When you apply for life insurance, the carrier typically evaluates your health and finances to make sure the policy you purchase is appropriate for your needs as well as those of the company. Because of this, evidence of insurability is an essential component of the application process, providing financial justification for the policy you choose. Keep reading to learn what it means to have evidence of insurability and what happens if you don’t.
What Is Evidence of Insurability?
Life insurance is designed to replace your income, providing financial support to your dependents if you die prematurely. In part, evidence of insurability is a statement that proves to the insurance carrier that you qualify for the coverage you’re applying for. Depending on the insurance company, evidence of insurability may include two components:
- Financial: The Evidence of Insurability statement proves to the insurance company that you plan to use the policy the way it was intended — as a safety net rather than as a potential pathway to wealth for your family.
- Physical: For many carriers, evidence of insurability refers to proof of good health. During this part of the application process, the applicant is expected to provide detailed information about their overall health before being considered eligible for a policy.
What Is the EOI Process?
The EOI process lets your carrier know that your plan’s death benefit aligns with your income, personal assets, and the current and future needs of your beneficiaries. It helps the company determine whether you’re insurable, how much risk you pose to the carrier and what your premium will be.
The process may include the following steps:
- Filling out and submitting an EOI form, medical history statement or health questionnaire, either online or in person. The completed document should contain detailed information about your personal health or the health of the relevant dependents.
- A medical exam
- Results of medical tests such as bloodwork, EKGs and blood pressure
- A report from the applicant's physician
- Proving insurable interest
- Furnishing other relevant information, as needed, to provide a complete picture of the applicant’s health and finances
What Is Insurable Interest?
The financial portion of the EOI may rely on the presence of insurable interest. Insurable interest demonstrates to the insurance company that your potential beneficiaries rely on you for financial support and would experience financial hardship if you die. If you have any of the following relationships, they're typically considered valid as proof of insurable interest:
- A spouses or domestic partner
- An ex-spouse still receiving financial support from you
- Minor children, either biological or adopted
- Adult children with disabilities
- A business partner
Girlfriends, boyfriends, siblings and other relatives or friends may be considered proof of insurable interest if you can demonstrate their financial dependency on you.
What Is an EOI Form?
The EOI form is a questionnaire that an applicant must fill out with detailed information about their personal medical history and overall health. Questions may include, but are not limited to, the following topics:
- History of smoking or tobacco use
- Mental health issues
- Prescription medications
- History of high blood pressure or high cholesterol
- Diseases such as cancer, diabetes and asthma
- High-risk hobbies
What Does It Mean to Be Without Evidence of Insurability?
When you refer to a policy as without evidence of insurability, it means that an insurance carrier underwrote a life or health insurance policy without verifying the insured’s eligibility for coverage. This may also be referred to as without evidence of good health.
In certain circumstances, such as the ones listed here, coverage may be regularly issued without evidence of insurability:
- Group policies that have open enrollment periods
- Plans with lower benefits or limited coverage
- Convertible life insurance that is undergoing conversion
- Plans that are issued without evidence of insurability
- Policyholders adding riders or other additional coverage to their current policy
- Policyholders purchasing additional coverage at specific life milestones, such as the birth of a child
- Policyholders purchasing coverage for their spouse or children
What Happens if I Can't Provide Evidence of Insurability?
If you can't provide evidence of insurability, you may still be able to purchase benefits. Options such as final expense life insurance may help loved ones cover end-of-life costs, such as medical bills and funerals, without requiring evidence of insurability. Although the coverage is limited, it's better than no coverage at all. You may also find it helpful to discuss your situation with an experienced insurance agent or broker, who can help you find other available coverage options.