Life insurance is one of the best ways to ensure the financial stability of your loved ones after you die. However, the application process isn’t all that fun. Traditional life insurance policies require applicants to undergo a medical exam as part of the application, which means you have to wait weeks to schedule an appointment and then actually undergo a physical. The reason insurers require an exam is so they can assess the risks involved with offering you coverage. Today, however, there is an alternative that doesn’t require you to undergo a medical exam: no exam life insurance.
How do no exam policies differ from traditional policies that do require an exam? When should you buy no medical exam insurance? When should you avoid it? Here we will discuss the answers to your most pressing questions.
No Medical Exam Life Insurance
The way traditional life insurance policies work is that you must fill out a lengthy questionnaire as part of your application and submit to a medical exam. This helps insurers determine whether you are eligible for coverage or not. If you are eligible (i.e. you don’t have any major health issues), underwriters further assess your medical information to determine the amount of your monthly premiums. For example, smokers always get higher premiums than non-smokers because of the inherent health risks involved in smoking.
The general rule of thumb is: the healthier a person is, the lower their premiums will be, and vice versa.
No medical exam life insurance allows you to skip the lengthy questionnaire, and more importantly, the medical exam. There are two main types of no exam insurance: Guaranteed Issue (GI) and Simplified Issue (SI).
Guaranteed Issue life insurance can be bought by virtually anyone, as long as they are unde rthe age limit (which varies by insurer). There are usually only 4 questions about your health on a GI application:
• Do you smoke?
• Are you currently in a hospital or long-term care facility?
• Do you have AIDS or HIV?
• Have you been declared terminally ill?
Guaranteed Issue is a type of whole life insurance, which means that once you purchase the policy, it’s yours for life. The drawbacks of GI is that it is expensive, since the insurer knows very little about you, and that coverage is usually capped at $25,000 or $50,000, depending on the insurer. Many people choose GI as a type of Final Expenses policy, which means the payout will be enough to cover funeral and burial costs.
Simplified Issue life insurance requires that you provide some details about your medical history and health, but no medical exam is required. But because you provide some information, insurers are able to get a better sense of the risk involved and the cost is typically lower than GI. Coverage also goes higher than GI, up to $500,000 or even $1 million, depending on the insurer.
SI is a type of term life insurance, which is bought for a specified period of time, or term. The term can be 5 years, 10, 15, 20, etc. Generally, term is typically more affordable than whole, and no exam life insurance is no exception.
Both GI and SI are usually geared toward elderly people who may have medical issues that disqualify them from getting a traditional life insurance policy. If you’re unsure which type is best for you, you can consult with Sproutt insurance advisors, who can offer the best solution for your particular situation.
When to Buy No Medical Exam Life Insurance
There are many benefits of no exam life insurance. It allows you to:
• Skip the medical exam
• Get approved much easier
• Get approved fast
• Apply entirely online
However, just because there are many benefits doesn’t mean it’s for everyone. The people who will get the most out of this type of life insurance are people who:
• Have an uncontrolled chronic health condition, like diabetes or heart disease
• Have a serious health condition
• Need life insurance quickly, for a divorce, loan or something else
• Have a risky job (policeman, firefighter) or hobby (rock climbing, skydiving)
• Have some health problems but no group life insurance from work
Bear in mind that just because no medical exam life insurance is typically geared toward the people listed above doesn’t mean others can’t get it. Today, many insurers are offering more competitively priced no exam policies because the demand is going up. This means that even young people who are in good health can apply and get relatively good rates.
The only reason why younger people may not want no exam life insurance is because of the limited coverage. People in their 20s-40s may need a higher coverage amount than $1 million, and if this is the case, no exam life insurance may not be the answer. If $1 million will suffice, no exam life insurance is a hassle-free way to get the coverage you need.