How long is the waiting period for Life Insurance?

life insurance waiting period

Some life insurance plans have what’s called a “waiting period.” This is the window of time between when you enroll in the plan and when it takes effect. If you die within the window, your beneficiaries will receive nothing more than a refund of the premiums you have already paid. This is important to know as you plan how life insurance will affect your loved ones. In addition, life insurance is part of your overall estate plan, which is an important financial process that should not be taken lightly. A financial advisor can help you craft the right estate plan to meet all of your financial needs.

What is life insurance?

Life insurance is a form of insurance designed to help you take care of your friends or family after you die. With life insurance, you take out a policy with a specified amount of coverage and name one or more beneficiaries. You pay premiums, usually monthly or quarterly, based on mortality factors such as age and health. When you die, the insurance company makes a payment to your beneficiaries in the amount of your policy’s coverage.

For example, say you took out $1 million in life insurance and named your spouse as the beneficiary. At the time of your death, the insurance company will pay $1 million to your spouse. If they have also passed, the insurance company will issue this payment to their heirs.

Like other forms of insurance, life insurance is designed to help pay for unexpected expenses. Unlike most forms of insurance, however, life insurance is not designed for you. Instead, it helps your loved ones. For example, it can help them pay for the costs of arranging your funeral, or it can also help partners and dependents replace your income if you were in work when you died.

What is a waiting period?

life insurance waiting period

life insurance waiting period

When it comes to buying life insurance, there are two common definitions of a waiting period, a pending application waiting period or a death benefit waiting period. Both have the same result because the waiting period prevents the life insurance policy from paying out benefits if something happens to you. Let’s take a closer look at how each one works.

Pending application waiting period

Virtually all life insurance policies come with a waiting period after your initial application. This is the time period between when you apply for your policy and when the insurance company approves it for coverage to begin. This can take as little as a few minutes for an automated system, up to a few weeks. During the application waiting period, you neither pay premiums nor have any coverage. If something happens to you during this waiting period, your beneficiaries will collect nothing.

Waiting period for death benefit

Some life insurance policies come with what is known as a death benefit waiting period. This is the time period between when the insurance company approves your policy and starts collecting premiums and when your beneficiaries are eligible to receive death benefits. If you die within the death benefit waiting period, your beneficiaries will not receive the death benefits under your policy. Instead, most policies will issue a payment based on some portion of the premiums you’ve already paid to date.

Why do plans have a waiting period?

There is an application waiting period to allow the company to determine if it wants to issue insurance. The company uses this time to gather information about your personal habits, such as whether you are a smoker or a heavy drinker. It will usually ask for a medical and any other data relating to your actuarial life expectancy. Based on this information, the company determines your risk profile and life expectancy and sets its premiums accordingly.

In contrast, there is a death benefit waiting period to allow the insurance company to control the risk of imminent death. Most policies describe a general waiting period for the death benefit, meaning that it applies regardless of the cause of death. However, the aim is to ensure that the company does not regularly write policies that it has to pay out immediately. In this way, it works similar to the clause in most contracts that prevents payment in the event of suicide. The company does not want to insure people who have reason to know that they will die soon.

The bottom row

life insurance waiting period

life insurance waiting period

A life insurance waiting period is the window of time when your beneficiaries cannot receive death benefits under your life insurance plan. Application waiting periods are the time between when you apply for insurance and when it is approved, while death benefit waiting periods are the time between when you receive coverage and when your benefits apply death benefits. Having some kind of waiting period is usually a standard that should be considered in your plans when buying life insurance.

Tips for buying insurance

  • Helping your loved ones isn’t just about insurance. It’s about maintaining a solid financial foundation throughout life, and you may need the help of an experienced professional, such as a financial advisor, to help you create the right plan. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your advisor matches for free to decide who is the best fit for you. If you’re ready, find an advisor who can help you reach your financial goalsstart now

  • Like all insurance, life insurance is about risk management. However, in this case, you manage the risk for your loved ones, not for yourself. Learn more about how to determine the amount of coverage you need.

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