Applying for key man life insurance probably conjures up images of poring over policy options, spending hours filling in lengthy applications, and trying to squeeze in a doctor’s visit into your busy day.
Not so anymore.
The life insurance application process for businesses has evolved considerably – and for the better. Whether you’re a first-time buyer or revisiting your coverage needs, understanding what to expect upfront can save you time and help you make a more confident decision.
We have decades of experience at MEG Financial working with business owners to secure the best policy at the best possible price – while meeting your timeline. In this article, we’ll provide an overview of what you can expect during the application and approval process.
Key Takeaways of The Process of Applying for Key Man Insurance
- Applying for business life insurance has changed considerably over the years. AI and software have sped up the process in many cases, but there are instances where a more thorough application and review are required.
- A key person insurance policy protects businesses financially if a critical employee dies or becomes disabled, helping cover lost income, business debts, and hiring costs.
- Companies can choose between term life insurance, permanent life insurance, or universal life insurance, depending on their financial goals and needs.
- Early planning is crucial for small businesses and sole proprietors who rely heavily on top executives and key employees to maintain financial viability in the event of an untimely death.
The Types of Business Life Insurance Policies to Choose From
Whether the solution involves term life insurance, universal life insurance, or a permanent life policy, choosing the right insurance coverage is essential.
Here’s a quick breakdown on the types of policies – and their differences – to help you make your decision on which is right for you:
- Term life insurance: The most common and affordable option, term life covers the key person for a defined period (typically 10, 20, or 30 years). Premiums are lower than permanent options, making it a practical choice for businesses that need coverage tied to a specific window, like the duration of an SBA loan.
- Permanent life insurance: Unlike term, permanent life doesn’t expire as long as premiums are paid, and it builds cash value over time that the business can borrow against or use as a financial reserve. This makes it attractive for businesses that want both long-term protection and a savings component built into the policy.
- Universal life insurance: A flexible form of permanent life insurance that allows the business to adjust premium payments and death benefit amounts over time as the company’s needs change. It also accumulates cash value, but with greater control over how that value grows than with traditional permanent life policies.
Next, we’ll review the application process and the ways it has changed over the years.
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How Technology Has Changed the Insurance Application and Underwriting Process
In 2020, the world was impacted by a major catastrophic event, COVID-19. The life insurance industry was not immune to the effects.
For decades, the life insurance application process included a nurse visiting your home or office to ask questions, measure your height and weight, and collect blood and urine samples. During the Coronavirus threat, not many people were excited about any human interaction, let alone a nurse coming to their location to complete an insurance exam.
Insurance companies have attempted many different approaches to improve the traditional life insurance application and underwriting approval process. The path has not always been smooth; most insurance companies have adopted a multifaceted approach.
There are two primary avenues you can take to get a business life insurance policy:
- The modern approach
- The traditional approach
In general, both loosely follow the sequence of steps below:
- An initial application interview with a licensed life insurance agent
- Electronic life insurance application submission
- Information gathering and a review for approval
- Underwriting assessment and formal offer
- Policy issue and delivery
But as you’ll see when we walk through them next, the modern approach to underwriting can drastically speed up this process.
The Modern (Instant) Process for Getting Business Life Insurance
The modern approach (often instant or accelerated) is becoming more widely available thanks to AI-driven advancements that automate the underwriting process.
When you apply, you are either accepted for coverage or rejected. If you need a policy fast, and you fall within the acceptable categories, you may be able to get a life insurance policy in as little as 20 minutes.
The steps are:
- Online application
- Algorithmic underwriting
- Auto approve/deny
- Human intervention if needed
Online Application
You will need to first submit an application; it will require you to include your driver’s license, Social Security number, personal and family medical history, and any prescription drugs you take. This information is used to verify your identity and assess your overall health and any associated risks.
Depending on the specific insurance products you wish to buy, you may also be asked about your legal history, health insurance history, drug and alcohol use, lifestyle, and employment status.
Algorithmic Underwriting
This is where the benefit of speed comes in. You won’t need to speak to an expert or even schedule a medical exam.
An algorithm will review your application and underwrite a policy based on all of the information you provided. Advances in technology have enabled life insurance underwriters to quickly access your personal electronic information online.
Auto Approve/Deny
Depending on your application, you will then be either approved or denied. In some cases, it can be instant, though for more involved applications, this can take from minutes to hours.
There are limits to where instant underwriting makes sense. Age, health, and the amount of coverage all come into play and can determine whether a human is needed in the process. For that, the next three paths may be more suitable.
To provide a real-world example, Ethos outlines its coverage process in three quick steps. Ethos allows you to get a quote instantly by answering a few simple questions and then submitting a secure application online, which should take no more than 15 minutes. Once submitted, Ethos offers instant approval or denial, and if approved, you can activate your coverage immediately.
Algorithm With Escalation If Needed
With some providers, you will receive an answer based on all the data collected and the information provided. Due to the extra human involvement, the timeline for approval/denial can be stretched out to a few days, but it is still much faster than the traditional process, which we will cover next.
