Life insurance effective date

The most important date in your policy is the effective date — the day that your life insurance coverage kicks in.

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Why is the effective date one of the most important life insurance definitions to be aware of? The effective date is the day a policy is considered to be active, or “in force”. A policy with January 1, 2020, as the effective date means that if the insured passes away on or after that date, the insurer will pay the death benefit to any listed beneficiaries. Before the effective date, you do not have any life insurance coverage.

Key Takeaways

  • Life insurance policies are only officially active, or in force, on and after the effective date.

  • Applicants can opt for temporary life insurance coverage to be financially protected if they die prior to the policy’s effective date.

  • If you need to replace an expiring life insurance policy, start early to avoid a coverage gap.

How long does it take for a life insurance policy to go in effect?

While it only takes a few minutes to apply online for life insurance, it can take 5-6 weeks to go through the underwriting process, receive a final policy decision, and have an active life insurance policy. The underwriter determines what classification you receive and in turn, what types of rates you will pay on your life insurance premiums.

There are a few factors the underwriter takes into account when determining your life insurance classification:

  • The medical exam — This will verify the information you provided, such as height and weight, and evaluate your health. The medical practitioner will be looking for conditions such as high blood pressure, elevated cholesterol, and diabetes. The healthier you are, the better life insurance classification you will receive.

  • The attending physician’s statement (APS) — An attending physician’s statement informs the underwriter of any prescriptions you are taking and your complete health history. With a more holistic view of your health, a classification determination can be made.

  • Final approval — After collecting all your application data, the underwriter will analyze the information to approve (or reject) your application and determine what classification you receive.

How do you find the effective date of a policy?

The effective date varies for each policy — it is the day that you sign your policy papers and pay your first premium.

After you accept the policy by signing any necessary documentation and paying your first premium, your effective date will be reflected in the policy statement.

If your insurance company handles policy details online, this will be reflected immediately in your account.

If your insurer handles all policy documentation over mail, a new policy document that includes the effective date will be mailed to you.

Getting coverage before your effective date

Because the life insurance process requires various steps for approval, there is a gap of time from when you start your application and when your coverage actually kicks in.

If you die during that in-between time (also known as a coverage gap), then your family won’t receive a death benefit. To make sure that they are financially protected in the event of your death, you can purchase temporary life insurance coverage.

Temporary life insurance coverage

During the life insurance application process, you can get temporary coverage that lasts until your effective date. A temporary life insurance policy offers anywhere from $50,000 to $1,000,000 in coverage — maximum coverage amounts vary for each carrier — and it safeguards a death benefit and some financial security for your loved ones if you die before your policy goes into place.

The cost of temporary coverage will be based on the quote you receive when you initially apply for life insurance online, while the underwriter examines other components of your application (such as the medical exam) to determine your final policy and premium payments.

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What is the issue date?

There is another important date for your policy — the issue date. The key difference between the issue date and effective date is that the issue date is the day that the policy is approved and an offer is extended to the applicant, but the policy is not in force and the applicant does not have life insurance coverage yet. If you die in between the issue date and the effective date, your beneficiary will not receive the death benefit.

When the insurer extends the policy offer, you are given a quote as well. At this point, you can choose to reject or accept the policy details. If you choose to accept the policy offered by the insurer, you will sign policy documents and pay the first month’s premium, which puts the policy in force. The first day that a policy is in force is the effective date.

The time in between the issue date and effective date can be anywhere from upon receipt of the policy to a few months. The maximum amount of time you have to accept the policy is set by the carrier and varies based on the life insurance classification you receive. Healthy individuals may have a few months to accept the policy, while individuals who have health concerns may only have 30 days.

Keeping a policy in force

You’ve been interviewed, taken a medical exam, and paid your first premium, which effectively makes your policy active — now what? For your life insurance policy to remain in force, and in turn, for a death benefit to be paid out when you die, you’ll need to continue to make premium payments on time.

There are other caveats as well. For example, if you lie on your life insurance application and the insurer finds out during your contestability period, they can cancel your policy and invalidate your coverage.

What happens when your policy expires

The day your policy expires is called the term date. If you die and your policy has expired, your family will not receive a death benefit. If you still have any financial obligations or dependants that will financially suffer in the event of your death, you will need to purchase a new policy to retain coverage.

To avoid a coverage gap, it is ideal to start the application process for a new policy six months prior to your policy’s expiration date. This entails repeating the original process over again — there will be an interview, medical exam, and underwriting process. Policy rates and application eligibility will probably be different the second time around due to age and health.

Some term policies can be converted to permanent policies, which means you won’t have to take a medical exam or go through the underwriting process again. Similarly to purchasing a new term policy, you should begin the process to convert your policy at least six months in advance. By beginning the process early enough, you have time to purchase additional coverage if you’re unable to convert your policy.