What Is Temporary Life Insurance?
A temporary life insurance policy is a short-term plan designed to cover an applicant during the underwriting process until the long-term policy goes into effect or until you can afford a more permanent life insurance option.
It can take four to six weeks — or longer, depending on the underwriting process — before a long-term life insurance policy goes into effect and the applicant pays their first premium. There are two types of temporary life insurance, sometimes known as a temporary insurance agreement (TIA):
- Short-term coverage offered by insurers to cover applicants during the underwriting process.
- Annual life insurance that is re-evaluated and renewed annually.
When Does Temporary Life Insurance End?
Temporary life insurance policy benefits are generally equal to the amount of coverage that you have applied for, up to a limit — typically $1 million. Temporary life insurance coverage generally ends after one of the following:
- Your permanent term or whole life insurance policy goes into effect.
- A certain length of time passes after your application is filed, usually 60-90 days.
- You are declined for traditional life insurance coverage.
- You request a refund for the premium or cancel your proposed long-term coverage.
Temporary Life Insurance Provides Applicants With Short-Term Coverage
If you don't have a previous life insurance policy in place — for example, from your employer, a professional association or trade union — you're without coverage until your insurer approves your application in the interim. Sometimes applicants seek short-term life insurance coverage because they don't qualify for traditional, long-term life insurance. If you were denied life insurance — or suspect you might be due to high-risk factors — you can use the temporary period to improve your eligibility criteria.
Some people buy short-term life insurance policies because they're going on high-risk adventures, such as skydiving, and want the coverage. Temporary life insurance ensures your beneficiaries receive a death benefit if you pass away unexpectedly between the time you apply and when you make your first premium payment. A short-term, temporary life insurance plan ensures the policyholder's beneficiaries receive the death benefits if they die during underwriting as long as they make their regular premium payments.
What Does Temporary Life Insurance Cost?
Participants can renew their temporary life insurance policy annually, and unlike traditional life insurance policies, where the premium is locked in for a long-term period — 10, 20 or 30 years — the temporary life insurance premium can go up each year upon renewal. However, temporary life insurance applicants generally don't have to undergo a medical exam every time they renew. Annual renewable term life insurance is designed to be a short-term coverage plan. Eventually, it's a good idea to switch to a traditional term or whole policy that locks in long-term rates.
A 30-something nonsmoking male can buy a temporary life insurance policy for $140 a year, compared to a 10-year term life policy for $170 annually. Within four years, the premium for the short-term becomes more expensive than the $170/year term life policy. Your temporary life insurance premium may not reflect your final, permanent life insurance policy premium. Your actual costs are determined during the underwriting process and can be higher or lower, depending on your health, age, medical history and the amount of coverage you applied for.
Some insurers do not provide temporary life insurance or renewable life policies. An alternate is to buy a life insurance plan that doesn't require a medical exam and has a quick approval process.