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Some Americans have never properly researched life insurance because they believe they may be automatically disqualified for coverage. This is because most insurers require an applicant to answer a health questionnaire as well as undergo a medical exam prior to underwriting and issuance.The process allows companies to estimate the amount of risk an applicant poses and the probability they will have to pay out a death benefit during the term period. Similarly, carriers can outright deny consumers with health issues.
However, there are options for people with health conditions and high risk lifestyles, professionally and personally. High risk applicants can choose to apply for no exam life insurance.You may have a fear of needles, blood, doctors or hospitals, or simply hate going through a medical exam just for life insurance. Now they can obtain the coverage they need without the inconvenience of one.
What Kind of Life Insurance Is Available With No Exam?
The most common type is term life insurance without a medical exam, as opposed to permanent life insurance.Term life is the cheapest kind of coverage and it does not offer a cash value, savings or investment component. Term policies offer set periods of protection between 5 and 30 years. Premiums may be fixed, increasing or decreasing depending on the conditions of the particular policy. As a rule, there are death benefit limits for policies without a physical exam, so those who require a lot of coverage may not want this option.
Why No Medical Exam?
Life insurance companies want to insure people who are healthy and have a low chance of dying early, thus they require medical exams to screen applicants who are less than “perfect” policyholders. Senior citizens, those with pre-existing conditions or tendencies toward future health problems (diabetics, obesity, and genetic pre-dispositions for heart disease or cancer) are usually turned away for traditional term life insurance. A no exam policy may be the only alternative for families.
If you are interested in no medical exam policies, you are likely focused on the most popular kind – guaranteed issue life insurance. To qualify, all you have to do is answer 4 questions.
- Do you smoke?
- Do you currently reside in a hospital or long-term-care institution?
- Have you been declared terminally ill?
- Do you have AIDS or HIV?
Answering “yes” to the first question can still get you coverage, but your premiums will be more expensive. Unfortunately, a “yes” to any of the remaining 3 questions will make you immediately ineligible.
Types of No Medical Exam Life Insurance
There are several kinds of no exam life contracts, ranging from easy to easiest to get approved for. Some types require some health information whereas others need none at all. Those which need information are on the cheaper end of the premium spectrum, because the insurer can better determine risk.
The following will help you differentiate between the different types of no exam coverage available:
- Simplified issue life insurance doesn’t require a medical exam but does make the applicant provide certain health information and facts through a medical questionnaire. If you are unhealthy but not suffering from a serious illness, simplified issue may be a better choice because it is the cheapest of the 3 coverage options, and the company can still underwrite your policy within a couple days.
- Graded benefit policies are somewhat complicated when it comes to their terms and conditions. You still have to answer a few medical questions, but the policy does not vest until after the first 2 years. This means that, if you die during the 2 year waiting period after a policy is issued, your beneficiaries will only receive a refund of your premiums. The waiting period protects the insurance company against quick deaths.Graded benefit is ideal for the elderly.
- Guaranteed issue life insurance is the most expensive coverage of the group, but the easiest to get approved for. Guaranteed acceptance insurance requires no medical exam or health questions and virtually guaranteed assuming you aren’t terminally ill or have AIDS or HIV. Just note that you will be paying 3 to 5 times higher premiums compared to a traditional term policy.
Pros and Cons of Skipping Your Exam
Pros. If you suffer from a health condition or illness that makes you unable to buy traditional life insurance, no exam coverage may be right for you. Additionally, anyone with an innate fear or distrust of doctors may benefit, too. People in the later stages of their lives or those who are preparing to cover their final expenses find these types of no exam life insurance accommodating and affordable.
No medical life insurance is also processed much faster than other kinds due to the lack of comprehensive underwriting guidelines.
Cons. The biggest disadvantage is that no exam contracts are more expensive than traditional term life insurance. Companies take on more of a financial risk by issuing policies to applicants without health exams, and thus pass on that risk to the customer in the form of higher premiums.
Carriers further hedge their risks by capping death benefits. The largest policy limit available is $500,000, but even that is rare. Most companies average between $100,000 and $300,000,and if you buy guaranteed life insurance, the death benefit amount is closer to being $10,000 to $50,000.
Finally, as we discussed earlier, contracts stipulate a 2 year waiting period, during which your beneficiaries are only entitled to a refund of your premiums. This prevents someone from buying coverage right before they pass.
In the end, no exam life insurance isn’t right for everyone, and should be considered a last resort option to cover funeral or burial expenses. If you are relatively healthy, research and review a standard term policy to get the best of both worlds – cheap rates and high coverage. Otherwise, compare carriers, policies, and quotes to find the best no medical exam coverage you can find.