Life Insurance Underwriting: What's The Deal With Term Policies?

Life insurance is a financial product that provides a death benefit to the policyholder's beneficiaries in the event of their death. When applying for a life insurance policy, the insurance company will assess the applicant's health and financial information to determine their eligibility for coverage, the amount of coverage they can receive, and the cost of the policy. This process is known as underwriting, and it involves evaluating the applicant's health, lifestyle, and financial situation. While some life insurance policies require a medical exam as part of the underwriting process, there are also no-medical exam policies available, which can be attractive to those who want quicker coverage or have pre-existing health conditions. Term life insurance is one type of policy that can be purchased with or without a medical exam, depending on the insurance company and the applicant's circumstances.

No medical exam term life insurance

No-medical-exam term life insurance, also known as no-exam life insurance, is a type of life insurance policy that does not require a medical examination as part of the application process. This means that applicants can skip the physical exam and blood test that are usually necessary when applying for life insurance. Instead, applicants may be asked to fill out a health questionnaire, answer health questions, or share medical and pharmaceutical records.

No-medical-exam term life insurance is designed to speed up the application process and is especially useful for those with pre-existing medical conditions, high-risk occupations, or a fear of needles. It is also a good option for seniors who want to avoid the medical exam.

While no-medical-exam term life insurance offers a faster and more convenient way to obtain life insurance, there are some potential drawbacks. These policies may be more expensive than traditional life insurance policies that include a medical exam. There may also be a cap on the coverage amount, and applicants will likely still need to answer health questions.

Some companies that offer no-medical-exam term life insurance include Mutual of Omaha, Transamerica, John Hancock, State Farm, Lincoln Financial, and AAA.

No medical exam whole life insurance

No-medical exam whole life insurance is a type of permanent life insurance that provides coverage for the entire life of the policyholder. It tends to be more expensive than term life insurance, but the death benefit is certain. Premiums usually remain consistent throughout the length of the policy, and your plan may be able to accumulate cash value in a separate savings account. This cash value may be borrowed against, making it a useful investment.

No-medical exam whole life insurance is a good choice for those looking to provide added financial security for family members. It is also useful for those exploring new investment opportunities.

The cost of no-medical exam life insurance is based on factors like age, lifestyle, coverage goals, and medical history. Even if you opt for life insurance with no medical exam, your provider may still ask medical questions or use past medical records to make an assessment. Typically, life insurance costs tend to rise as you age.

There are a few specific instances where getting a life insurance policy without a medical exam may be extra helpful. For example, if you have a history of good health and would like to save time by avoiding a medical exam, or if you have known health issues and are looking to help provide support for funeral and burial expenses on a rapid timeline.

Several companies offer no-medical exam whole life insurance, including Aflac, Mutual of Omaha, Fidelity Life, Transamerica, John Hancock, State Farm, Lincoln Financial, and AAA.

Simplified vs guaranteed issue life insurance

Overview

Life insurance is a financial product that provides peace of mind and security for individuals and their loved ones. Two common types of life insurance are simplified issue and guaranteed issue life insurance, which offer distinct features and benefits. Simplified issue life insurance is ideal for individuals with minor health issues or those who prefer a quicker and easier application process. On the other hand, guaranteed issue life insurance is designed for individuals with severe health conditions who may not qualify for other types of coverage. It's important to understand the differences between these two options to make an informed decision when purchasing life insurance.

Simplified Issue Life Insurance

Simplified issue life insurance is a convenient option for individuals seeking life insurance coverage without undergoing a comprehensive medical examination. Instead, applicants answer a few health-related questions, and the insurance provider uses third-party sources to gather additional information, such as prescription drug history and driving records. This simplified underwriting process makes it faster and easier to obtain coverage compared to traditional life insurance policies.

Pros of Simplified Issue Life Insurance:

• Easy approval: The less stringent underwriting criteria increase the likelihood of approval for a broader range of applicants.
• Quick issue: The time between applying and receiving a policy is significantly shorter than standard life insurance.
• Level premiums: The amount paid remains consistent throughout the active policy period.
• No medical exam: Applicants only need to answer a few health questions, making it more accessible and less invasive.
• Term or whole life coverage: This option offers flexibility in choosing the policy length to meet diverse needs.

Cons of Simplified Issue Life Insurance:

• More expensive: The insurance company assumes a higher financial risk, leading to higher premiums compared to standard life insurance.
• Limited coverage amount: Many policies offer a maximum coverage of $500,000, which may not suffice for individuals seeking higher death benefits.
• Limited age range: Most providers have an upper age limit of 75-80, excluding older individuals from this type of coverage.
• Limited riders: Simplified plans have fewer add-on options, and the availability of riders may vary depending on the insurance provider.
• Possibility of denial: While the requirements are less strict, applicants can still be denied coverage based on their health status.

