Temporary Insurance Agreement (TIA) When Applying for Insurance

November 24th, 2011 | Author: Mitch Reynolds

What is a Temporary Insurance Agreement?

Temporary Life and Health Insurance Coverage During Underwriting

Most people don’t know this, but you can get a temporary insurance agreement (also called a conditional insurance agreement or temporary life insurance)giving you life or health insurance coverage while you are being underwritten for the actual policy. This might seem a little complicated to most people – I’m buying a product (i.e. life insurance) but I don’t have it yet (being underwritten by the life insurance company to see if you qualify for the coverage) so I can get a temporary insurance agreement (interim life or health insurance coverage while your application is being approved).

Clear as mud? No! Well, let’s go into a little more detail.

The application and underwriting of an insurance contract

When you decide to buy life insurance, disability insurance, or any form of health insurance you don’t automatically get the coverage. You have to go through an application process. This is when the life insurance company “underwrites” you, assessing your risk to see whether or not you are an acceptable risk for the insurance you are applying for.

Most Canadians are offered insurance at standard rates (the premium the life insurance broker quoted you). Some people qualify for preferred rates (a discount as a reward for good or exceptional health). Some Canadians have a more trouble getting life insurance because of poor health, hazardous occupation, dangerous sports, etc. From the time you take the application until the underwriting is completed and a new life or health insurance policy issued it can take 4 – 12 weeks (depending on how much medical information needs to be collected).

So, during the interim, while you are being underwritten, you are not actually covered for life or health insurance UNLESS you take the Temporary Insurance Agreement (TIA).

How to get a Temporary Insurance Agreement (TIA)

At the time of application your life insurance broker should offer you a temporary insurance agreement (TIA). In order to qualify for a TIA you have to pay your first month’s premium up front and answer a sub-set of medical questions.

The first month’s premium is required to activate the TIA contract. Think of the TIA as a mini-insurance policy that is offered to you while you are being underwritten. For any legal contract to take effect in Canada there needs to some form of “consideration” (payment of a reasonable fee for the service being provided). The life insurance industry has agreed upon payment of the first month’s premium as a reasonable fee to offer the TIA to clients.

You also have to answer NO to a subset of medical questions. Many of these questions are a repeat of the medical information you have already answered in the application, but they have to be answered separately on the TIA form in order to ffered the mini-insurance policy. Here are some typical Temporary insurance agreement medical questions:

Are you over the age of 65?
Have you been treated for or have any indication of Alzheimer’s, Parkinsons, heart or circulatory diseases, heart attack, chest pain, elevated blood pressure, diabetes, cancer or tumours, stroke, chronic kidney, liver or lung disease, multiple sclerosis (MS), paralysis, or any symptoms or treatment for AIDS or HIV infections?
Been unable to perform regular activities for more than 7 days in the last 6 months due to injury or sickness?
Been admitted to a hospital within the last 2 months (other than pregnancy and child birth) or been advised to do so?
Have any pending tests, investigations, or surgery not yet done?
Ever been declined life or health insurance or been offered a policy with extra premiums or modified in any way?

These sorts of questions are asked in many different ways by all the life insurance companies in Canada. They are trying to weed out people who are applying for life or health insurance who will probably be either declined or rated for their policy or who might have ongoing medical issues that would cause a postponement (unable to offer the insurance until all medical treatments and investigations are completed).

Do you have to pay extra for the Temporary Insurance Agreement?

NO! Many people think they have to pay a extra month’s premium in order to get the temporary insurance agreement (TIA). Actually that is not true. The TIA requires that you pay the first month’s premium for the life or health insurance contract. So, you pay the first month’s premium IN ADVANCE. Since there is no actual insurance policy offered yet, and no policy in force, the money you pay for the TIA is held in trust.

When you insurance policy is finished underwriting and issued the money moves out of the trust account and is applied to the first month’s premium. Thus your first month’s premium is automatically paid from the money that was held to give you the TIA. So, in effect, the temporary insurance agreement is FREE. It only requires you pay the actual first month’s premium in advance (maybe two or three months before the premium for that first month is actually due).

If you qualify for a temporary insurance agreement and you don’t currently have life or health insurance coverage in force, then getting the TIA is an obvious choice. You have to pay the first month’s premium anyway – why not pre-pay it and get interim insurance coverage?

What does the Temporary Insurance Agreement cover?

Well, if the Temporary Insurance Agreement is like a mini-insurance policy, what does it actually cover? Is it full coverage like the life insurance contract would be? The answer is NO – it is insurance coverage CONDITIONAL on your acceptance for life or health insurance through the underwriting process.

Here are the common conditions of a Temporary Insurance Agreement:

It is good for a maximum of 90 days (giving the insurance company 3 months to underwrite you and get a policy out the door).
You must qualify based on the TIA medical questions.
The TIA terminates when the actual policy applied for becomes effective or the life insurance company makes a counteroffer.
The insurance company has the right to terminate the TIA at any time (usually if the find some medical evidence that would contradict your answers to the above questions and make you ineligible for TIA coverage).
Maximum TIA coverage is $1,000,000 for life insurance and $500,000 for critical illness insurance.
No critical illness benefit will be paid for a diagnosis of cancer under a temporary insurance agreement.
Will not pay for an act of suicide.

Conclusion: Get your Temporary Insurance Agreement (TIA)

If you qualify for temporary life, critical illness or disability insurance you should take it. Basically, it’s free! Your first month’s premium will be paid from the first month’s premium you advanced the life insurance company. No extra money out of your pocket at the end of the day, since you would be required to pay your first months premium anyway when your life insurance broker delivers the policy.

When buying life insurance from a Life Guard Insurance broker, they will always offer you a temporary insurance agreement if you qualify.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about a temporary insurance agreement (TIA) would be very much appreciated.