Life Insurance For Unemployed People

Life Insurance For Unemployed People: A Guide To Affordable Coverage

Due to the coronavirus pandemic, many of us fall at risk of being unemployed. With the increased financial risks, insurance becomes even more important at these times – especially if your family depends on you as a provider. 

If you’re unemployed and you still want to make sure your family is protected, is life insurance still a viable option or would insurers refuse to cover you?

In this guide, we’ll discuss how to get life insurance if you’re unemployed. We’ll go over how insurance companies view different kinds of unemployment, what options you have for insurance, as well as how to protect your existing insurance policy.

shutterstock 1297284493

Do Life Insurance Companies Care About Employment Status? 

Life insurance coverage is provided in exchange for a regular payment called premiums. You may worry that if you aren’t working, the life insurance company will refuse to insure you because you can’t pay. 

While it’s true that life insurance companies take your ability to pay into account, being unemployed won’t automatically disqualify applicants from receiving protection. The insurance company also considers the circumstances of your unemployment as well as how long you’ve been unemployed. 

In addition to unemployment, the insurance company also takes into account many other personal factors such as health condition, lifestyle, age, and family health history. These factors also impact your eligibility, because the insurer considers the risk they take when insuring you. If you’re less likely to die during your term, you’ll have a better chance of getting your application approved and being offered affordable rates.

If you’re young and recently unemployed, you can expect to be offered relatively low rates. Having a working spouse will also impact your chances of your application being approved. Plus, even if you don’t qualify for a traditional term policy due to being jobless, the insurance company may also offer you smaller-valued coverage so you can stay protected.

How A Life Insurance Company Views Different Types Of Unemployment 

Unemployment isn’t a simple yes or no question to a life insurance company. When looking at the application of a prospective policyholder, they’ll also consider things such as the reason and the length of their unemployment. Depending on your circumstances of unemployment, you may still have good chances of qualifying for protection.

Recently Unemployed

As a result of the COVID-19 pandemic, many people have found themselves without a job. Typically, insurers don’t have any fixed guidelines to evaluate recently-unemployed life insurance applicants. Most likely, they’ll assess you on a per case basis, examining your previous occupation and income as well as your employment prospects.

To make sure that you’re financially viable, they may also ask for your income history and information on any assets you may have. Having a shorter period of unemployment on your profile would look favorable to them as well, so it’s recommended that you buy life insurance as soon as you lose your job. 

Because of the wide-reaching impact of COVID-19, some insurers may be more lenient in their underwriting if you lose your job because of the pandemic. 

Graduate Students

Most graduate students need life insurance to help pay for their student loans in the case of their death. While a student may not have earnings now, they’re expected to earn money from the job they’ll have after graduating. Typically, a life insurance company will underwrite a graduate student based on their projected income after graduation.

Stay-At-Home Spouses

Even though you have no income as a stay-at-home parent, an insurer still considers being a homemaker as work. While there is no income to replace if a stay-home parent dies, their payout can be used to replace the work that they provide around the home. A stay-at-home parent is estimated to provide $160,000 worth of work per year doing childcare and other home maintenance activities

People With Permanent Disabilities

If you can’t work due to a disability, getting a traditional life insurance policy may be challenging. If your condition is expected to shorten your life expectancy, the insurance company may be unwilling to cover you. Another large obstacle to getting insured as a disabled person is that you may have little financial justification for protection because you earn no income.

However, you may be qualified for specific types of protection like burial or guaranteed issue policies. While they may be more expensive and have a smaller amount of coverage, you’ll still be able to buy life insurance protection.

shutterstock 1688597911

Protecting Your Existing Life Insurance Policy Against Unemployment 

If you have an existing life insurance policy, being jobless may jeopardize it if you don’t take steps to protect against it. Here are two options that you can choose to help protect your policy.

Disability Income Riders

Riders are additional protection that you can purchase to strengthen your insurance coverage. A long-term disability income rider allows you to receive money regularly should you become disabled. 

The amount of coverage is typically 1% of the policy’s face value, paid monthly. Depending on the agreement, this income can last until a certain age or until the policyholder dies. 

