When researching for the best type of life insurance policy to purchase, have you come across terms like “fully underwritten”, “medical exam”, “guaranteed issue”, “no exam life insurance” and maybe even “simplified issue”? Confused and not really sure what they mean and how they affect which life insurance policy is right for you?
One thing is for sure when you are researching the best life insurance options for you and your family, there isn’t a shortage of terms and definitions that need explaining! Let’s take a look into these terms and see how they will help you on your journey through the life insurance buying process.
Fully Underwritten Life Insurance
A fully underwritten life insurance policy requires that you answer a lot of health questions on the life insurance application. Then, you will meet with a nurse to complete the medical exam, with the option to have them come to your home or go to their office.
During the exam, they will ask questions confirming information from your application and phone interview, check all your vitals, take a urine and blood sample, and then send them off to the lab where results will be sent back to the insurance company for a final determination.
Guaranteed Issue Life Insurance
In contrast, guaranteed issue life insurance requires no medical exam or health questions, and as long as you can pay the premium, you get the policy. However, guaranteed issue life insurance typically has what’s called a graded benefit, meaning that the death benefit is not available at all or only partially for a specified amount of time (usually the first one or two years that the policy remains paid and in force).
If the person ends up dying within that timeframe, their beneficiary will receive paid premiums in lieu of the death benefit amount. This type of life insurance is really only beneficial to people who are uninsurable on any other policy, as the premium is going to be the most expensive with the least features on top of possibly having graded benefits.
No Exam, No Medical, or Simplified Issue Life Insurance
A no exam or simplified issue life insurance policy, which can also be called no medical life insurance, means that the application process doesn’t require nearly as many questions and there is no medical exam required. In essence, you are allowing your height and weight, as well as good medical history and healthy lifestyle habits, to speak for themselves.
While it might be confusing to have several different terms basically mean the same thing, think about it like this – fully underwritten policies require a lot of extra work on your part as well as the insurance company. With no exam, no medical, or simplified issue life insurance policies, they will be issued as long as you can answer a few questions favorably and meet height and weight guidelines. Finally, guaranteed issue life insurance requires the least amount of effort with just an application process.
Which one should I choose?
Now that you know the difference between fully underwritten and no exam life insurance, which one is right for you? Is there a benefit to picking one over the other?
That really depends on you and your answers to the following questions:
- What is your Body Mass Index (BMI)?
- Have you had any medical issues in the last 5 years?
- Do you take any medications currently? Have you in the past 5 years?
If you answered with a high BMI (anything over normal or standard) or yes to any of the medical questions, then you may or may not qualify for no exam life insurance and have to go through the medical process for the fully underwritten policy.
While you may be thinking this is a great process with no exam, there are benefits as well as drawbacks. Read on to see why going through a fully underwritten process may not be the worst outcome when applying for life insurance.
Also, it’s extremely important to get plenty of no exam life insurance quotes before making a decision.
Pros of No Exam Life Insurance
The greatest benefit to no exam life insurance is the reduced time in gathering personal and medical information, filling out the initial application and health questionnaire as well as the fact that you don’t have to go through the process of scheduling and completing the medical exam.
As long as you don’t currently live in an assisted living or long term care facility, have been declared terminally ill, or have HIV/AIDS, you will most likely qualify for no exam life insurance. Some companies are even okay with people who smoke cigarettes or cigars, but you will most likely have to pay a higher premium than a nonsmoker would.
You may or may not be surprised to see that’s just about the only benefit for someone who is otherwise in good health.
However, no exam life insurance is a great, and sometimes only, option for people who have current or recently passed medical issues or don’t otherwise meet the criteria for fully underwritten life insurance. It allows for them to have some sort of death benefit that can be provided to their beneficiary once they pass.
Cons of No Exam Life Insurance
Most people would think that the easier process of no exam life insurance would be better for them, and in certain situations, they aren’t wrong.
But, there are some things to consider if you are leaning towards no exam life insurance but are otherwise healthy. Completing the health questions and medical exam as a healthy person usually means that you can qualify for preferred or even preferred plus rates, which saves you money on the monthly premium. When you are looking to pay premiums for 20 or 30 years or even longer, you could be saving some serious money if you are healthy enough to get preferred or better rates!
Not only can fully underwritten life insurance save you money, but it also allows for a much greater death benefit for those who need it. Most no exam life insurance policies have a maximum death benefit amount, which can vary widely from $10,000 to $500,000 for most companies.
Considering the average funeral can cost close to $10,000 or more, there’s not much if any death benefit left to be used to pay down debt, help take care of family, or take care of any of the other goals you or your family have for your life insurance death benefit.
Another reason no exam life insurance might not be the best fit for you is that it greatly reduces or completely eliminates rider options that can be attached to the policy. We’ll get into riders in more detail in a later article, but riders are a really cost-effective way to get additional coverage or special features added to your policy.
Riders can include additional coverage for your spouse and/or child, and can even provide accidental death coverage and waiver of premium options if you become disabled while paying premiums on your life insurance policy. As always, the types of riders, cost, and eligibility factors can vary from company to company.
Are there any other factors that might help me make a decision?
Not that long ago, no exam life insurance coverage was only available through a whole life insurance policy. In recent years, some companies have started to offer no exam term life coverage for 10, 20, or 30 years. If you decide to go this route, be prepared that you might have to go through a more in-depth application process in order to be approved.
If you have a need for a large death benefit coverage amount, then you may still have to go with the fully underwritten policy. Some companies will provide coverage up to $500,000 without an exam, but you will pay higher premiums for the life of the policy if you choose to go with this plan.
Still not sure if No Exam Life Insurance is right for you?
Let’s do a quick recap in order to review the pros and cons to help you decide if No Exam Life Insurance is the best option for you.
- No medical exam required
- Less overall time to complete the application process
- Coverage for less healthy individuals is almost guaranteed based on a few health questions
- More expensive
- No or hardly any rider options
- Death benefit cap amount is low and may not meet your financial needs
- May be subject to a more rigorous application process
Recently, more insurance companies have started to offer new products with better pricing to attract policyholders. This means that there will be more offerings for simplified issue life insurance products with comparable benefits and riders when compared to fully underwritten life insurance.
Now that you have learned more about no exam life insurance, hopefully, it has helped you determine whether it is the right fit for you and your family. Be sure to check back soon to learn more about the type of life insurance options available and how medications and health diagnoses can affect the plan and policy available to you.
If you are looking for more information about possible life insurance options, reach out to us directly to receive a free quote.