Do you know what a life insurance waiting period is? If not, you’re not alone!
The waiting period often adds another layer of complexity when shopping for a new policy, so it’s important to understand how it works and why it exists.
In this blog post, we'll provide an overview of the life insurance waiting period and explain how it impacts your life insurance buying decision. We'll also advise on how to navigate these restrictions as effectively as possible.
You'll learn:
What is the waiting period for insurance?
An insurance waiting period refers to the amount of time between when you sign up for coverage and when your benefits actually begin. This varies depending on the type of insurance you have, but it's typically around 30-90 days.
During this time, you won't be able to file claims or receive any benefits. However, don't be discouraged. Your coverage will begin soon, and knowing the waiting period allows you to plan accordingly.
Take the time to review your policy and understand the waiting period requirements so you can avoid any surprises down the road. Remember, your insurance is there to protect you, so it's worth the wait.
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What factors can affect the length of your waiting period?
Several factors can influence how long you have to wait. If you are relatively young and healthy, there may be no waiting period on your policy.
In contrast, guaranteed issue life insurance policies generally have a waiting period of up to two years. If you pass away during the guaranteed issue waiting period, the insurer will pay back the money you paid into the policy. After two years, your beneficiaries receive the full death benefit amount.
Pending application waiting period vs death benefit waiting period
The pending application waiting period refers to the time between when you apply for coverage and when you are approved. Generally, this waiting period ranges from a few days to a few weeks, during which your application is reviewed and evaluated.
On the other hand, the death benefit waiting period is the time between the policy's start date and when the death benefit is payable. This period can range from one to two years, depending on the policy's terms. By understanding these two waiting periods, you can adjust your needs and expectations.
Remember, to take the time to research and understand the terms and conditions of your policy. It is an excellent way to ensure you are protecting yourself and your family's future.
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Why do insurance companies have waiting periods?
Many life insurance companies include some sort of waiting period.
A waiting period lowers their risk of an immediate life insurance payout.
Waiting periods play a key role in managing the cost of coverage, as any claims made during this time won't be paid out. This process, in turn, assists in keeping insurance premiums reasonably priced.
Therefore, while waiting periods may seem unreasonable, they play a critical role in ensuring fair and reasonably priced protection.
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What happens if you pass away during the waiting period?
If the policyholder dies during the waiting period, their beneficiaries might not get the full death benefit. Still, this doesn't imply that their family members would be left empty-handed.
Most insurance policies still offer a partial payout, usually a proportion of the death benefit, to assist with expenses.
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Guaranteed Issue Life Insurance
Guaranteed issue life insurance is a great choice for individuals who have been rejected for other life insurance plans. This policy type guarantees coverage, irrespective of your medical history, age, or any health conditions. Although premiums might be higher compared to other policies, the peace of mind gained from knowing you and your loved ones are safeguarded is invaluable.
With guaranteed issue life insurance, your family will not bear the financial weight of funeral expenses or other end-of-life costs. Don't let a prior denial prevent you from getting coverage. Contact an independent life insurance broker to explore if guaranteed issue insurance makes sense for you.
Can I avoid the waiting period?
This depends on the type of life insurance policy you are considering. Most guaranteed issue life insurance policies have a two-year waiting period. However, if you apply for traditionally underwritten life insurance, you may have no waiting period.
Conclusion
Some life insurance policies have a waiting period. If you pass away during the period, you will get a partial, but not full, life insurance payout. Guaranteed issue life insurance generally has a two year waiting period.
Ultimately, your financial situation will help decide both what type of life insurance policy is appropriate and how long you might need to wait for coverage. This knowledge can help prepare you for any unexpected events or changes with your finances and insure that you have a plan in place should an emergency arise.
Contact an insurance broker like Dundas Life today and get started on your life insurance journey. It could be one of the most important decisions of your lifetime.
Gregory Rozdeba is the CEO of Dundas Life, Canada's leading digital insurance brokerage. He has over 8 years of experience in the life insurance industry. Gregory previously served as Director of Sales at a Toronto-based insurtech firm. He took the company from having no product to raising over $7.6M+ in venture capital to transform the prospect to policy process in Canada. Gregory holds a Bachelor's Degree in Finance & Accounting from Ontario Tech University and a Master of Information Management from FH Joanneum.
