Life insurance policies help your family deal with the costs and hardships after you're gone and with the loss of your income.
What to know before buying life insurance
In general, life insurance is cheaper when you are young and gets more expensive as you age. Your health history and life choices, such as smoking, play a key role in determining the cost of your policy. We recommend shopping around to compare different policies and companies to ensure you get the best rate that fits your needs.
Life insurance is a long-term commitment; it’s usually not in your best interest to move from company to company, especially if there is a penalty for canceling your policy before its maturity date. Your company may also charge you a surrender fee if your policy has a cash value.
Two types of policies to consider
Term life:
- Provides you with coverage for a specific number of years
- Costs more as you get older
- Doesn't have a cash value so you can't cash it out
Cash value life (whole life, universal life, variable life):
- Uses part of your premium to set up a financial account that earns interest
- Gives you actual dollars you can borrow or withdraw.
- Costs more at the start of the policy
- Gives you the flexibility to determine your premium
Remember, a life insurance policy is not an investment. If an agent or broker tries to sell you life insurance as an investment with a high return, insist they show you that specific guarantee in your contract.
Reasons life insurance companies can’t turn you down
They can't refuse coverage based on your:
- Sex
- Gender identity
- Marital status
- Race
- National origin
- Living organ donor status
The Living Donor Act prohibits insurance companies from declining or limiting coverage because you're a living organ donor. If a company denies you life insurance coverage for other reasons, shop around. Companies use different methods and factors to decide who they'll insure.
Though life insurance companies are supposed to evaluate all applicants equally, discrimination can happen. If you believe you have been unfairly denied coverage, you have the right to file a complaint with our office.
You may have to answer health questions
Insurance companies can require you to answer health questions to buy life insurance. Health information helps insurers find the right policy to offer you. It also helps set a premium that manages their risk and aligns with your health and life expectancy. The insurance company needs to know the full details of your health, as honestly and accurately and to the best of your knowledge as possible.
Few people are in “perfect” health, so chances are you can still get good coverage even if you’ve had a few health problems. Providing false health information could lead to the cancellation of your policy or no payment of benefits to your beneficiary.
Buying life insurance if you are transgender
Insurers can't deny you a life insurance policy or charge a different premium simply because you're transgender. Some companies, however, may use the sex you were assigned at birth rather than the gender you identify with to set your policy's premium. An insurer's risk assessment or underwriting is based on mortality, which is statistically tied to the sex you're assigned at birth.
For example, someone who's assigned male at birth and then transitions to female still has a prostate, which increases the underwriting risk of prostate cancer later in life. People assigned female at birth still carry an increased underwriting risk for osteoporosis even if they transition to male.
Some life insurance companies are starting to accept the gender the life insurance applicant identifies with, but the underwriting requirements vary by insurer. We recommend you check with multiple insurers about their underwriting policies.
Getting a life insurance policy may be a bit more complicated if you're in the process of transitioning. Most insurers postpone offering life insurance coverage if you have any pending gender-affirming surgeries. Insurance companies usually like to wait until you have surgery and recover before offering coverage because there's always an inherent risk associated with surgery.
What to do if you change your mind
When you get your new policy, read it carefully. Every new life insurance policy issued in Washington state comes with a 10-day free look period. This means if you're not satisfied with your policy, be sure to:
- Return the new policy within 10 days after you receive it.
- Mail it to the company's home office or give it back to the agent who sold it to you.
- Get a dated receipt from the post office or insurance agent.
The company must return your premium within 30 days from the date you returned your policy or pay a penalty.
Who can take out a life insurance policy
There are certain restrictions when it comes to other people taking out a life insurance policy on your or when you'd like to buy a life insurance policy for your kids.
On you
No one can take out a life insurance policy on you without your permission, except for your spouse. If you divorce or end a domestic partnership, your ex-spouse or partner cannot be your beneficiary unless a court orders it or you fill out a new form listing them as your beneficiary.
Your employer can take out a life insurance policy for you, but only with your written permission. They can only list the business as a beneficiary if they can prove that they have an insurable interest in your life and that you are essential to the business.
On your children
Insurance companies have strict guidelines on whether they'll issue life insurance policies on children. In most cases, only birth or adoptive parents or court-appointed legal guardians can take out life insurance on children under age 17. If another family member (such as a grandparent) wants to buy a policy for a child, they must first get written consent from the child’s parent or legal guardian.
When you apply for life insurance for your child:
- The insurance company may refuse your request for life insurance if your child’s current policy or the life insurance you're applying for exceeds the company’s maximum death benefit limit for children.
- The insurance company will review your application to make sure the policy benefit is proportional to the value of the life insurance or accidental death benefits issued to the child’s other siblings or immediate family members.
- If the application is for $50,000 or less and the company doesn't require underwriting or a risk assessment, it must check a national database for active insurance information to find out if there are existing policies or other applications out on your child.
- Children 15 and older will need to sign any life insurance application someone takes out on them.