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Why get life insurance

Life insurance when you’re unemployed

Getting a life insurance policy may be more difficult if you’re unemployed. Find out what you can do to improve your chances of getting coverage.
There are a lot of factors that go into qualifying for life insurance. These can include everything from your height to your overall health to your family health history.

Many insurers also consider your job and financial situation. If you're currently unemployed, a lack of steady income may impact your life insurance application, potentially causing postponement or rejection.

However, that's not to say you're out of options if you're unemployed and looking for life insurance. According to Policygenius, if you have been unemployed for six months or less, you shouldn’t face too much difficulty finding a life insurance policy.* Every insurer has their own underwriting guidelines, so employment isn't always a barrier to getting the coverage you need.

If you're currently unemployed and want to know how to get life insurance coverage, here's what you need to know.

How does employment impact life insurance?

When it comes to securing life insurance, your risk level is very important to the insurance company. Typically, the higher risk you present to the insurance company, the more you'll usually need to pay in premiums.

For many insurance companies, it's important that there is a degree of certainty that you're able to pay your monthly premium for the long term and without a lapse. If you're unemployed, that often has an impact on your financial situation, which can make you seem riskier compared to someone who has a job in the eyes of an insurer.

Can I get life insurance if I'm unemployed?

The answer is: it depends.

Just because you don't currently have a job, it doesn't mean you are automatically going to get rejected from a life insurance policy. While it is one of many factors that an insurer will consider with your application, it's not the only factor.

Depending on your situation, your insurer might review your application more rigorously than it would if you were fully employed. So, if you are out of work and applying for life insurance, prepare for a longer process during which you may be asked more questions than if you were still employed.

The factors that life insurance companies consider

If you're unemployed and applying for life insurance, one of the first things the insurer looks at is how long you've been out of work. Generally, long-term unemployment is when you've been out of work for six months, though that can extend a bit during times of economic hardship like recessions.

If you've been unemployed for six months or less, and are actively searching for a job, many insurance companies may move forward with your application and consider your previous income level as a guide.

If you've been unemployed for longer than that, the insurer will often want to know why. Depending on the situation — for example, you're in graduate school or a stay-at-home parent — the insurer will take those factors into consideration when deciding on coverage.

Some people with disabilities don't work, sometimes because they can't due to their disability or a related illness. In this case, it can be harder to get coverage.

How to get life insurance if you're unemployed

There are things you can do to improve your chances of getting approved for life insurance if you're unemployed:

  • Lower your coverage need — You can try to apply for a smaller coverage amount that covers basic needs, such as funeral costs, until you are back on your feet again.
    Consider more affordable insurance: If you're working on a budget, a term life insurance policy might be a good fit. It's generally much less expensive than other options and will provide coverage for a set period, anywhere from 10 to 40 years.
  • State your case  Before you start your application process, get a copy of your resume and write a letter that explains your situation. If you're recently out of work with a good chance of being employed again in a similar role, your insurer could be more likely to approve your application.
  • Reveal all your assets  Being a homeowner or having other assets makes you less of a risk for nonpayment or a policy lapse. Having these assets helps demonstrate you are financially responsible.

The most important thing to remember is not to let your circumstances prevent you from applying for life insurance coverage. Many quality insurance companies work with people on a case-by-case basis, helping you find the plan that will work best for your situation.

*Gambhir, N. & Shih, A. (2021, October 1). Can you get life insurance if you're unemployed? Policygenius


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