Guaranteed Issue Life Insurance

Guaranteed issue life insurance, also known as "guaranteed acceptance" life insurance, stands out for its inclusivity. This type of policy does not require applicants to undergo a medical examination or answer any health-related questions. As a result, it is a popular choice for individuals with severe health conditions who may have been denied traditional or simplified life insurance.

Pros of Guaranteed Issue Life Insurance:

• Simple application process: The absence of medical questions makes the application process straightforward and less time-consuming.
• Guaranteed approval: The flexible underwriting criteria ensure that almost everyone can obtain this type of life insurance.
• Quick issue: Similar to simplified issue, the time between application and policy receipt is faster than standard life insurance.
• Level premiums: Consistent payments throughout the active policy period provide stability.
• No medical exam or questionnaire: This feature makes guaranteed issue life insurance appealing to those who want to avoid disclosing their health status.
• Guaranteed coverage: Once enrolled, policyholders can be assured of receiving the coverage they need.

Cons of Guaranteed Issue Life Insurance:

• Most expensive: Due to the absence of health qualifications, insurance companies charge higher premiums to mitigate their risk.
• Limited coverage amount: Similar to simplified issue, most policies offer a maximum coverage of $50,000, which may not meet the needs of those seeking higher death benefits.
• Limited age range: The upper age limit of 75-80 restricts older individuals from obtaining this type of coverage.
• No riders: Guaranteed issue life insurance does not offer any add-on options for additional coverage.
• Limited types of coverage: Policyholders can only obtain permanent life insurance, which lasts for their lifetime.
• Two-year waiting period: There is typically a two-year waiting period before the death benefit can be paid out to beneficiaries.

Simplified issue and guaranteed issue life insurance are both types of no-medical life insurance, but they differ in several key aspects. Simplified issue life insurance offers more coverage options and is generally more affordable. However, applicants may still be denied coverage if they do not meet certain health criteria. On the other hand, guaranteed issue life insurance accepts all applicants but tends to be more expensive and provides lower coverage amounts. When deciding between the two, it's essential to consider your unique circumstances, health status, and the level of coverage you require.

Pros and cons of no-exam life insurance

No-exam life insurance offers a simplified application process, which usually results in quicker coverage. The underwriting process for no-exam policies is faster than traditional policies, and it can be a good option for high-risk people. For example, a person with a pre-existing condition may be able to obtain coverage through an employer-sponsored group life insurance programme that doesn't require answering health questions or taking a medical exam.

No-exam policies also allow you to skip the invasive procedures of a medical exam. You won't have to worry about anyone poking and prodding you, and you won't face the inconvenience of scheduling an appointment.

However, no-exam policies have a few drawbacks. They are more expensive than policies that are medically underwritten because the insurer has less information to determine the applicant's mortality. No-exam policies also often cap coverage levels. For example, guaranteed issue coverage is usually limited to $5,000 to $25,000.

Pros of no-exam life insurance

• Faster approval than traditional policies
• May be suitable for applicants with pre-existing conditions
• The application process can be completed in minutes from the comfort of your home

Cons of no-exam life insurance

• Higher premiums than policies that require an exam
• Lower coverage limits than traditional policies

How to get life insurance without a medical exam

Life insurance without a medical exam, also known as no-exam life insurance, is available from several providers. This type of insurance is ideal for those who want to avoid the hassle of a medical exam or who need coverage as soon as possible. It is also a good option for those with pre-existing health conditions or high-risk occupations, as well as those with a fear of needles.

The most common types of no-exam life insurance are simplified issue and guaranteed issue policies. Simplified issue life insurance is best suited for young and healthy individuals who want coverage without a waiting period. However, you will need to answer health questions and share your medical and pharmaceutical records, and the premium will be more expensive than a typical life insurance policy. Guaranteed issue life insurance, on the other hand, does not require any health questions and is ideal for those with health issues. However, the coverage may be limited and significantly more expensive.

Some companies that offer no-exam life insurance include Mutual of Omaha, Fidelity Life, Transamerica, John Hancock, State Farm, Lincoln Financial, AAA, and Aflac. These companies offer a range of term and whole life insurance policies with no-exam options.

It is important to note that no-exam life insurance may have lower coverage limits and higher premiums than traditional life insurance policies. Additionally, most companies will still require you to fill out a health questionnaire. It is recommended to shop around and compare quotes from different providers to find the best option for your needs.

Frequently asked questions