BannerLife outlines its accelerated underwriting offering in this helpful PDF. As with instant underwriting, there are eligibility requirements to be aware of:
- Ages of 20- 60, and up to $500,000 in coverage
- Ages 61-70, and up to $500,000 in coverage will require APS
And pre-existing conditions will exclude you as well, including but not limited to:
- Blood disorders
- Cancer
- Chronic kidney disease
- Heart disease
- Liver disease
- Parkinson’s Disease
And others. Still, if you qualify, then it can be an exceedingly simple and fast way to acquire a key man life insurance policy.
The “Traditional” Process For Getting Life Insurance
For those who are older, need extensive coverage, or have a pre-existing medical condition, the traditional process will likely be required. While this process requires a bit more back-and-forth than the previous two, your personal involvement will be minimal.
- A brief interview
- The application
- The exam
- Underwriting
- Approval
Schedule a Brief Interview
This assumes you have identified an insurance provider (think of that as “Step 0.” Once you have selected an insurance company for the life insurance policy, your first step is to schedule a brief telephone interview. For example, if you work with our team at MEG Financial, we will help you run through the questions on the formal insurance application.
Apply
Once the interview is complete, we will email/fax/mail your application for your review and signature. While we will have walked through these questions together, we recommend carefully reviewing the entire application for accuracy before signing and returning it to our firm (or the firm of your choice). If you would like to bind coverage, you must include a check payable to the insurance company for the first premium payment. Coverage will not be effective until a premium payment is remitted.
The Exam
To secure a key man policy, you will need to obtain a “mini-physical” exam. While some providers offer no-exam policies, there are limitations to these:
- You must be 60 years old or younger.
- If you are over 60 years old, then an exam will be required with every company.
- You must be in good health and have no pre-existing conditions.
- If you have any marginal health concerns or pre-existing conditions, the no-exam life insurance policy is likely not a good option. If you do have a health issue, every non-exam life insurance company will order your medical reports from your physician(s). This process can take several weeks.
The insurance exam is administered by a licensed examiner, who will contact you to schedule an appointment at your convenience. The exam can be completed at your home or office. The exam consists of blood and urine samples, a height and weight check, a blood pressure check, and a detailed review of your medical history. On some occasions, an EKG may be required, depending on the insurance company.
Underwriting
The underwriting process begins when the insurance company receives your key person’s life application and exam. During this process, a representative at the insurance company will review your application and exam paperwork, order your lab results from the lab, and request any medical records from your attending physicians.
They may also request financial information on the business, as well as your driving record and a brief telephone interview to verify the accuracy of your information. The underwriting process should take 4-5 weeks, depending on the specific requirements. Our office will work diligently to expedite the approval of your policy, and we will keep you informed with a weekly status update.
Check out our guide to key man insurance underwriting for a deeper walkthrough of this process.
Approval
When your key man policy is approved, we will notify you immediately. In some cases, information obtained during underwriting may result in an approval at a slightly higher rate. If your policy is approved, other than applied, our office will immediately shop the marketplace to verify the accuracy of that offer.
If there are more favorable opportunities to secure a more competitive policy, we may transition to that insurance company. In any case, you are under no obligation to accept a policy that is not competitive. At MEG Financial, we leave no stone unturned in securing the best results for our clients.
Once your key man life or disability insurance policy is approved, we will receive it within 7-10 days and forward it to you the same day. Instructions for the policy requirements are included on a cover page sent with your policy. When you receive your actual policy, carefully review all documents and call MEG Financial with questions. If you have no questions, review the cover page for the instructions and requirements needed to make your coverage effective. Simply return the initial premium due, along with any completed and signed forms, in the postage-paid envelope.
Your life insurance policy becomes effective when you complete the required steps and submit your initial check, payable to the insurance company.
Top Insurance Underwriters Compared
|
Carrier / Program |
Max No-Exam Coverage |
Age Range |
Key Requirement |
|
Banner Life — Lab Lift / Digital Accelerated |
Up to $4 million |
Ages 20–50 |
EHR or APS substitutes for a paramedical exam; digital application |
|
Banner Life — Lab Lift |
Up to $2 million |
Ages 51–60 |
Same EHR/APS substitution; same-day digital platform |
|
Principal Financial — Accelerated Underwriting™ |
Up to $3 million |
Ages 18–40 |
No exam or labs for Standard or better. 24-hr decision possible. |
|
Principal Financial — Accelerated Underwriting™ |
Up to $2.5 million |
Ages 41–60 |
No exam or labs for qualified applicants. |
|
Principal Financial — Business Solutions Enhanced UW |
Up to $50 million |
Ages 25–70 |
Employer-owned, trust-owned, or affiliated policies; comp ≥$150K; no traditional exam. |
|
Penn Mutual — ACE (Accelerated Client Experience) |
Up to $10 million |
Ages 0–65 |
Fully digital e-app to e-sign to e-pay; Standard or better assessment required. |
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How Long Does the Business Life Insurance Underwriting Process Take?
