What is a Waiting Period?
A waiting period is the duration a life insurance policy owner has to wait before their coverage activates. If the insured dies within the waiting period, the insurer is not required to pay out the death benefit.
When life insurance has a waiting period
Many term and permanent life insurance policies come with no established waiting period, but that doesn’t mean you get coverage the day you apply. Usually, a life insurance applicant may have to wait several weeks for the underwriting process, during which the insurance company evaluates the risk level of the applicant.
Underwriting often takes about six weeks. You wait for coverage during underwriting, but this isn’t technically a waiting period. That’s because the policy issue date generally coincides with the effective date, or the date on which the policy activates. In other words, once the insurance company issues the policy to you, the coverage is in effect and continues to be ” provided you make the required premium payments.
While you do have to wait for coverage during underwriting, insurance companies don’t call that a waiting period. Instead, a waiting period gets attached to specific types of coverage as a way for the insurance company to mitigate risk. In other words, higher-risk individuals are more likely to get coverage with an associated waiting period. It stipulates that while the policy gets issued on a set date, coverage doesn’t go into effect until the waiting period is over.
Types of life insurance with a waiting period
Generally, you’re significantly more likely to get a life insurance policy with a waiting period if you skip the medical underwriting process, choosing coverage like:
When you forgo the medical exam, the life insurance company doesn’t have a way to evaluate their risk in insuring you. To save themselves from the financial loss they would experience if the insured dies very early in the policy, they often attach a waiting period of two years.
That means you can get certain types of life insurance without a medical exam, but you’ll need to live for at least two years for your beneficiaries to see any upside from the coverage.
Good candidates for life insurance with a waiting period
A waiting period is risky. You could buy a life insurance policy and pay premiums for 18 months, for example, only to pass away. If you’re still within the waiting period, your beneficiaries won’t get anything from the life insurance company. All of those premiums you paid would be for nothing.
Still, though, life insurance with a waiting period is often better than no life insurance at all. If you’ve been denied a traditionally underwritten policy because of a risk factor like a serious health condition, life insurance with a waiting period can give you a way to put coverage in place.