Traditionally, before a life insurance application is approved (either term, whole, or universal life insurance) an applicant must undergo a medical exam to provide they are insurable (in order to keep insurance rates down). Yet, there are a few insurance plans that don’t require a medical exam.
Simplified issue life insurance (no-exam life insurance) doesn’t require a medical exam, but still requires the person applying to give some medical information verbally.
Because guaranteed issue life insurance doesn’t require a medical exam you can’t be turned down!
Graded benefit life insurance doesn’t require any medical exam or you to answer any health questions, but purchasing and paying for it can be more complicated than it would be if you were purchasing either Term, Whole, or Universal life insurance. Its usage is best suited for individuals in less-than-best health who are late middle-aged and older.
Why buy no-exam life insurance?
So why should you buy no-exam life insurance?
One great reason is that purchasing no-exam life insurance can speed up the application process; considering that the average policy would take 4-6 weeks to issue it’s pretty easy to understand how much faster it must be to issue an insurance policy that has a shortened underwriting process (due to the lack of exams). You could essentially take something that would take weeks to get approved for and get it in a matter of days.
Another reason, and perhaps the most obvious reason, is to get coverage for someone that wouldn’t be able to obtain coverage any other way. Whether it’s a myriad of health issues, or complications with advanced age, it’s very possible to get turned down for traditional life insurance-hence the creation of no-exam life insurance.
Many people who purchase no-exam life insurance, guaranteed issue life insurance are preparing for their foreseeable end and intend to use the insurance policy benefit to cover their funeral expenses. It may also be a good choice for people who are find themselves uncomfortable in a hospital/medicinal setting.
Something to be considered is that No-Exam Life Insurance is more expensive
Life insurance prices are based off of the life expectancy of the risk pool; anyone with a good bill-of-health will pay a lower insurance rate than someone who’s less than favorable. Normally, an insurance carrier will ascertain the life insurance applicant’s life expectancy based on their medical condition, yet with this type of insurance that’s not possible. So to compensate for their lack of knowledge about the applicant’s health they raise the rates in order to hedge themselves against risk. This is similar to a credit card company still offering a credit card to someone with bad credit; just hiking up the interest rate.
Never forget that Insurance Companies are in the benefit of managing risk.
