Disability Insurance Underwriting Guide: Important Factors You Need To Know To Get Approved Today!

Updated: June 18, 2024 at 9:27 am

disability insurance underwriting

In my opinion, there is no disputing how important disability insurance is. Just go to www.gofundme.com to see the pain many people and families experience when a breadwinner is hurt or sick and can’t earn the income they need to continue their lifestyle.

Of course, the solution to many of these situations would be a comprehensive, affordable disability insurance policy. Their lives could have been so much better.

However, if you need disability insurance, you first need to understand how disability insurance underwriting works. Understanding how underwriting works is key to obtaining a disability insurance policy.

We receive phone calls from many people who are interested in disability insurance. However, they are unaware of how their background and health affect their chances of obtaining a policy. They think they can apply, and the disability insurance company approves them the next day.

Disability insurance underwriting doesn’t work like that. It involves various, complex factors.

This guide discusses the important aspects of disability insurance underwriting so you know what to expect during the application process. We will inform, clarify, and set expectations so you can get approved today.

This is a long, comprehensive guide. So, feel free to jump around sections. Here’s what we will discuss:

Let’s get right into it and discuss disability insurance underwriting.


What Is Disability Insurance Underwriting?

Underwriting is simply the process of reviewing and analyzing a specific risk before insuring or undertaking that risk.  Any type of insurance goes through underwriting – a mortgage application, auto loans, investment accounts, and, of course, insurance. The underwriter – the person skilled in analyzing the risk – reviews your situation. Specific to disability insurance underwriting, the disability insurance underwriter reviews your:

  • medical history
  • occupation
  • income
  • medication
  • driving records, felony history, and bankruptcy history
  • “fun” activities
  • and really, anything else he or she deems material to a decision

The risk, of course, that underwriters measure and analyze is the risk of a disability happening to you. If your situation falls into their underwriting guidelines, they approve you. If not, they will decline your application.

We will discuss these factors next. First, though, let me address something that needs to be said.

The best time to purchase disability insurance is right now. You are the youngest and (probably) the healthiest you will ever be. 

Additionally, once you are insured, disability insurance carriers can’t go back to their underwriting and change your plan. (Unless you have a conditionally renewable policy, which is outside the scope of the article). For example, let’s say you have a disability insurance policy. Five years later, you are diagnosed with bipolar disorder. If your bipolar disorder leads to a disability claim, the company pays your benefit. Why? Because you applied and were approved before your diagnosis.

The time to purchase disability insurance is right now.

Now, let’s discuss disability insurance underwriting in more detail.


Disability Insurance Underwriting Key Factors

In our opinion, disability insurance underwriting is more stringent than other types of personal insurance, including life insurance and health insurance. Why? The underwriter and the carrier are insuring two things:

(1) your income

(2) your likelihood of disability

Additionally, the factors we introduced previously drive the underwriter’s decision.

Now, I know what you are thinking. “John, there is no way I am going to be disabled.”

As I have said previously, if you know your future, you should not be reading this article. You should play the lottery and win money.

But, you are reading this article…

Do you see what I mean?

The fact is, 1 out of 4 workers, in general, will face a disability lasting greater than 90 days. That’s 3 months. Do you have enough money to survive that? Moreover, if a disability lasted 13 months, do you have enough money to survive that timeframe? Or 2 years? 5 years? Or more?

Moreover, this statistic isn’t coming from me. It’s from the Social Security Administration.

As we have stated elsewhere in articles, this probability is worse than an unexpected death and even passing away from cancer.

If you understand how the underwriting works for disability insurance, you will be better educated and informed come time for the application.

Let’s discuss in detail these key disability insurance underwriting factors now.

Your Medical History

Your health history matters like any personal insurance (long-term care, life, supplemental health, etc.).

to show disability insurance underwritingUnlike life insurance underwriting, seemingly innocuous injuries or illnesses could affect the disability underwriter’s decision.

For example, that shoulder injury that laid you up for a couple of months won’t affect your life insurance approval decision. However, the disability insurance underwriter might exclude that shoulder and injury from coverage. Why? Because the injury prevented you from working before. Moreover, a greater possibility exists for that injury to happen again.

Disability insurance underwriters access your medical history in 4 ways (other than what is on the application). (Note: when you sign your application, you give the disability insurance company the right to access your medical and lifestyle history.)

  • the MIB
  • Milliman Intelliscript
  • a telephone call
  • your medical records

Both the MIB and Milliman Intelliscript contain medical claims data and diagnosis / treatment codes. Underwriters use this information to match up against what you say in the application.

So, if you were thinking of not disclosing a medical condition, think again. Underwriters have ways of finding out. It’s best to be honest on the application. Underwriters (and your insurance agent) don’t like surprises.

Additionally, some underwriters require a telephone call with you. The purpose of the call is to gain clarity about your occupation or something in your health history. We discuss more about the telephone call later.

Finally, if your information warrants it, underwriters will order your medical records. They will want to know the severity of any health problems you have.

Your Occupation

Your occupation matters in disability insurance underwriting.

Nearly all carriers provide occupation classes from 1 to 5 (or 6) with 5/6 being the best. In other words, the higher the number, the lower the disability risk of your occupation. Moreover, the lower the disability risk…you got it, the lower the premium, all things being equal.

For example, most companies assign a class 1 for the construction worker occupation and a class 5 for accountants. That means if you are a construction worker, you pay a higher premium than an accountant (all things being equal).

Regardless of your occupation, you should still enroll in a policy, even if you have to pay a higher premium. Why? A disability strikes anytime.

While occupational disabilities happen – and they happen all the time – they are not the #1 disability claim. As mentioned earlier, illnesses and musculoskeletal issues cause a majority of disabilities.

Some carriers upgrade your occupation to a higher class depending on your occupation and situation. For example, we work with a company that elevates the massage therapist occupation to class 5 if the therapist meets certain requirements. Nearly all other disability insurance companies classify the massage therapist as a class 2.

Finally, your average weekly hours worked matter. Disability insurance companies generally will insure an applicant who works 30 or more hours per week, which they consider “full-time.” Not many companies insure applicants who work fewer than 30 hours per week.

In other words, if you work part-time, then many companies won’t accept an application.

However, we still have options. We do work with a few companies that offer disability insurance for part-time professionals. We have helped many part-time professionals obtain disability insurance. Contact us if you have any questions.

