5 Ways to Screw Up Your Life Insurance Purchase

All of us want to save money on our insurance rates and most of you folks out there want to do so legitimately.

Sometimes, even those individuals who are honest and forthright can pull one of the bonehead mistakes below.

And for the select few of you who thinks it's a good idea to scam or pull a fast one on the insurance company' we've got news for you below as well.

Here are 5 things you should never do when applying for life insurance.

1. Lie on your Life Insurance Application

This one may seem like common sense, but it's not.

Life insurance applications ask you a bunch of health related questions.  Some questions are pretty innocent like asking you if you've been to the doctor or hospital recently.  You might be thinking that they have no business asking you this, or they don't really need to know, or perhaps you are afraid that if you tell them the truth about your health history, they may penalize you on your rates.

Folks, the insurance companies don't care if you had to be treated for the flu, or had your ingrown toenail fixed.  They're not going to penalize you for these, but you still must disclose it, or risk a potential contested claim (see three paragraphs down).  They would only penalize you for major medical impairments that could have an impact on your life expectancy.  They want to know if you have heart disease, diabetes or if you smoke, meaning those things that can shorten your life.

Some people think that after they've been turned down, or were charged higher rates if they've been approved, might be of the mindset to apply elsewhere.  These are the people who try to get clever and figure they can simply lie on the next application form.

Here's a news flash so you don't make this dumb mistake.  First, the insurance company is going to request your medical records from your doctor, and second they are going to access health information about you from the Medical Information Bureau (MIB).  The MIB is a database where all the insurance companies share information which includes medical details from insurance applications.  They do this to prevent fraud.

Finally, you should know about the 2 year contestability clause.  Any death claim that occurs within the first 2 years when a policy goes into effect can be fully investigated by the company that issued the policy.  

If they can prove you lied on your application, they can contest the claim (not pay the claim).

 

So, don't be foolish and think you can second guess the insurance company, and don't try and outfox them.  You won't win.

2. 'Putting Off' Your Life Insurance Purchase to Drop a Quick 20 lbs

You are ready to apply for life insurance, but your agent tells you that you're over the weight limit for the best health class by 15 pounds.  You might be thinking that if you drop some weight real quick then you might 'fit' within the weight limit and qualify for the best rates available.  So, you go on a crash diet to try and drop 15 or 20 pounds.

Here's the problem.  Every insurance application asks if you've lost more than 10 pounds in the last year. They also know that people who drop a bunch of weight real quick put a lot of it back on not long after they stop dieting.  The best you can expect is they will only credit you with half of what you lost.  So, if you dropped 20 pounds before the exam, then you only get credited with 10 pounds.

If you were able to lose a quick 20 lbs, while this likely will improve your blood pressure, blood results, and overall health, I still would Never recommend you postpone applying for life insurance to drop weight for 3 reasons.

Obviously, there's also the small risk of death while you wait.  Yeah, that's a little dramatic, but you never know.  Another possibility is you develop some sort of medical condition during your weight loss that raises your rate or makes you uninsurable.

The bottom line is that in 99% of cases, NOW is the best time to apply for life insurance.  

You can always put the insurance in force now, and then a year later ask the company for a rating reconsideration as the new slim and trim version of you, and will be able to save money then.

3. Enjoying a Cigarette Here and There

Cigarette smoking is a tough habit to kick.  Every now then, you might have a minor lapse and have a butt at a party.  You might still consider yourself a non-smoker and hey, so what?  It was just one lousy butt right?  Nope!  Even if you only smoke one lousy cigarette a year, 99% of insurance companies still consider you to be a smoker.

You have to be 100% completely smoke free for at least a year with most insurance companies to be considered a non-smoker.

Don't lie about this because if they happen to find out you were an occasional smoker while investigating a claim, your family will suffer the consequence because the claim could be challenged.  It's not worth the gamble.

As with the point on weight loss, just bite the bullet and pay the tobacco rates until 12 months have passed from the time of your last cigarette, then request a rating reclassification from the company.

As a side note, there is one insurance company that will allow up to 24 cigarettes and still give you the non-tobacco rating.  See Non Tobacco Rates for Occasional Smokers.

4. Plan an Exotic Vacation

Many people want to travel and see exotic places.  Many of these locales are safe, but some are not.  Dangers that lurk can be anything from a tiny microbe to which Americans have little or no immunity, to guerrilla and terrorist movements, and anything in between.

When you apply for life insurance, these companies want to know what kind of situations you are going to be exposed to in your travels.  If you want to get the best rating for your life insurance, and you are traveling abroad, it might be a better idea if you postpone booking your trip until after you have been approved.

Be careful though because some applications will ask if you plan to do some traveling in the following year or so.  You might think to get tricky and say you're not, and travel anyway after they approve the application.  That's a no-no because that's a lie, and if anything happens, you could get the short end of the stick and pay the price.

5. Seeing your Own Doctor before the Insurance Medical Exam

Thinking about buying life insurance often gets us thinking about our own health.  Maybe you haven't been to the doctor in 5 or 10 years and are thinking maybe you want to know where you stand health-wise before you apply for life insurance.  You should know that whatever your doctor finds, the insurance company will learn about it as well.

Now, understand that I am not advocating or even suggesting that you don't get a medical check-up or seek medical help if you are experiencing a current health issue, I'm simply saying that maybe you should get your life insurance in place before you get a check-up.

What Now?

Bottom line.  Do your homework.  Work with a knowledgeable agent who can explain all these variables to you, and help you apply with the company that will give you the best deal based on your own situation.  For more common mistakes people make when buying a life insurance policy, click here.

This is a guest post from Chris Huntley, an independent insurance agent in San Diego, CA and founder of the insurance blog Insurance Blog by Chris.