The effective date is the day a life insurance policy is considered to be active, or in force. If your policy lists January 1, 2023, as the effective date, it means that if you pass away on or after that date, your insurer will pay the death benefit to your listed beneficiaries.
You don’t have life insurance coverage before the effective date.
When does a life insurance policy typically becomes effective?
A life insurance policy typically becomes effective once your application has been approved, you’ve signed your policy and made your first premium payment.
While it doesn’t take long to apply for life insurance online, it can take five to six weeks to go through the underwriting process, get a final policy decision, and have an active life insurance policy.
How do you find the effective date of a policy?
Your life insurance effective date can be found in your policy statement and the online portal for your insurance policy. The actual effective date varies for each policy because it’s the day that you sign your policy papers and pay your first premium.
If your life insurance company handles all policy documentation by mail, a new policy document that includes the effective date will be mailed to you.
Getting coverage before your effective date
Because there are multiple steps to the life insurance application process, there’s a gap between when you start your application and when your coverage actually kicks in.
If you die during that 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
While applying for a policy, 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 amounts vary for each insurer — and ensures your loved ones get some financial support if you pass away before your application is approved.
The cost of temporary coverage is based on the quote you receive when you initially apply for life insurance.
Can an age change impact the effective date?
If you pass your birthday or half-birthday during the underwriting process, you may have the option to backdate your life insurance policy by paying an extra monthly premium.
This way, your effective date will begin at the age you were when you applied, as opposed to your current age. Since life insurance premiums increase as you get older, some people choose to pay an extra premium upfront in order to get lowest rate for the rest of their term.
In this scenario, you’re technically paying for time without coverage in order to lock in the lowest rate. Not all life insurance companies allow this, but the insurance agent you’re working with will be able to help you if your age change affects your policy.
What is the life insurance issue date?
Your policy’s issue date is the day that your policy was approved and your insurer offered you coverage. At this point you can choose to accept or reject the policy, but you don’t have coverage yet.
If you die between the issue date and the effective date, your beneficiary will not receive the death benefit.
The time in between the issue date and effective date can be anywhere from upon receipt of the policy to a few months. The amount of time you have to accept or reject depends on your provider and your risk classification.
Individuals with just one or two minor health conditions may have a few months to accept the policy, while individuals who have more complex health concerns may only have 30 days.
How to keep your life insurance policy in force
For your life insurance policy to remain active, 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, it 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 dependents on your term date, you’ll need to purchase a new policy to retain coverage — or convert your term life policy into a permanent life insurance policy.
To avoid a coverage gap, start the application process for a new policy six months before 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.
Your life insurance policy’s effective date is an important detail in your family’s financial plan. If you don’t have an existing policy, ask your provider about temporary coverage to ensure your loved ones are protected before your policy goes in force.