Your Income / Salary

Of course, your income matters. The higher you make, the higher your premium. It’s that simple.

Is this a bad thing? No! Remember, we insure your income in case you can’t work due to a disability.

You can always reduce your monthly benefit if you don’t want to pay a high premium. For example, if your income allows you to have a $6,000 per month benefit, but you only want $3,000, then you can do that. The disadvantage is that, although you are paying a lower premium, you are potentially underinsured if you are disabled.

Remember, too, that you need to select the right income for disability insurance underwriting. If you are an employee, your income is your gross salary. Conversely, your income is your net income if you are a self-employed business owner. (Moreover, anything else, such as your salary draw, etc.) Your net income is your gross business sales minus your business expenses. It is your net income located on your business tax schedule. (Schedule C, Schedule E, etc.)

Underwriters may want a copy of your tax returns, W-2, or other financial information to substantiate your monthly benefit. This is called financial underwriting. The underwriters do not want to insure more salary / income than required. Remember that disability insurance companies provide monthly disability benefits in the 60% to 65% range for employees and around 70% for business owners and self-employed individuals. The actual benefit amount they will insure depends on your actual salary or income you make as well as the income limits of the disability insurance company.

Note: unearned income could affect your disability insurance application. Usually, disability insurance companies limit disability insurance coverage.

Your Prescription Drug History

When you submit your applicaiton, one of the first things the carrier does is look up your prescription drug history.

This is private information; however, the carriers have access to it through Milliman Intelliscript.

Temporary prescription drugs probably won’t matter in the application.

For example, if you took an antibiotic 2 years ago, the carrier may want to know what that was for. However, it should not matter unless it is a serious drug.

Your prescription drug usage is not a secret. Disability insurance carriers rely on electronic data. Do you think you can avoid disclosing medication? No. When you sign the application, you agree to let the carrier review your prescription drug history.

How does your prescription drug history play into disability insurance underwriting? Let’s say you have high blood pressure. However, you forgot to mention your high blood pressure on the disability insurance application. The underwriter sees your prescription drug history. She sees you are currently taking lisinopril. Next, she contacts you to find out more because you answered “no” on the application.

For your information, you don’t want the underwriter to do any more work than he or she has to. Again, it is best to be honest on the application.

Driving Records, Felony History, Bankruptcy History

Your driving records, felony history, and bankruptcy history are also risk factors in the disability insurance underwriting process.accidents and speeding tickets matter with disability insurance underwriting and could negatively impact the decision.

John. Why do these matter? They are not related to my health or occupation.

Well, they are. I think you would agree with me that a person with many speeding tickets or reckless driving citations heightens the chance of an accident, right? Moreover, an accident can lead to a disability. Companies will compensate for this increased risk through a possible rating or even a declined application.

A felony history matters as well. Generally speaking, a felony history indicates unstable situations. If you have a felony or misdemeanor, is that an automatic decline? No. However, underwriters will look at:

  • when the felony occurred
  • nature of the felony
  • if you are currently on parole or probation
  • your situation since then

Generally speaking, for severe felonies, no underwriter will approve an application for an individual disability insurance policy. You will have to obtain a policy through a guaranteed issue process (like for small business owners (Link) or a group employer).

Your bankruptcy history also matters, and if any entity subjects you to a lien.

Your “Fun” Activities

All work and no play burns you out, right? We all need extracurricular activities. They recharge us. However, some activities are deemed too risky by insurance carriers. They include, but are not limited to:

  • skydiving
  • hang-gliding
  • motor-vehicle racing
  • scuba diving (beyond 100 ft usually)
  • rock climbing
  • mountaineering
  • anything else like this

Depending on the frequency and degree of participation, the carrier will excludeto show how hazardous activities affect disability insurance underwriting your activity from the policy or decline your application altogether. In other words, if you like to rock climb, any disabling injury from rock climbing is not covered.

However, don’t worry here. We have insured MANY professionals who engage in hazardous extracurricular activities. We tell them upfront about the exclusion (see what I wrote earlier).

Sounds good, John, you say. But, what if I join after the policy is issued?

Good question. You are likely covered 100%. However, the carrier will probably investigate before paying a benefit. It wants to see if you participated before the application and lied. Trust me; carriers have ways of finding out. If this is the case, the carrier will deny any disability benefit claim.

However, if not, then no worries.

To summarize: the disability insurance company will likely exclude any current hazardous activities from coverage at the time of application. Any NEW activities performed AFTER the policy is in place are likely covered.

Again, the moral of the story: be honest on your application.

Anything Else?

Could mean a lot of things.

One lately, in particular, is the recreational use of marijuana. While many states have approved the use of recreational marijuana, it is not approved at the federal level. Knowing this, and the risk behind it, carriers usually consider marijuana use as tobacco (i.e. smoker status) and apply a rating, depending on the use.

They will even decline your application for excessive use.

Moreover, while in some cases, your application can go through non-medical underwriting, the carrier may require a urine sample to test your level of THC.

Additionally, carriers will look up your credit and any bankruptcy history. If you have a history of bankruptcies or severe credit issues, carriers will decline the application.

Tests The Carriers May Want to Confirm Your Health

While underwriters can get a good idea of your health through your MIB and Milliman Intelliscript reports, they also may require testing or medical exams.

A common medical exam that carriers may require is the paramedical exam. A paramedical exam is like a mini-medical examination or physical. It provides additional information that goes beyond the MIB and Milliman Intelliscript.

An examiner will come to your residence or work, if you prefer. (Note: some exam companies have locations where you can make an office visit appointment.) The examiner will conduct the following:

  • measure your height and weight
  • take your pulse
  • take a blood pressure reading
  • ask you the health and medical questions again
  • obtain a blood sample
  • obtain a urine sample

Underwriters may do this because:

  • the monthly disability coverage applied for exceeds non-medical underwriting requirements
  • they see something in your background information that needs clarity

It is nothing to worry about if the underwriter requires a paramedical exam. As long as you disclosed any pre-existing conditions, then there should be no surprises to your insurance agent or the underwriter. (Remember, underwriters don’t like surprises!)

The Phone Call

Many underwriters nowadays require a telephone interview with an applicant rather than ordering medical records or a paramedical exam.

