the life insurance company and the policy owner. The insurance company is the only party to the contract that makes an enforceable promise, which is to pay out the face amount of the policy upon the policy owner's death. While it is true that the policy owner must pay the premiums as they come due to keep the policy in force, no promises are made to continue paying those premiums.
Therefore, the life insurance company must verify that it is indeed you they are insuring. With your social security number, they are able to confirm your identity with a government issued I.D. , and, in no exam cases, confirm your health status. Without that information, it could become possible for them to mix you up with another person who has your name and birth date (rare, but not out of the realm of possibilities).
Why do life insurance companies need to know so much about my finances?
It may be taboo to reveal your salary, net worth and other asset information, making you feel uncomfortable about disclosing it to 3rd parties. However, revealing your financial information to the life insurance company, helps them understand how much life insurance you both need and qualify for. Salary is a great indicator, but knowing your total worth, including the value of your home, cars, investments and retirement accounts, paints a more vivid picture about what exactly you expect to protect with life insurance.
What do they care if I'm traveling?
Your family cruise or impending trip to London is unlikely to raise red flags from insurance companies. Yet, when applying for life insurance, you will undoubtedly be asked if you have upcoming travel plans. What's the deal? While your road trip across the country may not matter, if you are planning to travel to war torn countries or regions where contracting a deadly illness is likely, it may affect your premiums. You'll see these types of questions on the life insurance application to better assess your risk of death, making sure the life insurance company gives you the most accurate estimate possible.
What do my driving records have to do with my life insurance?
Have you been in a few fender benders in the last couple years? Or are you accruing speeding tickets, running stop signs or red lights? These are considered behaviors that could increase your risk of death. A safe driver is considered less risky, so the life insurance company will ask about your driving history to understand whether or not you have a clean driving record.
Do my hobbies really matter to a life insurance company?
The short answer is yes. If you bungee jump, sky dive, fly planes or helicopters, or your job is unusually dangerous (think race car driver or logging worker), you may be included in a higher rate class even if you're healthy. The reason for this - someone whose primary hobby is base jumping has a far higher risk of death than someone whose primary hobby is baking cupcakes.
Why does a life insurance company care about my mental health?
Mental health may not immediately seem like an important factor in life insurance. Surely heart disease and cancer are greater indicators of death risk, you might think. While it's true that physical health is important in determining your risk, if you take antidepressants or suffer from mental illness, you may be considered a greater risk. Asking questions about your mental health helps the life insurance company to determine the proper rate and insurance policy for you.
Applying for life insurance can surely feel like an interrogation, but every question the life insurance company asks has a distinct purpose. Even if your answers to these questions drive up your premiums, it's important to answer honestly so that your beneficiary's right to your life insurance claim can't be disputed.
We hope you're well versed now in why life insurance companies ask certain questions on the life insurance application, but if you have more questions about what to expect when you apply, contact us today or begin by requesting a free quote.
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