It depends on the method you choose, your personal medical history, age, and the amount of coverage.
The timeline will largely depend on your health and medical history. It can take anywhere from minutes to four weeks. Wherever you fall in that range, don’t worry. We have multiple avenues you can take and platforms you can use to compare quotes and find the right policy:
Instant underwriting can take minutes to hours
Accelerated underwriting typically resolves within a few days
Traditional underwriting runs four to five weeks.
For instant underwriting, Ethos is a fantastic option. And for accelerated underwriting, BannerLife can be a good option, too. And for traditional underwriting, we work with top providers, including Pacific Life, Penn Mutual, and dozens more.
No matter your situation, we can guide you down the path to find the right policy at the best possible price.
Special Considerations When Applying for Business Life Insurance
Is No-Exam Life Insurance Right for Your Business?
Waiting to schedule an exam and then waiting for results to come in will slow you down when compared to the instant or accelerated processes we shared above.
The instant underwriting path is effectively a no-exam life insurance option for businesses. If the key person you’re insuring is in good health and under a certain age, you may be able to skip the medical exam entirely and get approved based solely on your application responses and algorithmic review. This is a significant development for business owners who need coverage quickly and can’t afford to wait weeks for exam results and underwriter review.
What if I Have a Medical Condition?
Pre-existing conditions can limit your eligibility for instant or accelerated underwriting, but they do not mean that you cannot get key man life insurance.
Even with a serious medical condition, like coronary artery disease, insulin-dependent diabetes, or bypass surgery, you can still acquire a key man insurance policy. The anxiety comes from how much it will cost.
If you have a medical problem, the following information is critical to guarantee the best results:
If you have any history of even marginal health, it is crucial to disclose to your agent and the insurance company as much detail as possible about your situation. Be upfront, because with organizations like LexisNexis, MIB (Medical Bureau of Information), and EHR providers, the insurance company can uncover more than ever. Any information not disclosed will only delay the process.
You should provide, as early as possible, everything you know about the date of diagnosis, the severity of the condition, treatments including medications, and your physician’s prognosis.
With this information, we can begin the process of finding the best life insurance for you. In other words, you cannot just compare prices, submit an application, and hope for the best.
Key Man Insurance
Key man insurance is a life or disability insurance policy a business takes out on an essential employee. In many cases, a business owner must consider the key person’s salary, the monetary value they bring, and the potential major financial harm caused by a key employee’s death. Businesses can also explore cash-value options offered by permanent life insurance policies, allowing them to build reserves.
When the business owns the policy, the company pays the premiums paid, and the policy’s death benefit can be used to cover a business loan, satisfy a financial institution, or protect against business debt and lost sales. Unlike other life insurance policies, a key person policy focuses on maintaining the company’s financial viability in the event a key employee dies.
For small businesses and sole proprietors, key man insurance can be the difference between survival and closure. Unlike large corporations with deep bench strength and diversified leadership, small businesses often depend on one or two individuals for the majority of their revenue, client relationships, and operational knowledge.
Key Man Insurance vs. COLI: What’s the Difference?
Key man insurance is sometimes confused with a broader category of coverage known as COLI (corporate-owned life insurance). While the two share similarities, they’re not the same thing, and understanding the distinction matters when you’re deciding how to structure your coverage.
Corporate-owned life insurance refers to any life insurance policy a company owns on its employees, with the business named as the beneficiary. COLI policies are often used by larger companies as a tax-advantaged financial planning tool; premiums may be paid with pre-tax dollars in certain structures, and the death benefit is typically received by the company tax-free.
Key man insurance is a specific application of COLI.
When a business takes out a policy on a critical employee to protect against the financial impact of their death or disability, that policy is technically a form of corporate-owned life insurance, just with a narrower, more defined purpose.
Need a Life Insurance Policy Fast? Get a Quote From Top Providers in Seconds
The process for applying for key man insurance has changed over the years, but the goals for business owners remain the same: protect what you have.
A life insurance policy for a key employee not only preserves operations but also safeguards the company’s financial foundation. Key person life insurance provides a death benefit that can help replace lost income, manage company debts, and cover costs associated with hiring a replacement employee.
You can take the first step today by requesting a free quote. Click the button below and answer a few questions to get an insurance quote in seconds to start your policy journey. Thanks to technological advancements, you very well could have a policy within the hour.
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Frequently Asked Questions about The Process of Applying for Key Man Insurance
How Do You Get Keyman Insurance?
To obtain key man insurance, a company must first identify its critical employees and then apply for coverage through an insurance provider. The process usually involves underwriting, including medical exams and financial assessments.
Is Key Man Insurance Worth It?
Key man insurance is often worth it for businesses that rely heavily on a few individuals for revenue, strategy, or operational success, as it can cover financial losses and provide stability during a transition.
How Do I Choose a Key Person Insurance Provider?
Choosing a key person insurance provider involves comparing financial strength ratings, reviewing customer service records, evaluating policy options, and working with a knowledgeable insurance broker to find the right fit for the company’s needs.