In my experience, underwriters will ask for a phone interview if:

  • you have medication in your prescription drug history which has a dual purpose
  • the underwriter needs clarity on a current or prior medical / health condition
  • something doesn’t jive with what you said on the application versus what is indicated on the MIB, prescription drug history, or other reports
  • clarity on your occupational job duties

The telephone interview is nothing to stress out about. Usually, a 3rd party service trained in telephone underwriting conducts these interviews. The phone call can take 10 minutes or less.

The telephone interview is an important part of the underwriting process. However, if you are honest and transparent on the application, you can probably avoid the need for a telephone call.

How Pre-Existing Conditions Affect Disability Insurance Underwriting

Let’s discuss pre-existing conditions and the role they play in the disability insurance underwriting decision.

Generally speaking, if you have been diagnosed or treated for any health condition, the carrier excludes said health condition from coverage.

So, for example, if you are taking Wellbutrin for depression, the carriers will exclude mental or nervous disorders from coverage.

What, John?! That is wrong! 

I understand. But, from the carrier’s perspective, it is not.

Think for a moment. If you were a disability insurance carrier, would you cover pre-existing conditions on someone?

Probably not, unless you want to charge a lot of money and you would have to.

No one would pay those premiums, and you’d be out of business.

Additionally, if you have a chronic condition that is managed well with your physician team, do you think that condition will cause a disability?

Yes! 

The right answer is you don’t know. A million ways a disability happens. It’s not just from your pre-existing condition. Yet, we tend to only focus on the pre-existing condition.

However, let’s think about pre-existing conditions in more detail. Let’s say you have chronic back problems. Your doctor manages your back problems well, and you work just fine.

I bet the chances of a cancer diagnosis, injury, or another type of illness have an equal, or even better chance, of a disability rather than your managed illness or back problems.

See what I am saying?

Again, anything can happen anytime and a million ways exist for a disability to happen.

If you want to protect your family and loved ones, which is the main purpose of disability insurance, you will simply have to get around the pre-existing condition situation.

You can read more in our pre-existing conditions guide and contact us if you have questions.


Disability Insurance Underwriting Fails And Pitfallslist disability insurance underwriting fails

We have helped many white, blue, and gray-collar professionals obtain disability insurance.

We have seen almost every underwriting scenario and situation.

We’ve encountered many fails and pitfalls. You need to be aware of these. These probably won’t lead to an application decline. However, they will lead to adjusted benefits and/or exclusions.

If these scenarios apply to you, that’s no need to ignore disability insurance. Just be aware of these possible exclusions and limitations.

You Get Paid Under-The-Table

Carriers insure income. We addressed income earlier. If you get paid under the table, you are out of luck.

To obtain disability insurance, you must show earned income through a W-2 or positive net income through your tax returns.

If you make no money or get paid under the table, I’m sorry. You don’t report it, so the money isn’t insurable.

It’s no problem, John, you say. I just won’t provide the information.

Well, think again.

Let’s say you get paid under the table. You trick the carrier, and they issue a policy.

A year later, you get in an accident. You file a disability claim, and the carrier requests your income tax return or proof of salary.

Uh-oh…

If this happens, you may be out of luck.

Moreover, they may even cancel or rescind your policy.

If you are serious about disability insurance – and you should be – the remedy is simple: Record your income properly.

You Go To The Chiropractor

Seems benign, right? You routinely go to the chiropractor for a spine adjustment. It also feels good. There’s nothing wrong with your back, of course. You also go for wellness.

That’s not how carriers see it.

Every application has a question like this:

“In the past 5 years, have you ever consulted another healthcare provider, chiropractor, therapist, counselor, psychiatrist, or psychologist?”

Here is the carrier’s point of view: Chiropractors are doctors, right? Why would you go? For fun? Nah…

Carriers say there must be a problem with your back.

In other words, you have a back and spine issue. Most carriers simply apply a back and spine exclusion to your policy.

However, you don’t see it that way. You go to the chiropractor because it keeps your back strong. You feel it prevents a back disability from happening.

So, first, let’s just say, in general, that chiropractor visits lead to a back and spine exclusion.

However, a few carriers have taken a more lenient approach to chiropractic visits.

If you only go a few times a year, just for “maintenance” and no documented back issues, a few carriers won’t exclude coverage.

However, if you go a lot, let’s say more than 6 times per year, carriers will exclude your back and spine from coverage.

That is just how it works. Think about it. If you go about 12 times a year, that is 1 time per month. That is a lot. Anyone would think you have a back or spine issue, even if you like going and the adjustment feels good.

Contact us, let us know your occupation, and we can help.

You Have Documented Depression Or Anxiety

This is a tricky area. We receive many phone calls from folks who take first-line medication for depression and/or anxiety. The pandemic hasn’t helped, either, with a significant increase in depression and anxiety in young adults.

We are always upfront. What I tell them is that nearly all the carriers limit your benefit to a 90-day waiting period / elimination period and a maximum 5-year benefit period.

Additionally, they place an exclusion. Any disabilities arising from any emotional or nervous disorder aren’t covered. This includes substance and drug abuse.

Usually, the carriers don’t budge.

Why is that? That doesn’t seem fair…

Same here. I understand. I have spoken to nearly all of them about it. Rather than try to explain here their reasons (as it gets really detailed), contact us, and I am happy to discuss.

But, John. I am prescribed anxiety medication to help me sleep only.

Doesn’t matter. If you are taking anxiety medication to help you sleep, then you have anxiety. That’s the way carriers see it. If it’s hard for you to fall asleep, and you need medication to help you with that, then that is anxiety and an exclusion.

This is another example of stringent disability insurance underwriting. With life insurance, a first-line medication for controlled anxiety and/or depression is no big deal. However, remember, carriers are insuring your chance of disability.

As an aside, we have helped many people maneuver this situation and still have disability insurance. Please see our topic on removing exclusions below for more details.

You Smoke or Use Marijuana

As of this writing, getting life insurance with marijuana use is no big deal.

However, this is not the case with disability insurance.

I can write an entire blog about disability insurance and marijuana use.

Many disability insurance carriers will decline an application from someone who uses marijuana.

Sure, it might be legal in your state. But, it is not on a federal level.

This is an evolving scenario. I predict carriers will be more lenient with people who use marijuana. However, currently, there are a few carriers that will insure people who use marijuana. But, at tobacco use rates.

