It’s not uncommon to be asked personal, even intrusive questions about your health, travel, your hobbies, and even your financial well-being on life insurance applications.
To underwrite you, the largest life insurance companies need the information to assess their risk!
“Why are they so interested in my prostate?”
While many people may have reservations about sharing some of this information, there are good reasons for the questions life insurance companies ask on the application.
The underwriters ask these life insurance questions for two reasons:
- They need to know your health and lifestyle details to rate your life expectancy
- They need to see whether you are financially justified for the amount of coverage you are requesting
Why Do Insurance Companies Ask About My Health?
Most obvious of these is that the insurance company must know details about your current health as well as your medical history.
Some clients complain to me that the application is too intrusive, asking questions about every possible health impairment they’ve ever had.
What you need to keep in mind are three things:
Life insurance companies don’t just take your word for it.
Even though they want you to give them all of the information upfront, they are still going to verify everything.
With the Insurance Company it’s definitely a “Trust but Verify” situation.
If you are trying to get traditional life insurance, every application at the least is going to have the following checks:
- MIB Check
- Prescription Drug Check
- MVR Check
These three reports are typically used to determine if your statements on the application are true.
So, while you might think about hiding some information, don’t do it!
Why Do Insurance Companies Ask About My Travel Plans?
It should also make sense that the insurance company wants to know about any possible risk – either in your lifestyle, your occupation, or travel habits to un-modernized countries where certain diseases may be prevalent.
They also want to know if you are in the habit of engaging in hazardous activities.
Even though these have nothing to do with your health, it should be clear to you that insurance companies have to know about these activities.
Because even if you die while racing in a dirt bike race or die traveling into the inner regions of the Amazon jungle, the insurance company has to pay the life insurance proceeds upon your death.
If you apply for life insurance, please do yourself and your agent a favor and don’t be so skeptical about their questions. They’re in business to make money.
They need details about your health and lifestyle habits to accurately rate your life expectancy and any potential death benefits they would have to pay.
They’re not in business to approve policies on people who have extraordinarily risky hobbies or an extraordinarily dangerous health issue.
Why Do Life Insurance Companies Ask Personal Questions?
One of the first questions I learned to overcome as an insurance agent was, “Why do they ask for my Social Security number on the application?” (One client’s brother tried to convince him that I was trying to steal his identity!).
That’s a simple question to answer.
They need it to access your medical records.
Also, there should be no opportunity to mix you up with another person with your same name and date of birth.
Granted, this would be a rare occurrence.
But by chance or even fraud, crazier things have happened, and death benefits would be paid out to the wrong people or not paid out at all.
The life insurance agent should also ask some questions about your lifestyle, such as if you participate in any hazardous activities, like skydiving, rock climbing, racing, and so on.
Have you had any DUI’s, DWI’s or tickets in the past 5 years? What is your occupation? These questions may seem intrusive, but it’s good common sense, isn’t it? If you race speed boats or had a DUI 2 years ago, you’re a riskier person to insure than the average joe, right?
Why Do Life Insurance Companies Ask About My Finances?
Insurance companies will usually ask for the following financial information:
- Annual Income
- Amount of Assets
- Amount of Liabilities
- Net Worth
This has nothing to do with approving you for a specific health classification. It has to do with approving you for a certain amount of coverage.
For example, if I make $100,000 per year, I might have a hard time applying for $20 million of life insurance.
I should be able to get about 20 to 30 times my annual income, so $2 to $3 million could be a legitimate request for me, but if I ask for $20 million you should see where they would say, “Why do you need that much coverage? You’re not worth $20 million.”
Keep in mind the purpose of life insurance is to cover the beneficiary and make them financially whole.
The purpose of a life insurance policy is only to replace what was lost financially from the insured person’s death, so this is why they have to ask about your income.
It has to do with qualifying for the face value.
The same goes for why they ask about your assets and your net worth.
Many people purchase life insurance for estate planning purposes, and when you’re looking at large sums of insurance, sometimes they are purchased to pay an estate tax bill or for estate liquidity.
In this case, they’ll want to know about the assets you have.
