As an adult, buying life insurance is the responsible thing to do. The fact that most traditional policies require an inconvenient, invasive medical exam is just something we all have to bear. Or is it? To meet the growing consumer demand for convenient life insurance policies, many insurers now offer no exam life insurance, which can give you coverage without the hassle of a medical exam.
There are several types of no exam policies, and they differ in the amount of underwriting, coverage limits, costs, and more. Here we’ll outline the different types so you can get an idea if one is right for you.
The Benefit of No Exam Life Insurance
Before we get into the nitty-gritty, let’s understand why no exam life insurance is so important.
Many adults who have been recently married or had their first child understand that buying life insurance can help their loved ones in case disaster strikes. But because the application process is so long, it’s easy to procrastinate. No exam life insurance shortens the application process by more than half the time. In fact, some policies offer a completely online application and instant approval.
This makes no exam life insurance ideal for people who don’t want an application process that takes 4-6 weeks and for people who are scared of doctors and/or needles.
Accelerated underwriting is a service that many carriers offer. It allows consumers to apply for regular life insurance and also skip the medical exam. That’s called having the cake and eating it too! How is it possible?
Insurers are able to do this by using predictive models and algorithms to determine whether an applicant can qualify.
After you complete your application that includes health and lifestyle questions, these tools work in seconds to tell you if you can qualify for a traditional life insurance policy with accelerated underwriting.
If you do qualify, you get to skip the exam and still get monthly premiums that won’t break the bank. You can also get great coverage, up to $1 million.
In some cases, approval for coverage can be granted right away.
In others, your application must go to a team of underwriters who work quickly to deliver an answer very quickly. If you don’t qualify on the spot for accelerated underwriting, the life insurance company will request that you undergo a medical exam.
Smokers, for example, usually don’t qualify for the accelerated underwriting process and will need to undergo a medical exam.
Simplified issue is a true type of no exam life insurance. Anyone who applies is exempt from the medical exam. However, not everyone who applies can qualify.
The application for simplified issue includes fewer health questions than that of a traditional policy, which means that the life insurance company knows less about you. While that makes the application easier, it also means that premiums will be slightly higher than those of traditional policies.
This is how life insurance companies cover their risk.
Simplified issue is a good option for people who have a harder time qualifying for traditional life insurance due to health issues. Coverage can go up to $500,000.
Guaranteed issue is another type of no exam life insurance and anyone can be approved for it.
No health questions are asked and there is no underwriting. This type of life insurance is usually the only type that people with serious health issues can get, which makes it invaluable to them.
In many cases, it is used to cover the costs of funeral expenses, which can easily reach $10,000. At the same time, premiums are very expensive since the insurer knows nothing about your health.
The other downsides are that coverage only goes up to $25,000 and there is often a waiting period.
The waiting period means that if the policyholder dies within two or three years of purchase, the death benefit won’t be paid out. The beneficiaries will only get a refund of the premiums paid plus interest. All of these factors mean that guaranteed issue should only be purchased if you can’t get approved for any other type of policy. It’s a last-resort life insurance policy.
Group Life Insurance
Many employers offer a type of group life insurance that doesn’t require any medical exam or health information.
If you work there, you can get approved. Group life insurance is an example of a nice workplace benefit (especially since employers usually pay for most of it), but the coverage isn’t usually considered enough for one’s needs.
Most life insurance experts recommend using group life insurance as a supplementary policy, but getting a primary policy that offers better coverage.
Which No Exam Policy is Right for You?
While there are several types of no exam life insurance, they are very different from one another.
This makes it easier to decide which type is right for you. If you are relatively young and in good health, accelerated underwriting or simplified issue are the better options. If you have major health issues that would prevent you from qualifying for a different type of policy, guaranteed issue can save the day.
And if you work for an employer that offers group life insurance, there’s no downside to taking it, since it can provide a little extra to your primary insurance policy.