John. That’s OK, you say. I will just hide the information.

Think again. If you file a disability claim, and the carrier finds out you are a marijuana user, likely the claim is denied.

Listen, we have helped people who use marijuana obtain disability insurance. We can help you, too. Just contact us.

You Withhold Important Information

I am seeing this pitfall often nowadays.

If you work with me, I usually will send you a pre-qualifying questionnaire. I need to know your health and lifestyle history to properly educate you on the underwriting expectations.

Additionally, if you have health or lifestyle conditions, I can contact underwriters and find out what they think about your situation before you officially apply. That way, we know what to expect beforehand. It saves everyone a lot of time and effort, especially if underwriters would ultimately decline your application. Wouldn’t you want to know expectations beforehand if the underwriters would have declined your application anyway?

Which unfortunately happens. I have had clients withhold important medical information from me and the underwriters. In other words, they did not disclose significant medical history on the application. We go through the entire underwriting process, and they are declined. Remember that I said that underwriters don’t like surprises? If I had known about these situations, I could have pre-qualified the applicant, spoken to underwriters about insurability, and possibly could have gotten them some coverage.


Can Carriers Remove Exclusions In Disability Insurance Underwriting?

The short answer. Yes!

However, it is not that easy.

Moreover, the ability to remove exclusions depends on the situation. It’s possible, though.

Here’s a real story. A doctor prescribed a client of ours anxiety medication during her college years. Our client felt anxious about school, etc. So, the doctor prescribes medication.

She’s out of school now and contacted us about disability insurance.

Of course, we explained how carriers underwrite people diagnosed with anxiety. In her case, however, she and her doctor felt that it was a one-time situation. Our client hadn’t taken the medication for a while, either.

In her case, the carrier placed the 90-day/5-year benefit period with the exclusion. However, the disability insurance company agreed to review this exclusion in 2 years. If the client did not have the prescription filled during this timeframe, has no symptoms, and is under her doctor’s care, then the company would remove the exclusion.

So, yes. Exclusions can be removed. However, you will need to show the reason behind the exclusion, which is no longer an issue.

Some exclusions probably could never be removed. These are moderate to serious illnesses like bipolar disorder, rheumatoid arthritis, alcoholism, etc.


Why A Modified Policy Is Better Than No Policy

As stringent as disability insurance underwriting is, we have been able to help people with moderate to serious health conditions. We have helped people with bipolar depression, moderate anxiety, previous cancer diagnosis, and more.

When you work with us, and you have a unique situation, we contact the underwriters directly and discuss your situation. We don’t give them your name or anything like that, so your personal information is safe.

However, you may be thinking,“@$^# this! I’m not going to go through this!”

Well, you may be doing a disservice.

Remember, who is behind this disability insurance? Well, it is you. And then your family, and then your life.

If you are disabled, and can’t work, how will you pay your bills?

Well, will you tap into retirement savings – and destroy your future?

Will you sell your home – and destroy your future?

Will you rack up debt – and destroy your future?

Do you see what I am getting at? There is no good alternative except for taking a modified or rated policy that will still pay a percentage of your income. The peace of mind is invaluable.

Yes, there is John, you say. I will just invest!

So, FYI, I am a CFP® Professional, and I know how hard it is for people to save. Be honest with yourself, will you? I doubt it.

Just look at this example.

The Math – How Savings Doesn’t Work

Even if you dedicated yourself, the savings amount is insurmountable.

For example, let’s say you are eligible for a $5,000 monthly benefit, 5-year benefit period. You make $90,000 per year. You are age 45. The premium is $132 per month.

However, because of health conditions, the carrier rates you, and your premium is now $210 per month for the same $5,000 benefit. Is it a good deal? Absolutely! Let’s put some math behind it.

In that 5-year benefit period, you are insuring up to $300,000 of income ($5,000 per month X 12 months X 5 years). That’s a lot. Think about how your life changes having that safety net.

The obvious non-math answer is: if you were disabled tomorrow, do you have $300,000 dedicated (not your home or retirement) to support you? The answer I know is “no”. (This is why it makes sense to take a modified policy). But on with the analysis…

Results

Do you know how long it will take to insure your income by investing? At $132 per month and a conservative 5% annual return (why would you put risk if you need this money), it will take you 47 years to save $300,000 at $132 per month!!!

Do you think you will do better by saving $210 per month?

No.

It will take you only 38 years.

And, what will you do if you are disabled with no policy?

Just for your knowledge, let’s say you dedicated to saving $300,000 in 10 years as a disability fund. So age 55 through your retirement age, you have some protection in case of disability. At a 5% annual return, you will need to save almost $2,000 per month! That is $24,000 per year and probably 1/3 of your take-home pay. Yikes!

Let’s say you only have that $210 to save, well, you need an annual return (over 10 years) of 40% each year. That is just not going to happen unless you are extremely speculative with your money.

The math doesn’t work. Taking a modified policy is the right choice.

Back To Accepting A Modified Policy

This is the reason why you need to take a modified policy. You don’t know when you will be disabled. Additionally, it takes a very long time to save that money, if you even can.

Here is a succinct illustration, which shows your options if you accept or do not accept a modified disability insurance policy. All points to accept.

if someone is declined for disability insurance, it makes sense to accept any counteroffer


What If I Am Declined For Disability Insurance?

What if you go through the underwriting process, and you are still declined for disability insurance? You still have options. (Note: we really don’t let our clients go through all that first. If you have moderate to serious medical conditions, we tell you and/or contact the underwriters for eligibility.)

However, if you are declined for disability insurance or seeking other options, let us know. We have helped people with alternative options for disability insurance. Although these options are not ideal, they will provide some benefits.

These options include critical illness insurance and hospital indemnity insurance. Additionally, we do offer guaranteed issue disability insurance based on your situation.

If you are a business owner, we do have guaranteed issue disability insurance options.


Now You Know How Disability Insurance Underwriting Works So You Can Get Approved Today!

We hope this article explained the disability insurance underwriting process better and how to get approved today!

Although the underwriting is more stringent, there is nothing to worry about or fear. We help you along the way.

Now that you are aware of disability underwriting, are you ready to take the next step? Contact us or use the form below if you would like our assistance in helping you find the right disability insurance policy. As we mentioned earlier, we have helped many individuals, even those with health conditions, obtain important disability insurance. As with everything we do, we always have your best interests.

