Life insurance & unemployment

If you’re unemployed, you can still get life insurance coverage with many insurers, although your eligibility could depend on the reasons you’re not working and how long it’s been since you last earned an income.

Headshot of Tory Crowley
Headshot of Amanda Shih

By

Tory CrowleyAssociate Editor & Licensed Life Insurance AgentTory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.&Amanda ShihEditor & Licensed Life Insurance ExpertAmanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Edited by

Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio is a former associate content director who helped lead our life insurance and annuities editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
|

Reviewed by

Kristi Sullivan, CFP®Kristi Sullivan, CFP®Certified Financial PlannerKristi Sullivan, CFP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, she was a regional consultant at Fidelity Investments for nine years.

Updated|5 min read

Expert reviewedExpert reviewedThis article has been reviewed by a member of ourFinancial Review Council to ensure all sources, statistics, and claims meet the highest standard for accurate and unbiased advice.Learn more about oureditorial review process.

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

When insurers review your life insurance application, they use your financial history to determine how much coverage you need and whether you’ll be able to afford the cost of insurance. If you’re unemployed or not working for any reason, the agent working on your application will have additional questions about your finances. 

Usually, you can still buy life insurance even if you don’t earn an income — but the reason behind and the length of your unemployment will determine whether you’re approved for a policy. If you’re recently unemployed and looking for work, you’re more likely to receive a policy based on your previous income than if you’ve been unemployed long-term.

Key takeaways

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

  • If you’re recently unemployed, the amount of coverage you can get will be based on your previous income.

  • If you’re long-term unemployed, you can get a policy if you can demonstrate to the insurance company that your loved ones will suffer a financial loss if you die.

  • You can lower your policy’s term length and coverage amount if you need to find a rate you can afford in your current financial situation.

How does recent unemployment affect your life insurance options?

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 insurance companies 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. The insurer may ask you 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 sizable savings account, the insurer could use that information to verify that you have a level of financial responsibility that requires insurance.

Will losing your job impact your existing insurance policy? 

If you already have a policy in place and later become unemployed, nothing about your life insurance policy will change — insurers can’t reduce your coverage or cancel your insurance.

As long as you continue to pay your premiums, you’ll retain the same life insurance coverage.

In most cases, you’ll have the option to lower the amount of your insurance coverage or shorten the term length so that your payments will be more affordable. This can be useful if you become unemployed and take a job earning less money or rely on family members for your finances. 

Ready to shop for life insurance?

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

If you’ve been unemployed for more than six months, getting life insurance can be difficult. The insurance company will have questions about why you’re not working, and what the financial burden will be on your loved ones if you pass away. 

The most common reason to get life insurance is to protect your income. If you haven’t worked in a few years, it will be harder to justify your need for coverage. Many insurers won’t count financial support such as unemployment insurance benefits, as income.

If you intentionally haven’t worked for months or years because you’re a student or managing your household full-time, it’ll be easier for you to get insurance. In these circumstances, insurers will work with you to determine how much money your loved ones would need after you pass away based on your anticipated income or your contribution to your household. 

Can graduate students get life insurance?

If you’re a full-time graduate student, you might need a life insurance policy to ensure that if you die, your co-signers won’t be liable for your student loans or that a partner won’t be left shouldering the cost of your tuition in case you die prematurely. 

Most life insurance companies will take your projected income into consideration when determining how much coverage you’re eligible for. Graduate students may also be able to get coverage based on:

  • Your parents’ life insurance policy

  • Your spouse’s life insurance policy

Can non-working spouses get life insurance?

Surveys show that stay-at-home parents perform about $184,820 worth of labor annually. [1]

While non-working spouses don’t earn direct income, they perform labor that would have to be replaced if they weren't around, including childcare, domestic responsibilities, and administrative tasks.

If a working spouse is earning an income, a non-working spouse is often able to apply for a policy of similar value, depending on the insurer. There’s some flexibility with how different insurers calculate how much coverage a homemaker can set up. A licensed agent can help you determine how much coverage you need and which insurer is best suited to meet your needs. 

Ready to shop for life insurance?

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

Having a disability won’t stop you from buying coverage, but if you’re also unable to work, you may not qualify for a traditional life insurance policy. Whether an insurance company can insure you depends on the specifics of your disability. 

If your disability is related to a medical condition, you may be declined coverage due to your mortality risk. If you’re permanently unable to work, it’ll be hard to prove that you have financial need for a policy because you have no income that’ll be lost when you pass. 

If you don’t qualify for traditional life insurance coverage, guaranteed issue life insurance is one way to get some protection for your family, even if you’re permanently disabled. 

Coverage amounts are lower — up to $25,000 — and premiums are higher than traditional coverage, but guaranteed issue policies offer near-certain acceptance and can be helpful to cover end-of-life costs, such as a funeral or medical bills.

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 fit 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 significantly 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 and can afford the premiums for more coverage. 

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

A Policygenius advisor can help you find the best life insurance company for your situation.

Learn more about how much life insurance coverage you should have

Ready to shop for life insurance?

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 you from losing your coverage if you lose your income, but we don’t generally recommend them.

These riders can be costly and difficult to make claims on, so they’re not beneficial for most people. However, if having riders like these can bring you peace of mind, they may be worth it for you. 

More about finding your best life insurance policy

Image: H. Armstrong Roberts / Getty Images

References

dropdown arrow

Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of oureditorial standards.

  1. Salary.com

    . "

    How Much is a Mom Really Worth? The Amount May Surprise You.

    ." Accessed February 05, 2024.

Authors

Tory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Editor

Antonio is a former associate content director who helped lead our life insurance and annuities editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Kristi Sullivan, CFP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, she was a regional consultant at Fidelity Investments for nine years.

Questions about this page? Email us at .