Can You Get Life Insurance if You’re Unemployed?


What do getting life insurance and being unemployed have to do with each other? Probably more than you think. You may be able to get life insurance if you’re unemployed – but you might also be declined.

Here’s why.

A sad reason why you may be turned down

From a life insurance company’s perspective, the primary reason why you might be declined coverage is your lack of ability to pay for policy.

A life insurance company, after all, is a business, and like all businesses, they’re in business to make a profit. If they feel that you are unable to afford the premium, they may very well decline your application.

What difference should it make to the life insurance company that you’re unemployed – after all – it’s temporary situation, isn’t it?

The reason your ability to pay affects the insurance company is because the company will be putting money out up front in order to put your policy into effect. That will mean there will be an underwriting process, which will not only include salary and benefits paid to internal staff, but also fees paid to collect third-party information.

If the application process also involves a medical examination, the insurance company will have to pay for the cost of that too. If the company believes that you will not have the wherewithal to pay the premiums over many years, their ability to recover the upfront money paid in order to approve your policy may never be collected.

Unemployment can be a tip-off to an insurance company that your policy will lapse shortly after it is approved. This can be especially evident if the period of unemployment has been a particularly long.

Your application could be postponed or even declined

Everybody knows that a life insurance company evaluates an applicants overall health. What’s less obvious is that they will also consider your overall financial situation. If that is in any way questionable – which it will be in the event of unemployment – the company can either decline or postpone the policy.

This will be more apparent if you’re working in occupation that is in decline, or not commonly available in your geographic location. The insurance company may conclude as a result that your unemployment is chronic rather than temporary. Reemployment, when it comes, may ultimately result in a much lower paying job than the one you held before being unemployed.

If you are unemployed from a field in which jobs are plentiful, the insurance company may simply postpone approving the policy until you are once again employed.

How to get life insurance if you’re unemployed

Even if you are unemployed, there are still ways that you can get life insurance.

Work with a good insurance agent. Some insurance companies take a dim view of the unemployed applicant. But for other companies, the prospects are much brighter. Those are the companies that you want to work with, and a competent insurance agent can help you do just that. Make sure that you are working with an agent, rather than attempting to get life insurance on your own through a relatively small number of potential providers. As an industry outsider, you’ll have little knowledge of which companies you should be applying to. An insurance agent, on the other hand, will know exactly which companies to apply to.

Be prepared to demonstrate your ability to get a new job. This could include providing the insurance company with a copy of your resume, evidence of solid employment trends in your field and geographic location, and even a list of prospective employers you are currently applying with. The key is demonstrating that your period of unemployment will be temporary, and it will be coming to an end soon.

Show financial strength. Even if you’re unemployed, if you can demonstrate overall financial strength, an insurance company may approve your application. You can do this by providing evidence of large asset positions, such as savings accounts, investment accounts, and even tax-sheltered retirement plans. You may also want to demonstrate a low level of debt, as well as an excellent credit rating, by providing a copy of your recent credit report. All of these will show that you have the ability to afford your policy, even without a regular paycheck.

Apply for a lower amount of coverage. The same company that may decline your application for $250,000 in life insurance may approve you for a $100,000 policy. The lower policy amount will result in a lower – and more affordable – annual premium.

Term life insurance to the rescue

If all else fails, apply for a term life insurance policy, rather than whole life. Since term life insurance is so much cheaper than whole life, you can apply for an equivalent amount of insurance, but with a much lower premium. Since the lower premium will be so much more affordable, the insurance company may approve your policy even though you don’t have a job.

A term life insurance policy application – in combination with one or more of the above strategies – could get you an approval, even though you don’t have a job. Once again, a good insurance agent can help you with the process, by pointing you to the right companies to apply to, with the proper level of coverage that will get you the approval you want.