Learn More

Are you interested in learning more about the information in this article? Please fill out the form below, and we will email you additional information or give you a call. We always work in your best interest. By entering your information, you are providing your express consent that My Family Life Insurance may contact you via e-mails, SMS, phone calls, or prerecorded messages at any phone number(s) that you provide, even if the number is a wireless number or on any federal or state do-not-call list. Additionally, you understand that calls may be placed using automated technology, and that consent is not a requirement for purchase. Your information will NOT be sold and will remain private. However, you may opt out at any time. We respect your privacy first and foremost. By contacting us, you agree to receive text messages from our number (800) 645-9841. If you no longer wish to receive text messages, you may opt out at any time by replying "STOP".

Your Best Cost For $10,000 Whole Life Insurance Policy [By Age & Health]

Updated: May 11, 2024 at 11:09 am

Are you looking for a $10,000 whole life insurance policy? Many options exist; however, you want to ensure you purchase the right type of policy.

$10,000 is a popular coverage amount because the average funeral costs about $8,000 here in the United States. That is an average. In some parts of the country, a funeral costs more. In other parts, it will cost less. Moreover, generally speaking, cremations cost much less compared to a funeral.

Most people select a whole life policy because it is designed to last a lifetime. When you purchase a whole life insurance policy, you have “pre-funded” your funeral (or other obligations). In the article, we will discuss why whole life insurance is more advantageous compared to other life insurance options like term life insurance.

We work with many life insurance companies offering $10,000 whole life insurance policies.

Here is what we will discuss:

Let’s jump in and discuss the overview of a $10,000 whole life insurance policy.


Overview of a $10,000 Whole Life Insurance Policy

Let’s discuss what whole life insurance is, the face amount of $10,000, and how these two intersect.

There are many types of life insurance, but the two most common are term life insurance and whole life insurance.

Term life insurance exists for a set number of years (the term period). The term period could be 10 years, 20 years, or 30 years. A couple of life insurance companies even offer a 40-year term.

Term life insurance is good for temporary needs to cover obligations and commitments if you suddenly pass away. For example, many people purchase term life insurance to cover a home mortgage or provide for a young family on the unexpected death of a parent.

Conversely, whole life policies cover the insured for his or her entire lifetime. They pay a benefit when the insured passes away, whether tomorrow, 15 years from now, or when the insured is 99 years old.

Whole life insurance rates remain fixed for the insured’s entire lifetime. Once you are approved, the carrier locks in your monthly premium rate.

The $10,000 life insurance coverage amount is actually a low death benefitto introduce a $10,000 whole life insurance policy and why it is common amount. A face amount of $10,000 is typically used for burial costs or funeral expenses. This is why you hear about a $10,000 whole life insurance policy called “burial insurance.” The life insurance industry calls small whole life insurance policies burial insurance because the intention of life insurance is to cover your funeral costs upon your passing and other final expenses.

You’ll hear burial insurance called as:

  • final expense insurance
  • funeral insurance
  • end-of-life insurance

They all mean the same thing.

Burial Insurance: Easy Application

The good news is that burial insurance companies make it very easy to obtain a $10000 whole life insurance policy.

The reasons are as follows:

  • no medical exam is required – answer some health questions, and that is it. The company looks up your medical history through the Medical Information Bureau (MIB)
  • a decision on approval or not takes a day or so
  • incorporates many health issues – burial insurance policies cover many severe health conditions like COPD, stroke, and obesity
  • your premium rates remain fixed forever
  • usually a short electronic application with an instant decision or a few days after

We will discuss this further in this article. Just know that the easiest way to obtain a $10,000 whole life insurance policy is through a burial insurance plan.


Other $10,000 Life Insurance Options – If You Are Healthy Or Not, We Have Them

As we discussed in the previous section, one of the best and easiest ways to obtain a $10,000 whole life insurance policy is through a burial insurance platform.

Life insurance companies have made it very easy to obtain $10,000 of whole life insurance this way.

But, John. I am healthy. You said burial insurance incorporates health conditions in the underwriting. Is there anything for healthy people like me?

Yes, we have other $10,000 life insurance options for people in good health and with mild health conditions, such as controlled high blood pressure.

to give an example cost of a $10,000 whole life insurance policy. Healthy clients can obtain a better rate.We discussed this before in our low-cost burial insurance for seniors guide.

For example, many brokers use Mutual of Omaha for a $10,000 whole life insurance policy. Mutual of Omaha is a great carrier and one that I recommend in most cases.

However, other options are likely available if you are healthy and have very minor health conditions. Let’s say you are a 55-year-old man. A $10,000 whole life insurance policy costs about $36 per month (at the time of this writing) with Mutual of Omaha.

But, another company we work with – and many other brokers don’t – offers $10,000 whole life insurance for about $28 per month.

John, what is really a $8 difference per month?

I understand. However, that $8 difference could mean a lot for a person on a fixed budget.

We have many options like this. You’ll pay much lower rates if you are healthy than someone with health issues.

Low-Cost Life Insurance Options

Additionally, we have companies that offer “no-dividend” whole life insurance policies. Without getting into the weeds, these policies have lower monthly rates because they do not offer dividends. If your intention is to cover and pre-fund your funeral costs, then a “no-dividend” whole life insurance policy should work well.

Moreover, a guaranteed universal life insurance (GUL) policy typically offers a lower cost per $1,000 of coverage. The one drawback is that carriers (that offer GULs) require a minimum face value of $25,000.

For example, let’s say you initially wanted a $10,000 whole life insurance policy. After reviewing your situation, you decide to buy $25,000 to cover some additional expenses and leave a little money to your kids. You are a 65-year-old woman in good health.

A broker says he can get you a $25,000 whole life insurance policy (i.e.burial insurance) for about $100 per month. You then come across our article on low-cost burial insurance (remember, burial insurance is just another name for a life insurance policy).

A GUL on yourself for $25,000 costs about $74 per month.

So, you can save yourself $312 annually over the rest of your life. If you pass away at age 90, then you saved yourself around $7,800. That’s not chump change, especially for people on a budget.

$10,000 Term Life Insurance Options

John, I really would like $10,000 of term life insurance. Do you have that? A broker I visited said they don’t exist at that face amount.

