Understanding The Process: Evidence Of Insurability
Getting life insurance isn’t as simple as filling out an application form and paying premiums for policy maintenance. Companies want to evaluate the risk they’re taking by insuring you. Typically, the process of underwriting involves some background research on some personal information, such as your health and financial status.
The financial aspect is where your evidence of insurability (or EOI) will come in. This makes sure the insurance company doesn’t give you more coverage and benefits than you need. In almost all cases, you’ll have to wait until this process is complete to hear back about your approval.
This guide will help answer all your questions about this application process and why it’s important.
What Is Evidence Of Insurability?
Evidence of insurability is how companies make sure that they don’t over- or under-insure you with a policy. A life insurance plan is meant to protect your dependents by replacing your income in the event that you pass away, and companies want to prevent people from using it as a money-making scheme.
Life insurance enrollment will require you to fill out some background information. Underwriters will need your evidence of insurability application to check if the amount of coverage you apply for equates to your salary and number of dependents. This is separate from showing evidence of good health.
To check your health, you’ll be required to pass a medical exam. This will assess if you have any disability or health condition that could put you in a higher risk category or potentially disqualify your application.
Why Is It Important?
Having the correct amount of insurance coverage benefits both you and your insurer. For the borrower, you could be paying much higher premiums for coverage you don’t need. For the insurer, they’re risking more by guaranteeing a higher amount of coverage than necessary.
How Do You Show Evidence Of Insurability?
To show your evidence of insurability, you’ll have to show information on both insurable interest and financial justification. Insurable interest is proof that your chosen beneficiaries depend on you and your income and would be affected financially by your death. This helps the borrower and insurer determine an appropriate amount of coverage for your life insurance plan.
The coverage you need and the number of beneficiaries you can have will vary from person to person. In order to show insurable interest, you’ll have to list down your beneficiaries in a form for the underwriter during the EOI application process.
Some examples of valid beneficiaries include; your child or children, spouse, key employees, and business partners. Other relationships are trickier to prove, such as girlfriends, boyfriends, friends, adult children, and even siblings. Thankfully, you can edit or add to this list after the policy has been enacted.
The first steps during applications involve an initial phone screening. You’ll be asked some questions involving personal information which includes your age, salary, and dependents.
Make sure not to lie while answering the questions because you may be penalized if the company finds out. If the amount of coverage you’re asking for seems disproportionate, the underwriter may need to ask follow up questions or do background checks.
For some companies, the EOI process can be filled out on an online form. Online EOI enrollment is common for an employee being included under group insurance.
What If You Can’t Show Evidence Of Insurability?
Just because you can’t get approval with the traditional EOI process of enrollment, that doesn’t automatically mean you won’t be able to get insured. You can look for another form of insurance that will still offer enough coverage and death benefits. Likewise, there are options for those who can’t pass due to their health conditions, though there may be a significant difference in cost.
EOI is a valuable step in making sure you get the right amount of life insurance coverage you need, but it’s not the end-all-be-all. If you’re in a unique situation, you may still be able to find a plan that works for you.
If you want to know more about your options or need financial assistance, our team of professionals at Wesley LLC are here to help. Get in touch today for a consultation!