It’s rare that the underwriter will ask for more details than just a figure for your income or your assets.
They’re not going to ask for a breakdown of the properties you own or ask for the addresses of the properties.
At most, they might ask for an analysis of the asset classes you own.
For example, if you have a $10 million estate, you might say $5 million of it is in my business, $3 million in real estate, and $2 million in cash and investments – or something of the like.
Why Do Insurance Companies Ask About My Current Policies?
A website comment came in asking why the company asks you very personal information about the “other” policies you may own when applying for coverage from an insurance company.
I spent quite a bit of time on the response, so I’ll share it here as well.
Here was my answer:
“That’s a great question! There are at least 2 reasons.
First, insurance companies learned the hard way that some people apply for (or already own) coverage/policies from multiple different companies. Life insurance is supposed to be used to make the beneficiary whole, not for them to get super rich off someone’s death.
Take the example of a 40-year-old making $50,000 per year who is married with a couple children.
You could make the argument he could qualify for about 20-25x his income, and if you add in some additional coverage for a mortgage, some for the kids’ education, he may qualify for around 1.5 million of coverage or maybe 2.5 million on the high side.
That amount would make his wife and kids “whole”, meaning it will replace his income and other financial contributions, but not much else. That’s the point of life insurance.
And that’s the TOTAL insurability amount he has across all companies. Now if this same man already has a 1 million dollar policy, companies need to know because of the AMOUNT. If he has applied for another $1 million with 10 other companies, they’ll want to know that too.
They’ll ask about other applications the insured has applied for, and ask if the insured intends to keep ALL of them if he is approved, or just the best priced, or what have you.
Again he can buy maybe 1.5 to 2.5 million of coverage but does not have what insurance companies call “the financial justification” to get more, so companies will actually deny coverage on those grounds.
The SECOND part to the question is why would they want your policy #? Seems intrusive, right? This is all about protecting consumers. The unfortunate truth is some agents try to sell policies that don’t fit (aren’t suitable) for a consumer’s needs so they can make a buck.
The insurance industry, therefore, has adopted a set of guidelines for when a client is “replacing” an old policy, and are legally obligated to meet them. This includes notifying the old company (where the policy is being replaced).
This gives the old agent or company a chance to call up the insured and remind them why they bought the policy, how they shouldn’t replace it, etc. It’s the right thing to do and both of these are for YOUR protection.”
Why You Should Work With A Licensed Independent Agent
One of the largest advantages you can give yourself is to deal with an independent licensed agent when going through the life insurance purchasing process. We have been trained and have gone over hundreds and sometimes thousands of applications and different situations with customers.
The reason you want independent is that we represent several companies. This means that when we understand your medical, lifestyle, and financial situation, we can determine the best insurance carrier for you.
There is no one-carrier fits all situation. Everyone gets underwritten individually and we can assist you to make sure you have the best underwriting outcome and get the best price.
Keep these factors in mind when you get a quote on the right-hand side of this page. If you think any of the health or lifestyle factors I mentioned would make you a riskier person to insure, you might not qualify for the best rating “preferred plus”. Try “preferred” or “regular” for more conservative quotes.
I know it always feels like the insurance companies can be intrusive on their applications, but understand they’ve been in business for hundreds of years. They’re not asking you so they can share your information with anybody or so that they can be malicious with it.
They’re asking for it because of qualification reasons–either qualifying for a health classification or qualifying for financial justification. Those are the two reasons they ask anything about your health or your finances.
I hope this clears up any questions you have about life insurance carriers’ interest in questions.
If not, please feel free to call me at 888-603-2876. I look forward to hearing from you. For a free quote, feel free to use the quote box at the upper right of this page.
Get Life Insurance in 3 Easy Steps
Simply Follow Our “Hero for Life” Plan
#1 – Get a FREE Quote
Instantly compare rates from over 30 top-rated life insurance companies.
#2 – Quick & Easy Application
The application can be done by email or phone in minutes. 100% digital signatures.
#3 – You’re Insured!
Congratulations! You’re your family’s hero.*While we make every effort to keep our site updated, please be aware that "timely" information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Huntley Wealth & Insurance Services and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.