While $10,000 is a low face amount for a term policy, an option does exist.to compare the cost between a $10,000 guaranteed whole life insurance policy and a $10,000 guaranteed issue term life insurance policy.

We work with an “almost”  guaranteed issue term life insurance plan through an association. I say “almost” because there are 3 lifestyle questions that need answering.

It is available for people ages 18 to 74. The initial death benefit is $20,000. It is term to age 100, so it essentially lasts your entire life.

You apply through a self-enrollment link we have. (Contact us if you would like the link). It is an easy online application with a few standard lifestyle questions.

Association plans are generally based on group-term life insurance. At retirement ages, the death benefit decreases. This is typical with group-term life policies. In this case, at ages:

  • 70, the death benefit is $13,500
  • 75, the death benefit is $10,000 to age 100

People between the ages of 18 and 49 pay $50 per month. If you enroll at age 50 and beyond, the cost is $60 per month. There is a one-time administrative charge of $25.

Because it is “almost” guaranteed issue, the company has a waiting period. Carriers offering guaranteed issue life insurance don’t ask health questions, so they have a waiting period.

In this case, the carrier has a 1-year waiting period versus the typical 2-year waiting period with other life insurance companies.

The cost sets the guaranteed issue term life apart from their guaranteed issue whole life counterparts.

Term Life Cost Competitive Versus Whole Life

For example, let’s say a 65-year-old man wants $10,000 of whole life insurance at guaranteed issue. A typical $10,000 guaranteed issue whole life insurance costs $85 per month.

However, he finds us and realizes he can purchase the guaranteed issue term for $60 per month with an initial death benefit of $20,000. If he is still living at age 75, then face value drops to $10,000 until age 100. Knowing that the probability of living to age 100 is less than 1%, he purchases the guaranteed issue term for $60 and saves almost $25 per month.

We at My Family Life Insurance offer many $10,000 life insurance options, whether whole life or term life.

$10,000 Whole Life Insurance For Serious Health Conditions

John, I have some serious health conditions and am in poor health. What options do I have for $10,000?

You do have life insurance options. The $10,000 guaranteed issue term life insurance is a great option if you qualify (through the lifestyle questions).

However, if you don’t qualify, we have $10,000 whole life insurance options for people with serious health conditions.

As I mentioned earlier, we have the “almost” guaranteed issue term life. Some people are partial to term, and if that is you, we have term coverage to age 100.

Additionally, we have graded whole life insurance. What is graded whole life insurance? It has a graded death benefit because it is designed for people with moderate to serious health conditions.

Essentially, in the first couple of years, the life insurance company limits the death benefit to:

  • a return of your premium or
  • a percentage of the death benefit

For example, a life insurance company might say that if you pass away from any illnesses or natural causes in the:

  • 1st year: 10% of the death benefit
  • 2nd year: 60% of the death benefit
  • 3rd year and beyond: 100% of the full death benefit

If you pass away from an accidental death, then the carrier pays 100% of the death benefit, no matter when you pass away.

Example Graded Death Benefit Questionnaire

Here is an example health questionnaire from a life insurance company offering graded death benefit insurance:

As you can see, if you have moderate to serious health issues, you can still qualify for graded whole life death benefit insurance.

Nevertheless, as I mentioned in other articles, we can probably get you an immediate benefit life insurance policy even with serious health conditions or lifestyle situations.

If you have very serious health conditions, then you can obtain a $10,000 guaranteed issue whole life insurance policy.

$10,000 Guaranteed Issue Whole Life Insurance

If you have serious health conditions, then a guaranteed-issue whole life insurance policy is likely the only option available to you.

Guaranteed issue whole life insurance is a type of life insurance with no health questions or underwriting. You apply, and you have life insurance.

While that sounds great, limitations do exist:

  • you’ll pay higher premiums than a traditional $10,000 whole life insurance policy because of your health.
  • a waiting period exists, as mentioned before, because of no health underwriting.
  • most companies limit the death benefit to $25,000. However, that should not be a problem if you are only looking for $10,000.

Again, guaranteed issue life insurance is usually reserved for people in serious medical or lifestyle situations such as:

  • current cancer
  • dementia or Alzheimer’s
  • current parole or probation (although we can usually get some immediate coverage)

If you feel you need guaranteed-issue life insurance, please contact us. We have many guaranteed-issue life options, including those for those 40 and younger, and even some plans with no waiting period if you qualify.

Cost of $10,000 Whole Life Insurance Policy

Expect to pay anywhere from $25 per month to $100 per month or more for a $10,000 whole life insurance policy. The actual premium rate you’ll pay depends on your:

  • age
  • gender
  • health or lifestyle situation
  • state where you live
  • nicotine use

You can look up burial insurance quotes for $10,000 in the quoter below.

Note: these are estimates only. In the health status field, just enter:

  • good health – if you are in good health with limited health conditions (will show immediate benefit options)
  • decent health – if you have moderate health or lifestyle situations (will show graded death benefit options)
  • poor health – if you have serious health or lifestyle situations (will show guaranteed issue life insurance options)

Let’s discuss the $10,000 life insurance cost by age, gender, and health next.


Best Cost for $10,000 Whole Life Insurance Policy

In the charts below, we give our best premium cost for $10,000 whole life insurance. Note: we list the $10,000 almost guaranteed issue term life insurance as an option since it lasts to age 100 (a lifetime for most people).

Note: The rates below, with the exception of the rates in the term and poor columns, are non-tobacco rates. If you want tobacco rates, please contact us.

Premiums can change anytime.

“Good” means good health with minor, controlled, stable medical conditions like high blood pressure. These are our lowest-cost, immediate death benefit plans.

“Decent” means you have moderate health conditions. The premiums in the “decent” column represent graded whole life death benefit plans.

“Poor” means you have serious medical or lifestyle situations. These premiums represent guaranteed issue whole life plans.

Note: as we indicated earlier, even if you have moderate health conditions like multiple sclerosis, bipolar disorder, schizophrenia, stroke history, etc., we can still likely help you obtain a $10,000 whole life insurance policy with an immediate death benefit. The cost would be somewhere between the “good” rate and the “decent” rate defined below.

Additionally, the rates below do not account for specific health or lifestyle situations. Your premium depends on your:

  • age
  • health
  • lifestyle
  • tobacco use
  • etc.

