Short term life insurance

Life insurance is a financial safety net for your loved ones when you die. Life insurance policies usually last for an extended period of time — 10-30 years if you purchase a term life insurance policy and your entire life if you purchase a permanent life insurance policy. But it’s not uncommon for there to be a coverage gap between when you decide you need life insurance and when you actually have it due to the underwriting process.

The underwriter may not be able to offer you affordable premiums due to a current health condition, or you may just not want to risk the financial security of your family while you wait for the life insurance company to come to a decision on your application — either way, a short term life insurance policy can provide some coverage while you’re waiting to obtain long-term life insurance coverage. However, short term policies have their own set of limitations, like increasing premiums and coverage maximums.

Should I buy short term life insurance?

If you’re waiting to purchase life insurance — perhaps because you are trying to quit smoking or need to make some improvements in your health — or just waiting for the life insurance policy you applied for to go in force, then your beneficiaries won’t receive a death benefit when you die.

If your loved ones depend on you financially or you have any outstanding debts, you should make sure you have at least some coverage in the interim by purchasing a short term life insurance policy. Depending on your individual circumstances, you can choose an annual renewable life insurance policy or a temporary life insurance policy.

Having a life insurance policy in place for the short term ensures that your dependents will still receive the death benefit if the worst happens while you wait for your policy to be finalized or improve your health.

Annual renewable life insurance

Annual renewable life insurance has a term length of one year and renews on an annual basis. It works similarly to term life insurance, but the premiums often start even lower than traditional term life insurance costs and increase each year that you renew the policy. Note that because of the annual increase in premiums, an annual renewable policy can eventually become more expensive than a standard term life policy offering the same coverage amount.

You may want to consider an annual renewable life insurance policy if you anticipate changes to your life or health that will earn you lower premiums in the future, like if:

• You are trying to lose weight or have recently lost weight for health reasons.
• You are trying to quit smoking or are a former smoker.
• You’ve been convicted of a felony and are waiting for your probationary period to end.
• You are in the third trimester of your pregnancy or recently had a child.

If you’re holding off on purchasing a term or permanent life insurance policy and decide to apply for an annual renewable life insurance policy, you could still be denied coverage if the insurance company thinks that you’re purchasing life insurance only for a year or less. Your best bet to acquiring coverage is to give yourself a few years under an annual renewable policy before purchasing a new life insurance policy.

Temporary life insurance

Most people experience a coverage gap between initially applying for life insurance and when their policy actually goes into effect, also known as the waiting period.

Because the application process requires an interview, medical exam, and final underwriting decision from the insurance provider, the average life insurance application can take four to six weeks to complete — sometimes longer if the underwriter requires additional information. It’s important to note that you do not have any life insurance coverage until you sign your life insurance policy papers and pay your first premium.

Temporary life insurance is a short term policy option offered by life insurance companies that provides some coverage while you wait for your policy to go in force. While a temporary policy means you are insured if you pass away during the gap between your initial life insurance application and your policy’s effective date, it comes with some limitations.

How does temporary life insurance work?

Temporary life insurance cannot be purchased as a standalone or in lieu of a long-term policy because temporary policies are tied to the term or permanent life insurance policy you are purchasing from your insurer.

Check out the table below to see how much temporary life insurance coverage the best life insurance companies offer. Note that restrictions may apply based on your age, location, insurance classification, and the amount of coverage for which you applied.

Your temporary coverage ends when one of the following happens:

• You are approved for your actual life insurance policy and the policy goes in force
• The amount of time designated for your temporary coverage expires. Temporary coverage usually lasts between 60 and 90 days, depending on the insurer
• You’ve terminated your proposed coverage and approximately five days have passed
• You are declined for coverage

Short term life insurance and COVID-19

Buying a short term policy during the coronavirus outbreak is similar to purchasing a policy prior to the outbreak. If you want to avoid taking a medical exam right now, a few providers are offering temporary coverage until you’re comfortable resuming underwriting. And if your finances have suffered due to the pandemic, an annual renewable policy is a way to get cheaper coverage for a short period.

Annual renewable life insurance and coronavirus

If you are considering purchasing an annual renewable life insurance policy during the COVID-19 outbreak, applying will still take four to six weeks or more and require an initial interview and medical exam. If you’re hoping to expedite the application process or skip the medical exam, you may be better off looking into an accelerated or no medical exam life insurance policy.

However, if you and your family have been financially impacted by the coronavirus, an annual renewable life insurance policy can be a cost-effective policy option in the short term. You’ll pay less for the same amount of coverage as you would with traditional life insurance so you can protect your family until your finances bounce back. But remember that premiums increase each year, so your short term policy may eventually become more expensive than a long-term policy.

Temporary coverage and coronavirus

If you are applying for life insurance during the current COVID-19 outbreak and want to postpone the medical exam, you can opt for temporary coverage until the outbreak subsides and you resume the underwriting process.

Most life insurance companies still require the completion of the medical exam for temporary coverage to go in force, but Policygenius works with three life insurance companies that offer this supplementary coverage without a medical exam:

• Banner
• Pacific Life
• Lincoln Financial

To activate temporary coverage with these insurers, you’ll simply need to provide your payment information and sign the application for the broker.

Your ultimate goal should be securing a long-term life insurance policy, but if you’re waiting for a policy to go in force or hoping to earn better premiums by delaying buying a long-term policy while you make lifestyle changes, short term life insurance guarantees financial protection for your family in the interim. An independent insurance broker can help you determine the best short term policy for your circumstances.