Life insurance is an essential part of most people’s financial plans. It’s a way of making sure that your loved ones aren’t left in a lurch if the worst happens and you die early. However, despite the importance of life insurance, many people push off getting it because the application process is so lengthy. Specifically, the medical exam part of the application is a big nuisance. That’s why many insurers are now offering no exam life insurance, a type of insurance that offers coverage but doesn’t make you undergo a medical exam.
Being able to bypass the medical exam and still get coverage is very appealing to many people, especially those with a fear of doctors and needles. In fact, most people would choose no example life insurance off the bat, except that the monthly premiums are usually higher than those of typical insurance policies. You can get a free quote here to get an idea of the rates you can expect.
So when is a higher rate worth the convenience of no exam life insurance?
It totally depends on you.
There are many benefits of no exam life insurance, the real question is whether they suit your particular situation and lifestyle.
Fast approval – It takes between 4 to 8 weeks to get an answer about traditional life insurance, whereas it takes just a few weeks to hear back about no exam life insurance. In some cases, you can hear back in just a few days or even get immediate approval.
No waiting period – With no exam policies that offer immediate approval, there is no waiting period between submitting the application and being insured. This is crucial for anyone who needs life insurance quickly, whether for a divorce, SBA loan, or urgent travel plans.
Easy application – Traditional life insurance policies come with a lengthy application that includes detailed health questions. While no exam policies do ask some health questions, the application is much shorter, especially because you get to skip the medical exam. In many cases, you can complete the application entirely online.
Competitive rates – In the past, there were only a few companies that offered no exam life insurance, but today, almost every company has this option. This means that the rates are more competitive than they used to be. For people who are relatively young and in good health, no exam life insurance rates can be similar to those of traditional life insurance.
How Does No Exam Life Insurance Work?
No exam life insurance works the same as traditional life insurance. You pay a monthly premium to the insurance company, and in return, you are promised a payout to designated beneficiaries in the event that you die early. You must pay the monthly premiums in order for the policy to be valid.
The main difference between no exam and traditional policies is the lack of a medical exam. This difference, however, has many ramifications. The most important one is regarding the cost of your monthly premiums and how they’re determined.
With traditional life insurance, you undergo a medical exam and underwriters then review your information and determine which life insurance class rating you should get. Those with the best ratings get the lowest premiums. Those with intermediate ratings get middle-of-the-road rates. Those with poor ratings get very high premiums. The ratings are determined based on your health. The healthier you are, the better rating you get.
Smokers are a good example to use when talking about life insurance class rating systems. Smokers have a separate rating system than non-smokers. For example, Preferred Plus is usually the highest rating, but smokers have their own category of Preferred Plus. Consistently across class ratings, smokers are always charged more in monthly premiums because they have a statistically higher rate of mortality.
With no exam life insurance, underwriters lack a current picture of your health, and therefore, they can’t accurately assess how much of a risk you pose. The premiums are higher to cover the company’s risk.
Types of No Exam Life Insurance
There are three main types of no exam insurance:
- Simplified issue
- Guaranteed issue
Simplified issue is the most similar to traditional life insurance. It’s a type of term policy and the application includes some health questions, though not a lot. Because there is a certain amount of underwriting involved, companies can get a partial picture of your health and therefore your premiums won’t be sky-high. Simplified issue policies usually offer coverage up to $500,000. Bear in mind that not everyone can be approved for this type of insurance.
Guaranteed issue offers guaranteed approval to anyone who applies, as long as they’re under the age limit designated by the insurance company. Because anyone who applies can get coverage, premiums are extremely high and coverage only goes up to $25,000. It’s considered a last resort if you can’t qualify for any other type of policy. In some cases, it’s used as a final expense policy to cover funeral costs.
Group life insurance is usually offered through an employer. No exam or health questions are necessary. Your coverage is a benefit of being part of the group. Employers usually pay all or most of the monthly premiums, which means there’s no reason not to take advantage of it. However, a group policy shouldn’t be your only form of life insurance. For one thing, coverage doesn’t go very high. Additionally, if you leave your job, you may lose your coverage. That’s why group insurance is considered supplemental.
Is No Exam Life Insurance a Good Choice?
No exam life insurance isn’t for everyone, but it can be great for people who need life insurance quickly, are scared of doctors, or who can’t qualify for any other kind of insurance. To figure out whether it’s right for you, take a good hard look at your finances and personal situation. If you need guidance, you can contact an insurance advisor who will help you throughout the decision process.