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Individual Life Insurance

What is Individual Life Insurance?

Individual life insurance is coverage purchased to apply to a specific person’s life. People can buy individual life insurance on themselves or on others in whom they have an insurable interest, like their business partner or spouse.

Individual life insurance vs. group life insurance

If you’re shopping for life insurance on your own, you’ll generally be looking at individual life insurance policies. If you get life insurance through your employer, though, you’ll be part of a group life insurance policy.

Large entities like employers buy group life insurance to extend protections to their employees. Employees might need to wait a certain amount of time (e.g., 90 days) or reach a certain employment status (e.g., full-time employee) to be eligible for group coverage. But once they satisfy the eligibility requirements, they can generally opt into the coverage without much additional work.

With individual life insurance, things work differently. Specifically, the insurance company wants to gather information on the individual to whom the policy will apply. This prevents them from insuring individuals that they would deem too high-risk, like someone with a health condition that will dramatically shorten their lifespan or people with high-risk occupations or hobbies.

Underwriting with individual life insurance

After someone applies for individual life insurance, most companies initiate an underwriting process. During this period, they analyze specific details to determine the risk level associated with the individual applying for life insurance.

For most term and permanent life insurance policies, that includes a medical exam and a questionnaire. The person applying for coverage will need to report their occupation, any relevant hobbies (especially high-risk ones like skydiving), and other information at the insurer’s request.

Long story short, the process for getting individual life insurance is usually much more involved than getting coverage through group life policies.

Maintaining individual life insurance

Whether you buy individual life insurance on yourself or on someone else, you need to pay the premiums associated with the policy to keep it active. Your premiums might be due annually or monthly, for example. If you miss a premium payment, a grace period, usually of about a month, starts. Once that grace period expires, your policy lapses and you risk losing your coverage.

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