One of the big turnoffs of buying life insurance is the requirement to undergo a medical exam. No one likes going to the doctor, so taking time out of your busy schedule to get blood tests and be asked all sorts of invasive questions about your health is probably not your idea of a good time.
That’s why no exam life insurance policies are becoming more and more popular.
No exam life insurance is an alternative to traditional life insurance, and today it’s offered by many carriers. (You can find out about which carriers offer it here.) The main difference, of course, is that no medical exam is required in order to get approved. Whereas no exam policies used to cost significantly more than traditional policies, today the cost has balanced out due to the high demand.
Life insurance is one of the best ways to ensure that your loved ones will be taken care of financially in the event that you die, and a no exam policy makes it easier than ever to get coverage.
Why Do Traditional Policies Require a Medical Exam?
The amount of monthly life insurance premiums is based on four main factors:
- Potentially dangerous activities
While the first three have simple answers, the fourth is more complex. In the past, a medical exam has been the best way to get an accurate picture of someone’s health, which is necessary for insurance carriers to be able to assess their risk. The less information a carrier has, the higher the premiums will be since it is much harder for them to assess how much of a risk the person poses.
Today, a medical exam still provides the most accurate health information, but there is so much data available to insurance companies online that they are able to better assess their risk without the medical exam, bringing the cost of no exam life insurance down. To get an idea of prices, you can visit Sproutt.com for a free quote.
Types of No Exam Medical Insurance
There are two types of no exam life insurance:
- Guaranteed Issue
- Simplified Issue
Guaranteed Issue is a type of whole no exam life insurance and it is usually recommended for people who can’t qualify for traditional life insurance due to lifestyle or health. No health questions are asked on the application and almost anyone who applies for this kind of insurance is approved.
Due to the fact that no health questions are asked, the risk for insurers is great, which makes the premiums more expensive. Additionally, the coverage is limited, usually to $25,000. Buying multiple policies may get you coverage as high as $50,000.
Guaranteed Issue is popular for people who just need to cover their funeral expenses, which can range between $7000-$12,000. Premiums are fixed and the death benefit is paid out tax-free to beneficiaries.
Some Guaranteed Issue policies come with a graded death benefit, which means that the full death benefit is not paid out if the policyholder dies within two years of purchase. If the person dies within the first two years, only the premiums plus are refunded to the beneficiary, plus interest. If the person dies after two years, the full death benefit will be paid out.
Many Guaranteed Issue policies mature when the policyholder reaches the age of 100. This means that at age 100, the death benefit will be paid to the owner of the policy, and any gains will be subject to income tax. If the insurance carrier allows you to delay the receipt of the matured benefit, it’s worthwhile to do so and avoid paying taxes.
Simplified Issue is a type of term life insurance that does ask several health questions and require your medical records. Some underwriting is involved, but it’s fairly minimal, which makes the entire approval process much faster than that of traditional policies. Approval can take just a few days, and coverage can go as high as $500,000 or $1,000,000, depending on the carrier.
Terms usually come in increments of 5 or 10, so you could purchase a policy for 10, 15, 20 years, etc. Once the term is up, many carriers often the option of renewing the policy — but this comes at a cost, sometimes, as much as 10 or 20 times your initial premium. (The reason for this? As you age, you pose more of a risk to carriers.)
Since renewing can be costly, it’s important to make sure you accurately project how long of a term you need. Without renewing, the cost of term no exam life insurance is fairly on par with the cost of traditional term life insurance.
Deciding Whether No Exam Life Insurance is Right For You
No exam life insurance is the easiest way to get life insurance. In many cases, the entire application process can be done online. Guaranteed Issue is particularly popular among people who need only to cover their final expenses or people who have been denied traditional coverage. Simplified Issue can be a good option for people who don’t have time to go to the doctor or just want to buy life insurance in the easiest way possible. Because the rates of Simplified Issue are similar to traditional policies, the slightly additional cost can be justified by the convenience. The most important aspect of any policy is to make sure you get enough coverage so that your loved ones will be taken care of.