Q

Can you get life insurance if you’re unemployed?

A

If you’re unemployed, you can still get life insurance coverage, although it depends on why and for how long you haven’t worked.

When providers evaluate your life insurance application, they use your financial history to determine how much coverage you need and whether you’ll be able to pay your premiums. If you’re unemployed, it may raise some flags for your underwriter

But you can still buy life insurance if you don’t earn an income. The reason behind and length of your unemployment impacts whether you’re approved for a policy. If you’re recently unemployed and looking for work, you’re more likely to receive a policy in proportion to your previous income than if you have been unemployed long-term.

Key Takeaways

  • Insurers offer policies based on your ability to pay the policy premiums

  • If you are recently unemployed the amount of coverage you can get is based on your previous income

  • If you are long-term unemployed, you can get a policy if you can justify your reason for unemployment to the insurer

  • You can choose a lower term length and coverage amount to get a life insurance policy that’s in your budget

Can you get life insurance if you’re recently unemployed?

If you’ve been unemployed for six months or less, you shouldn’t face too much difficulty finding a life insurance policy. While there aren’t universal guidelines for how underwriters assess recently unemployed applicants, you’ll usually be evaluated based on:

  • Previous income

  • Previous occupation

  • Length of your unemployment

  • Whether you’re actively seeking employment

The shorter your period of unemployment, the better, so it’s best to apply early in your unemployment if you can. However, insurers understand that employment status can change. The factors above help them understand your financial viability and predict your future income. You may be asked to provide supplemental information, such as:

  • Accounting of your assets

  • Past pay stubs

These additional details can prove your financial stability. For example, if you own a house or have a healthy savings, your underwriter might view that as proof of financial responsibility.

If you already have a policy in place and later become unemployed, nothing about your life insurance policy will change—insurers cannot reduce your coverage or cancel your insurance. As long as you continue to pay your premiums, you will retain the same life insurance coverage.

Can you get life insurance if you’re long-term unemployed?

You can get life insurance if you’re long-term unemployed, but it will be more difficult. The underwriter will want to understand why you’re unemployed. 

If you haven’t worked in a few years, it’s more difficult to validate the need for coverage to an underwriter because they may not see a need for income protection. Underwriters don’t take into account financial support from other insurance, such as unemployment insurance benefits.

But, if you aren’t currently employed because you’re in school full-time or manage your household, insurers are more flexible.

Life insurance for graduate students

If you’re a full-time graduate student, you might need a life insurance policy to ensure that if you die, your cosigners aren’t liable for your student loans or that a partner isn’t left shouldering all the bills. 

Some life insurance companies will take your projected income into consideration when determining your life insurance policy. Graduate students may also be able to get coverage based on:

  • Your parents’ life insurance policy

  • Your spouse’s life insurance policy

Life insurance for non-working spouses

Surveys show that stay-at-home parents perform about $178,201 worth of labor annually. While non-working spouses don’t provide direct income, they perform labor that would have to be replaced if they weren't around, including childcare.

A non-working spouse can qualify for a certain amount of coverage in proportion to their working spouse, though this varies for each life insurance company. The table below shows coverage guidelines for non-working spouses from Policygenius’ partner insurance companies:

LIFE INSURANCE COMPANYNON-WORKING SPOUSE POLICY
AIGMatches up to $1.5 million of working spouse's coverage.
Banner LifeMatches 100% of working spouse's coverage.
BrighthouseMatches 100% of working spouse's coverage.
Lincoln FinancialMatches 100% of working spouse's coverage up to a maximum determined on a case-by-case basis.
Mutual of OmahaMatches 100% of working spouse's coverage up to a maximum of $2 million.
Pacific LifeMatches 100% of working spouse's coverage up to a maximum of $3 million.
PrincipalMatches 100% of working spouse's coverage up to a maximum of $2 million.
ProtectiveMatches 50% of working spouse's coverage up to a maximum of $1 million.
PrudentialMatches 100% of working spouse's coverage.
SBLIMatches 100% of working spouse's coverage up to a maximum of $2 million.
TransamericaMatches 100% of working spouse's coverage up to $1 million or 50% up to a maximum of $2.5 million

Methodology: Based on underwriting guidelines provided by 11 life insurance carriers that offer policies through the Policygenius marketplace as of April 2021 (AIG, Banner Life, Brighthouse, Lincoln Financial, Mutual of Omaha, Pacific Life, Principal, Protective, Prudential, SBLI and Transamerica)

Depending on the working spouse’s income level or your joint estate planning needs, there may be some flexibility on the maximum benefit available. Speak with a life insurance agent if your non-working spouse has greater coverage needs.

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Can you get life insurance if you’re disabled and unable to work?

Having a disability doesn’t necessarily prohibit you from buying life insurance, but if you’re also unable to work, you may not qualify for a traditional policy. Whether a provider insures you depends on the details of your disability. 

If your disability is related to a medical condition, you may be declined coverage due to your health history. If you’re permanently unable to work, it’s likely you’ll face coverage denials because it’s difficult to prove financial justification for a policy without a current or future income.

If you don’t qualify for traditional life insurance coverage, guaranteed life insurance is one way to get some protection for your family. Coverage amounts are lower and premiums are higher than traditional coverage, but guaranteed issue policies offer near-certain acceptance for any applicants who can afford the premiums.

How to get affordable life insurance if you’re unemployed

If you’re not bringing in an income, it may feel like life insurance doesn’t fall into your budget, but there are some ways to get affordable protection for your loved ones:

  • Buy term life insurance: Term life is the most cost-effective option for most people and costs five to 15 times less than permanent life insurance options. 

  • Choose a lower term and coverage amount: While it’s not ideal to own less life insurance than you need, some coverage is better than none. A lower benefit or shorter term can keep your premiums within your budget and your policy active until you find a new job.

  • Shop around: Each life insurance company underwrites health and financial situations differently. You’ll find the best rates by comparison shopping with multiple providers.

A Policygenius advisor can work with you to find the best life insurance company for you.

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Should you add unemployment riders to your policy?

Life insurance companies offer specific riders, or policy add-ons, that offer financial protection in situations other than your death. There are two riders that would protect your policy from lapsing if you are out of work, but we don’t generally recommend them.

You’ll ultimately get more comprehensive and affordable coverage from a standalone disability insurance policy. Life insurance disability riders are costly and can be difficult to qualify for due to a life insurance company’s definition of disability, which is a total and permanent disability.  

It may be easier than you think to get life insurance protection for your family even if you don’t have an income. Life insurance providers are lenient if your unemployment is recent and offer options for students or non-working spouses. If you’re denied a traditional policy, guaranteed issue life insurance may be a solution until you’re back to work.

Life insurance and unemployment FAQ:

Can I buy life insurance if I’m unemployed?

You can buy life insurance while unemployed, especially if you’re a student, a homemaker, or if you’ve been unemployed less than six months.

How much life insurance can I get while unemployed?

It depends on your circumstances. If you’re between jobs, you may be offered coverage based on your occupation and previous income. Non-working spouses get coverage based on their working spouse’s policy.

What happens to my life insurance if I get laid off?

If you’re laid off, you will likely lose your employer-sponsored life insurance. As long as you continue paying your premiums, your private life insurance won’t change.