Finally, rate variability occurs as life insurance companies come to market. In other words, more life insurance companies offer $10,000 whole life insurance policies for people age 50 than for those age 25.

$10,000 Whole Life Insurance Cost Ages 20 to 39

Below are the costs for $10,000 whole life insurance between ages 20 and 39.

$10,000 Whole Life Insurance Cost Ages 40 to 59

Below are the costs of $10,000 whole life insurance for people between the ages of 40 and 59.

Note: a person applying for the “almost” guaranteed issue term pays a higher premium starting at age 50.

to show cost for a $10,000 whole life insurance policy for people between the ages of 40 and 59. We categorize the cost by health status - good, decent, and poor.

$10,000 Whole Life Insurance Cost Ages 60 to 79

Below are the costs of $10,000 whole life insurance for people between the ages of 60 and 79.


Advantages and Disadvantages of $10,000 Whole Life Insurance Policy

Many advantages and disadvantages exist with a $10,000 life insurance policy as follows:

Advantages of $10,000 Whole Life Insurance Policyto show the advantages of a $10,000 whole life insurance policy

  • You and your loved ones will have peace of mind knowing there is money and financial protection in place for your funeral needs
  • Will cover the current average cost of a funeral here in the United States
  • Whole life has a guaranteed death benefit for your lifetime (term policies guarantee the death benefit during the term period)
  • $10,000 life insurance policy is usually a good budget for anyone at any age
  • You could borrow against the cash value as policy loans (if allowed by the life insurance company)
  • Your beneficiary (or funeral home if you “assign” any part of the death benefit to them) receives the death benefit income tax-free
  • Some plans offer living benefits
  • Life insurance premiums remain fixed for your entire life

Disadvantages of $10,000 Whole Life Insurance Policy

Disadvantages of a $10,000 whole life insurance policy include:

  • $10,000 is rather a limited death benefit. With the inflation increase in recent years, $10,000 may not “stretch” as much as it used to
  • You have limited coverage if you have a graded death benefit or guaranteed issue plan and pass away during the waiting period

Application Process for $10,000 Whole Life Insurance Policy

Applying for $10,000 life insurance is very easy. As we mentioned earlier, the life insurance industry has made applying for life insurance much easier than 5 or 10 years ago.

Here are the steps if you want to apply for a $10,000 whole life insurance policy through us.

(1) Contact us – you need to contact us either through the form at the end of this article, the contact us link, or call us at (800) 645-9841.

(2) Tell us your situation – tell us your date of birth and other information so we can analyze your situation. It is important that you tell us the health conditions you have (and medication) so we can accurately identify carriers that may approve you. It wastes everyone’s time if you are not upfront and transparent with any health conditions or lifestyle situations. In most cases, we can get you an immediate benefit $10,000 whole life insurance policy.

(3) Carrier selection – based on the information you tell us, we identify companies together that may approve you. We review these companies with you and their health questions.

(4) Apply – After we identify a company, you apply with us over the phone. Most applications take 30 minutes.

(5) Approved! – If everything checks out, then you are approved for the $10,000 life insurance policy

However, sometimes carriers decline our client’s applications. Usually, the reasons are as follows:

(1) you forgot an important component of your health or lifestyle situation

(2) something in your MIB knocks your application to decline status

(3) you forgot to tell us about a medication that knocks your application to decline status

Again, it is important that you tell us your complete health and lifestyle history so we can identify the right carriers for you.


Frequently Asked Questions About $10,000 Whole Life Insurance

Here are several frequently asked questions about a $10,000 whole life insurance policy.

How Much Does a $10,000 Whole Life Insurance Policy Cost?

A $10,000 whole life insurance policy may cost between $25 per month and $100 per month or more. The actual cost depends on your:

  • age
  • gender
  • tobacco status
  • health conditions
  • lifestyle situations

For example, a 55-year-old woman with bipolar disorder might pay $27.60 per month if she is healthy every other way. Let’s say she does not have bipolar disorder and has no health conditions whatsoever. In that case, her $10,000 whole life insurance policy might cost $25.50 per month (assuming she lives in the state where available).

What Is the Cash Value of a $10,000 Whole Life Insurance Policy?

The cash value of a $10,000 whole life insurance policy differs among the life insurance companies. Here is one example of a 65-year-old woman and a $10,000 whole life insurance policy:

to show the cash value accumulation in a $10,000 whole life insurance policyIt is important to note that the cash value account is an asset. If you go on Medicaid, you could lose your whole life insurance policy because Medicaid considers the cash value as a “spendable” asset.

Please contact us if this happens to you or a family member. We do have options, including a funeral trust, to protect that cash value. I also recommend that you contact an elder care attorney in your state.

How Long Does It Take For a Whole Life Policy to Build Cash Value?

It can take some time. Look at the example above. In year 5, the policy has $912 of guaranteed cash value.

A way to increase your cash value quicker is through a paid-up additions rider. Paid-up additions are outside the scope of this article. They are usually on plans reserved for healthy clients or with minimum death benefits of $50,000 or more. Contact us if you have any questions.

Can You Cash Out a Whole Life Insurance Policy?

Yes, you can cash out a whole life insurance policy. Cashing out a whole life insurance policy means you are terminating the policy. When you do that, you receive whatever cash value is in the policy.

For example, if our 65-year-old woman above decided to cash out her policy in year 5, she would potentially receive $956.

If her cash value exceeds her premiums paid, the IRS taxes the difference at ordinary income rates.

What Are the Benefits of $10,000 Whole Life Insurance?

The benefits of a $10,000 whole life insurance policy include:

  • You and your loved ones will have peace of mind knowing there is money and financial protection in place for your funeral needs
  • Will cover the current average cost of a funeral here in the United States
  • Whole life has a guaranteed death benefit for your lifetime (term policies guarantee the death benefit during the term period)
  • $10,000 life insurance policy is usually a good budget for anyone at any age
  • You could borrow against the cash value as policy loans (if allowed by the life insurance company)
  • Your beneficiary (or funeral home if you “assign” any part of the death benefit to them) receives the death benefit income tax-free
  • Some plans offer living benefits
  • Life insurance premiums remain fixed for your entire life

How Does $10,000 Whole Life Insurance Differ from Term Life Insurance?

