When to use a life insurance trial application

Estimated 4m read

When to use a life insurance trial application


When to use a life insurance trial application

Secure the best possible health rating for complex, impaired risk and jumbo cases

Estimated 4m read

When to use a life insurance trial application

Secure the best possible health rating for complex, impaired risk and jumbo cases

Estimated 4m read

When to use a life insurance trial application

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By Modern Life
June 13, 2023
By Modern Life
Jun 13, 2023
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  • Life insurance trial applications help assess eligibility and potential premiums before committing to a policy.
  • Utilize trial applications in situations with health concerns, complex financial needs, or uncertain coverage requirements.
  • Carriers will generally adhere to quotes provided in response to a trial application, so long as the information provided is accurate and no other adverse information emerges during the formal application process.

Navigating the life insurance application process can be a challenging process for both advisors and clients. For individuals with unique risk factors or high coverage needs, the process becomes even more complex, as many carriers charge substantially higher premiums or may even refuse to cover many conditions. 

A trial application (sometimes called a trial offer or informal application) can help individuals with complex life insurance needs obtain the best possible life insurance offer. A life insurance trial application is a preliminary, non-binding step that allows advisors and their clients to gauge potential underwriting outcomes and policy pricing before committing to a full application.

For individuals with complex needs, submitting an informal application may actually shorten the time that it takes to get covered, as doing so reduces the likelihood of completing an application, only to have it denied or return highly rated, forcing the advisor and client to restart the process of applying elsewhere.

When to consider using a trial application

While a trial application isn’t appropriate for every situation, there are several scenarios where using one can make a significant difference. Generally, when an individual has a complicated medical history or existing health conditions, completing an informal application is useful in helping them to narrow down their coverage options before applying. People with high-risk jobs or hobbies, or who are applying for more than $5 million in coverage may also benefit from completing a trial application.

Pre-existing medical conditions

Life insurance affordability and accessibility are often determined by an individual’s health status. A trial application serves as a gateway for those with specific health conditions to find the right life insurance carrier.

Applicants who have serious or chronic health conditions may run the risk of having their application denied or rated highly by insurance companies. However, some carriers actually specialize in certain scenarios and may be more likely to offer a favorable rating. Submitting a trial application to one or more carriers enables an advisor or brokerage team to have preliminary conversations with underwriting teams to determine which carrier is likely to offer the best outcome for an applicant.

Medical conditions that may necessitate the use of a trial application include:

  • Diabetes (Type 1 and Type 2)
  • Heart disease or cardiovascular issues
  • Cancer (current or history of)
  • Liver disease or cirrhosis
  • Respiratory illnesses, such as asthma or chronic obstructive pulmonary disease (COPD)
  • Mental health conditions, including depression and anxiety
  • Substance abuse or addiction history
  • Stroke or transient ischemic attack (TIA) history
  • Blood clotting disorders, such as deep vein thrombosis (DVT) or pulmonary embolism (PE)

When evaluating a trial application, carriers assess the applicant's risk based on their unique medical profile and offer tentative rates accordingly. A successful trial application can lead to a more financially favorable underwriting process, helping individuals secure the life insurance coverage they need at a price that fits within their financial plan.

High-risk occupations and hobbies

Securing life insurance can also be complicated for individuals engaged in high-risk hobbies such as skydiving, scuba diving, rock climbing, or private aviation. The same challenge also extends to individuals with high-risk occupations, such as pilots, commercial fishermen, or firefighters. These activities and jobs may be perceived by insurers as factors that amplify the risk of injury or fatality, which can lead to steeper premiums or even coverage denial. 

Jumbo cases

Trial applications can also be a strategic tool for individuals seeking significant amounts of life insurance coverage ($5 million in face amount or annual premiums greater than $10,000).

Life insurance carrier capacity is the maximum amount of risk an insurance carrier is willing to accept, based on the company's financial strength, risk tolerance, and reinsurance agreements. Generally, any amount of inforce and applied for coverage totaling over $65,000,000 will automatically impede the carrier’s ability to offer coverage without reinsurance support.

Carriers may limit the amount of coverage they will issue to a single person. This is because the financial implications of a claim on a single large policy could significantly impact the insurance company's financial stability. As such, life insurance companies use carrier limits to manage and distribute their risk.

Trial applications do not count towards carrier limits. By using a trial application, one can effectively explore their potential for coverage without impacting these carrier limits, thus retaining the ability to secure the best possible terms. 

Benefits of a trial application

By submitting a trial application, clients can gain valuable insights into potential underwriting outcomes, allowing them to make informed decisions about their coverage options. Advisors can leverage this information to guide their clients towards policies that offer the most favorable rates and terms, ensuring their clients receive the best possible protection for their unique circumstances.

The trial application process also saves clients time and effort by ensuring that they only complete an application for coverage for which they are likely to be approved.

Potential limitations

While the trial application process offers many advantages, it is essential for clients to provide accurate and complete information during the application process. Carriers will generally honor the trial application quote, provided that the submitted information is accurate and no significant discrepancies are discovered during the underwriting process. Financial advisors play a crucial role in ensuring that clients understand the importance of accuracy and transparency when applying for life insurance, ultimately leading to a smoother, more successful application process and a policy that truly meets the client's needs.

How to submit a trial application

Submitting a trial application for life insurance is an important step in the process of obtaining coverage, as it allows both the financial advisor and the client to assess the potential underwriting outcome and pricing before committing to a formal application. This can help to identify any potential issues or concerns that may arise during the underwriting process, and allows the client to make an informed decision about moving forward with a particular insurance carrier.

The process of submitting a trial application typically begins with the financial advisor gathering necessary information from the client, such as a HIPAA authorization, their age, gender, medical history, and desired coverage amount. This information is then submitted to the insurance carrier, either through an online platform or by completing a paper form. It is important to note that a trial application does not require the client to undergo a medical examination or provide payment information, as these steps are reserved for the formal application process.

The timeframe for receiving a response to a trial application can vary depending on the insurance carrier and the complexity of the client's situation. Generally, a response can be expected within a few weeks. Once the trial application has been reviewed by the underwriter, the financial advisor will receive an estimated premium quote and potential underwriting classification, which can be shared with the client. This information will help the client decide whether to proceed with the formal application process or explore other options for life insurance coverage.

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