Life insurance is a financial safety net put in place to protect your loved ones when you die. Unfortunately, there can 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 rates 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 carrier to come to a policy decision — either way, a short-term life insurance policy can provide some coverage while you’re waiting to obtain longer-term life insurance coverage. However, short-term policies often come with their own set of limitations to be aware of.

Should I buy short term life insurance?

Life insurance policies usually last for an extended period of time — around five to 30 years if you purchase a term life insurance policy and your entire life if you purchase a permanent life insurance policy. However, sometimes the need arises for a life insurance policy with a shorter term length to offer life insurance coverage during any coverage gaps.

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 all the pieces of the puzzle to come together.

Annual renewable life insurance

Annual renewable life insurance is a type of life insurance policy that has a term length of one year and renews on an annual basis. It works similarly to term life insurance, but the premiums you pay start off fairly low — usually even lower than a traditional term life insurance policy — and increase with each year that you renew the policy.

People with the following circumstances may want to consider an annual renewable life insurance policy option:

• You are trying to lose weight or have recently lost weight for health reasons and could potentially receive a lower life insurance rate if you hold off on purchasing a policy for a few years
• You are trying to quit smoking or are a former smoker and need to delay the application process to receive a lower premium and better health classification
• You’ve been convicted of a felony and are waiting for your probationary period to end so as to not face elevated life insurance premiums.
• You are in the third trimester of your pregnancy or recently had a child and want to make sure you have coverage until you can purchase coverage at a normal rate, as recent mothers can sometimes receive skewed life insurance premium rates.

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 in the interim, you could still be denied coverage if the insurance carrier 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 life insurance policy before purchasing a new life insurance policy.

Annual renewable life insurance and coronavirus

If you are considering purchasing an annual renewable life insurance policy during the COVID-19 outbreak, the underwriting process largely remains the same as purchasing a traditional life insurance policy.

The application process for an annual renewable policy can take four to six weeks and requires an initial interview and medical exam for the insurer to determine your policy premiums. For that reason, anyone hoping to expedite the application process or can’t take the medical exam at this time 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. Because its rates start off much lower than a term life insurance policy, you can expect to pay less for the same amount of coverage as you would with traditional life insurance.

The caveat is that each year, the cost you pay for premiums would increase — an annual renewable life insurance policy might not be the most cost-effective life insurance policy in the long term.

Temporary life insurance

Is there a waiting period for life insurance?

Most people experience a coverage gap between initially applying for life insurance and when their policy actually goes into effect.

Because the application process requires an interview, medical exam, and final underwriting decision from the insurance carrier, the average life insurance application can take about 4-6 weeks to complete — sometimes longer if the insurance carrier 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 carriers that provides some coverage while you wait for your policy to go in force. While you are insured during the gap between your initial life insurance application and your policy’s effective date, temporary life insurance comes with some limitations.

How does temporary life insurance work?

Temporary life insurance cannot be purchased as a standalone or in lieu of a longer-term policy, such as term life insurance or permanent life insurance. This is because temporary policies are tied to the term or permanent life insurance policy you are purchasing from the carrier.

Check out the graph below to see how the best life insurance carriers treat temporary life insurance coverage:

Temporary life insurance is only meant to last until your actual policy is in force. 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

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-in 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 either of these insurers, you’ll simply need to provide your payment information and sign the application for the broker.

Here is the type of coverage you can get from each life insurance company without taking a medical exam:

If you’re opting to take the medical exam but simply want to ensure you have coverage in place while you await an application decision, a temporary policy will pay out the death benefit to your beneficiaries as long as you were honest on your life insurance application.

During the coronavirus outbreak, you’ll want to disclose all travel plans, doctor visits, and medical diagnoses with the underwriter. If you die from the coronavirus and any records demonstrate that you failed to disclose pertinent information during the application process, the life insurance company can refuse to pay out the death benefit from your temporary policy.