Traditional whole and term life insurance policies require applicants to undergo a medical exam as part of the application process. These are called medically underwritten policies. Whole and term life insurance policies that don’t require a medical exam are called no exam policies. These are often more expensive and offer less coverage than policies that do require a medical exam.
However, the ability to skip the medical exam is a big draw to many people, since a medical exam can be inconvenient and invasive. Moreover, medically underwritten policies take 4-6 weeks to be approved, whereas no exam policies grant approval much faster.
According to the 2018 Insurance Barometer, half of all consumers say they would be more likely to buy life insurance if it is priced without a medical exam. This means that there is a great market for no exam policies.
But why are so many consumers willing to pay more and get less coverage for a no exam policy? There are several reasons:
- Easy approval
- Workplace coverage isn’t enough
The point of the medical exam for life insurance is to give insurers a complete picture of your health. This allows them to assess whether you should be approved for coverage and what class you should be in. Classes determine how much you pay in monthly premiums. Generally, a very healthy person is put in the best class and gets the lowest rates. At the same time, someone who smokes will always get a higher rate than those who don’t. If you’d like to get a free quote, click here.
If you have serious health conditions that could raise your mortality risk, the insurance company can deny your application. No medical exam policies offer easier approval so that you won’t get turned down even if you have a serious health condition.
Convenience is the ultimate reason people choose no exam life insurance policies. You just can’t beat a policy that you can apply for solely online or by phone, as opposed to having a half-hour exam with a medical professional and filling out lengthy questionnaires. Additionally, a life insurance medical exam requires a blood test, which means that you’ll need to fast until after your exam is over.
Another major inconvenience of traditional life insurance is waiting 4-6 weeks to get approved (or denied). With no exam life insurance, you’ll have your answer much faster. Some policies grant immediate approval, while others can take just a few days, or a few weeks at the most. The fact that you can skip the medical exam and get quick approval makes no exam life insurance very popular.
Work Coverage Isn’t Enough
Many workplaces offer group life insurance, which you can be approved for immediately but often the coverage is not very high. It usually amounts to one year’s salary and usually ends when you leave your job. For these reasons, most insurance experts recommend getting an additional life insurance policy, and a no exam policy is the easiest to obtain.
Types of No Exam Policies
There are two main types of no exam life insurance: simplified issue and guaranteed issue.
Simplified issue is a type of term policy, and you need to decide before you purchase it how long you’d like the term to be. Terms come in increments of 5, and many people choose 5, 10, 15 years and more. Coverage usually goes up to $500,000 or $1 million in some cases.
In terms of the application, you’ll be required to answer a few questions about your health and have a short phone interview. No medical exam is required, but in some cases, insurers seek information about you through third-party sources. This gives them a fuller picture of your health and helps determine whether to accept or deny the application.
Guaranteed issue is a type of whole life insurance, which means coverage lasts the policyholder’s entire lifetime. Guaranteed issue, as the name implies, means that nearly everyone who applies is guaranteed approval, and you’ll get your answer immediately. No medical exam or phone interview is required.
Since the insurer has very little information about you, it has no way to assess its risk. That’s why the guaranteed issue is the most expensive type of life insurance, and coverage only goes up to $50,000. It’s often considered a last resort by people who have been turned down for traditional life insurance or simplified issue, but for many, having limited coverage is better than no coverage at all.