Applicants often us ask if they should apply for exam vs. no exam life insurance. The answer is that it depends on several factors, including health and age. Those with health issues that are considered high-risk will likely face higher premiums or even get rejected after the results of a medical exam. That is why many clients often ask about the best type of policy for them to improve their chances of approval and to qualify for the best rates.
The misconception is that no exam life insurance is more expensive than traditional, fully underwritten policies. They used to be, but that was then, this is now. Modern no exam policies can be just as affordable as the typical policies, especially with the largest, household name insurance carriers. Of course, it will be dependent on your health profile, age, and other risk factors that life insurance companies consider in setting pricing and rate class. Let’s dive into some details.
No Exam Life Insurance: Who Should Apply?
Traditionally, it was thought that if any of the following conditions applied to you, it might be worth looking into a no-exam life insurance policy:
1) You have “high-risk” health concerns, such as diabetes or smoking
2) Other insurance companies requiring a medical exam denied your application
3) You have a high-risk occupation or hobby
4) Your employer does not offer life insurance
That’s no longer the case for the most affordable type of no exam life insurance. Today it’s more likely that a candidate will qualify for a no medical insurance if they’re in really good health, and therefore pose a much lower risk for insurance companies to provide coverage without the benefit of a medical exam.
Here is a typical profile of people who are good candidates for low-cost no exam coverage:
1) In good health with no significant medical risk factors or concerns
2) Relatively young (generally under age 50)
3) Clean driving record, good financial and credit history
4) Looking for a faster approval method, hate needles, or don’t want the hassle of an exam
5) Getting divorced and need coverage quickly for alimony or child support
Contrary to popular thought, if you do have any “high-risk” health concerns (such as diabetes, high cholesterol, or cancer), you might actually be more likely to get approved with a medical exam, because the insurance companies will be able to better assess your health risk (albeit with potentially higher premiums than someone in good health).
Types of No Exam Life Insurance
If you are purchasing a no medical insurance policy, chances are it’s either a “guaranteed issue” or “simplified issue” plan. It’s important to understand the costs and benefits of each type to know which type of no exam life insurance is best for you.
Guaranteed Issue: No exam, no questions, and no medical records required. True to its name, most applicants are guaranteed approval for these types of policies. However, there are a few drawbacks. First, the death benefit amount is typically low, meant to pay for funeral and burial costs. This Guaranteed Acceptance coverage is generally meant for those not in good health or who may have been denied coverage in the past.
Additionally, the death benefit usually won’t kick in until a couple years after the policy is purchased. This is what’s called a “Graded Death Benefit.” Your application will not be denied, regardless of health status. However, you will pay a higher price for coverage, and there is usually that waiting period. This may be a good option for you if you’re looking for permanent life insurance coverage but haven’t qualified for any other plan due to health concerns. A little coverage is better than no coverage at all.
Simplified Issue: This is the no exam life insurance option many people look for nowadays, especially if they are in good health. You will typically have a phone interview where you’ll be asked to answer a detailed health questionnaire. You’ll be asked basic questions such as do you smoke, were you ever diagnosed with a serious illness, do you have cancer or other chronic medical conditions such as high cholesterol or elevated blood pressure. The insurance company will also do a background check of your prescription, driving, and credit history. Also included is a medical records database investigation, usually with the Medical Information Bureau (MIB) to help assess your health risk. In most cases, this process doesn’t take more than a handful of days (as opposed to the 3 to 8 weeks for many standard life insurance policies).
So in general, what are the benefits to Simplified Issue plans?
1. There is no medical exam required.
2. No full medical underwriting, and thus quick approval and coverage for qualified applicants.
3. There is typically the added convenience of being able to complete most of the process online.
4. Simplified issue plans will end up being less expensive than their Guaranteed Issue counterparts, especially if you’re in good health.
5. Great for applicants in a hurry to get coverage because of a court-ordered divorce decree to cover alimony or child support for those who qualify.
Count the Cost – Compare Your Options
As stated before, a no exam life insurance policy may cost about the same than fully underwritten life insurance policies, especially with the big name carriers. The key is to compare rates across different insurance companies.
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For the household name companies that do offer no exam life insurance, rate quotes are almost identical to quotes for policies requiring an exam. However, if you compare those no-exam rates among some of the smaller insurance carriers, chances are you’ll find no exam policies will be more expensive than fully underwritten policies. This is why many believe that no-exam policies are more expensive than fully underwritten policies… they’re not; it’s just that every company does not offer them, so the ones that do may charge higher rates in general.
A no exam life insurance policy may cost about the same as fully underwritten life insurance policy, especially with the big name carriers. The key is to compare rates across different insurance companies.
Sample Quotes: Exam vs. No Exam Life Insurance
|Life Insurance Company||Exam|
|LINCOLN FINANCIAL: (35/year old Male, Non-Smoker, 20yr premium, $500,000 face value)||$503||$503|
|PHOENIX LIFE INSURANCE CO: (same client profile)||$892||$892|
|LINCOLN FINANCIAL: (40/year old Female, Non-Smoker, 20yr premium, $500,000 face value)||$604||$604|
|PHOENIX LIFE INSURANCE CO: (same client profile)||$1017||$1017|
With life insurance, the expectation is that the lower risk your health concerns are, the better rates and coverage you will get. So, if you’re relatively young and healthy, with low health risks, you might be the perfect candidate for a no medical exam life insurance policy, particularly a simplified issue life insurance policy. Not only that, you’ll get coverage much more quickly, sometimes in a matter of hours or a couple of days, and you’ll likely end up paying about the same as you would on a policy requiring a medical exam.
The best advice we can give is to compare the cost of different types of plans with different life insurance companies, in order to make an informed decision. You can compare free life insurance quotes online and speak with a licensed agent who can help you find the policy that best suits your health situation and your coverage need. The more research you do, the more likely it is that you’ll find an affordable plan that’s right for you.