However, you should keep in mind that to receive this rider’s benefits, your disability must be certified by a doctor. There’s also a six-month waiting period before this rider starts to pay out its benefits.

Waiver Of Premium Riders

A waiver of premium rider provides extra protection by allowing you to bypass insurance premiums if you’re unable to work. Similar to a disability rider, a waiver of premium rider protects you if you’re unable to work because of a disability or critical illness and features a six-month waiting period.

This rider is best bought when you first apply for life insurance because the insurance company won’t allow you to buy this rider if you have a pre-existing disability.

Other Life Insurance Options For Unemployed People 

Getting life insurance as an unemployed person could be challenging. However, you may have a better chance of qualifying for these life insurance options.

Term Life Insurance

Term policies provide you with life insurance coverage for a limited period of time, usually between 10 to 30 years. Once this period ends, your coverage will end. Because term insurance is generally much cheaper than permanent life insurance policies, it’s a popular choice for those who need cost-effective life insurance.

Another viable short-term option is to get annual renewable term life insurance. This policy provides one year of coverage with an option to renew for another year at the end of each period. This policy may be right if you’d like affordable temporary coverage while you work on getting a job.

Guaranteed Issue Life Insurance

A guaranteed life insurance policy is geared for seniors and other individuals who can’t qualify for any other life insurance protection. The main advantage of a guaranteed life policy is that it features no underwriting, so you’re almost automatically accepted for coverage.

However, a guaranteed policy provides a very small amount of coverage compared to its high life insurance premiums. They also have a two-year waiting period before it’s able to pay out death benefits. Guaranteed coverage should only be taken as a last resort if you cannot qualify for a fully underwritten policy.

Final Expense Insurance

Final expense life insurance is also mostly meant for seniors, but it can help unemployed folks as well. They protect you for the rest of your life, providing a small amount of life insurance coverage upon your death. This limited coverage is usually meant to cover your funeral expenses and little else. 

If you can’t qualify for any other type of protection due to being out of work, a final expense policy could be your backup option. The small face amount makes it relatively affordable and it usually features a more relaxed application process.

shutterstock 125935052

How To Get Life Insurance Affordably If You’re Unemployed 

In this section, we’ll discuss some things that you can try if you’re looking to get affordable insurance while you’re out of work.

Consider Self-Insuring

If you have no pressing need for insurance protection but you’d like to leave some money to your family when you die, you can consider self-insurance. Instead of applying for life insurance, you can put money in a purpose-made bank account at regular intervals. When you die, access to this account can be given to your loved ones as a form of inheritance.

Opt For A Lower Coverage Amount

An insurer decides whether to give you life insurance coverage based on how risky it is to insure you. If you choose a shorter-term length and lower face value, you’ll reduce the risk they take by providing you protection. By reducing your protection, you’ll be able to get lower rates and make your life insurance application more likely to be accepted.

However, you should remember that if you apply for lower coverage initially, you’ll have to go through underwriting again if you decide to increase your coverage or get a new policy in the future.

Explore All Insurance Options

Different insurance companies have differing guidelines for underwriting. Some insurance companies may also view unemployment more favorably compared to others. When shopping for a policy, it’s important to compare offers from multiple insurers so you can find the one that fulfills your protection needs at the best value.

Consult An Independent Life Insurance Agency

Researching policy information alone can be a daunting task due to all the options available. However, you can enlist the help of a life insurance professional. With your personal information in hand, they can help you navigate the market to find the right policy that fits your finances and employment situation.

Closing Thoughts 

Qualifying for life insurance if you’re unemployed may be harder than usual. However, insurers will examine your unemployment situation before deciding whether to insure you. If unemployment disqualifies you from traditional term insurance, you can opt for other types of insurance like guaranteed policies or final expense coverage. 

If you’re unemployed and looking for insurance, Wesley Insurance, LLC is here to help! Our professional team can assist you in finding the right policy that fits your unemployment situation and protection needs. Contact us today for more investment advice and information!

Written By Cameron McDowell
Follow the author on:
arrow-up