Whole life will pay out the death benefit no matter when you pass away. That could be tomorrow or age 100. Term life pays the death benefit if you pass away within the term period. If you are still living beyond the term period, your beneficiaries receive nothing unless you have additional life insurance coverage elsewhere.

That is the main difference. Another difference is the premiums. Whole life premiums are much higher than that for term life because of this guaranteed death benefit payout.

As mentioned earlier in the article, we do have a $10,000 “almost” guaranteed issue term life plan available.

Is $10,000 Enough Coverage for Whole Life Insurance?

That really depends on you, your needs, and your budget. However, a $10,000 whole life insurance policy may just cover your funeral expenses, and that is about it. Generally, speaking, you probably need more.

Can I Customize the Coverage of $10,000 Whole Life Insurance?

Yes; however, customization depends on the life insurance company. Some life insurance companies allow:

accidental death rider – will double the death benefit if you pass away from an accident (like a car accident)

child or grandchild term rider – allows you to purchase a $5,000 or $10,000 term policy on your child or grandkids. The ones we like are at guaranteed issue.

terminal illness rider – advances part of the death benefit sooner if you have a life expectancy of 12 months or less

living benefits rider – allows you to advance the death benefit sooner for any covered illness or chronic care needs

Again, the customization depends on the life insurance company.

Are There Any Restrictions or Exclusions for $10,000 Whole Life Insurance?

Not necessarily. However, remember, you have a graded period or waiting period if you have a graded death benefit or guaranteed issue life insurance policy. If you pass away during this period, the death benefit could be limited.

What Happens to the Cash Value of $10,000 Whole Life Insurance Over Time?

The cash value will grow at a defined growth rate. If your $10,000 whole life insurance policy offers dividends, you can reinvest these dividends into the policy (known as paid-up additions). This increases your cash value and your death benefit (beyond the $10,000 face amount).

Can I Borrow Against the Cash Value of $10,000 Whole Life Insurance?

That depends on the life insurance company. Some companies don’t allow borrowing with such a low death benefit amount.

You need to contact the life insurance company and find out.

You have to ask yourself, “What is the purpose of the life insurance?” Borrowing the cash value is secondary if the life insurance covers burial and funeral expenses.

However, if you are buying whole life insurance with the intention of cash value growth, then better options exist. Moreover, you will have to purchase a higher face amount (like $50,000) and be in good health.

What Happens If I Miss a Premium Payment?

If you miss a payment, the life insurance company will notify you (and me). Typically, the company gives you 30 days to pay the missed premium. Generally speaking, the life insurance terminates if you don’t pay within that 30-day period.

Some whole life policies have safety net provisions. These provisions use the cash value to keep your policy going if the company can’t reach you to make your missed payment. These provisions include:

extended term insurance – the company uses the cash value, as a single premium, to buy the same face amount as a term life policy. For example, Joe has a $50,000 whole life insurance policy with a $25,000 cash value. If his policy lapses, the company uses the $25,000 to buy a 10-year term, $50,000 face amount.

reduced paid-up insurance – the company uses the entire cash value in the policy to buy a new whole life insurance policy (as a single premium). For example, let’s say Joe has $25,000 cash value in his $50,000 whole life policy. His policy lapses. The company uses the $25,000 as a single-premium payment to buy $10,000 whole life insurance.

automatic premium loan – the company will use any cash value to pay your missed premiums. They take these premiums out as a loan that you can pay back. If you don’t pay it back, the life insurance company will keep taking loans out to pay your policy. At some point, the loans will be so great that the company will terminate your life insurance.

You select these provisions at the time of application.

The moral of the story here is that these are nice safety nets, but you need to pay the premiums on your policy if you want your policy original and intact.


Final Thoughts About Your Best Cost Of A $10,000 Whole Life Insurance Policy

Now you know your best cost for $10,000 whole life insurance policy. The actual premiums depend on:

  • your age
  • your health situation
  • the state where you live
  • your gender
  • your tobacco use
  • anything else pertinent to the application

We also discussed how to buy $10,000 of whole life insurance and the application process if you work with us. You can also quote $10,000 whole life insurance through the quoter in this article.

Do you have any questions or would like to get started? Feel free to contact us or use the form below.

As always, we only work in your best interests. It is the only way we know how to. There is no risk to speaking with us. If we can’t help you, we will point you in the right direction as best we can. You can always reach back out to us if your needs or situation changes.

Learn More

Are you interested in learning more about the information in this article? Please fill out the form below, and we will email you additional information or give you a call. We always work in your best interest. By entering your information, you are providing your express consent that My Family Life Insurance may contact you via e-mails, SMS, phone calls, or prerecorded messages at any phone number(s) that you provide, even if the number is a wireless number or on any federal or state do-not-call list. Additionally, you understand that calls may be placed using automated technology, and that consent is not a requirement for purchase. Your information will NOT be sold and will remain private. However, you may opt out at any time. We respect your privacy first and foremost. By contacting us, you agree to receive text messages from our number (800) 645-9841. If you no longer wish to receive text messages, you may opt out at any time by replying "STOP".

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Updated: April 12, 2024 at 9:38 am

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You want to know what these reasons are, right?

I have compiled 21 reasons why a life insurance company won’t pay out the death benefit.

This is a good list of activities to AVOID.

Continue reading 21 Reasons Why Your Life Insurance Won’t Pay Out | Although These Situations Don’t Happen Often, They Can Happen

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What are you talking about, John? I’ll receive a benefit if I am sick or hurt.

Right?

Maybe. It depends on the definition.

The definition of disability is the “heart” of your policy. It is critical that you understand how the carrier defines your disability. The carrier pays (or does not pay) the disability benefit based on this definition, which is located in your contract. Continue reading How The Definition of Disability Affects Your Benefits | If You Don’t Know This Definition, You Could Be in for a Surprise When You Make a Claim

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Are you looking for life insurance, but were you offered graded death benefit whole life insurance instead?

Yes, the broker said that because of my health conditions, I am only eligible for a graded death benefit policy.

Sometimes, that can happen.

However, sometimes, better options exist that have better benefits or lower premium payments.

This article explains graded death benefit insurance and discusses when and, more importantly, if you need it.

You could save yourself hundreds over the lifetime of the policy.

Continue reading What Is Graded Death Benefit Whole Life Insurance? | We Discuss What This Type Of Life Insurance Is, And If You Need It!