If you are considering obtaining a life insurance policy, you may wonder what type of life insurance to invest in. While traditional life insurance policies, like term life insurance, are a common option, they require you to undergo a medical exam so the insurance company can determine your risk profile and set a premium.
In some cases, a medical exam can disqualify you from life insurance coverage. If this occurs, you have a few alternate choices regarding life insurance coverage. Explore your no-exam life insurance options and see how they differ from traditional coverage.
Traditional Life Insurance
Traditional life insurance is intended to protect your loved ones after you pass. With life insurance coverage, your family receives compensation after your death. This sum commonly pays for immediate expenses such as funeral and burial, to cover dependent costs like childcare or education, or to act as an inheritance or savings for your loved ones.
Most traditional policies fall under one of two categories, permanent or term life insurance. Term life insurance offers coverage for a specific period, while permanent life insurance covers you until your death. There are many subtypes of life insurance coverage within both categories, including:
- Whole life
- Indexed universal
- Variable universal
For each of these traditional types of life insurance, you must undergo a medical exam to obtain coverage.
Why is a Medical Exam Required?
Life insurance companies require a medical exam for fully underwritten, traditional policies because it helps them calculate the risk of insuring you. The lower your risk of death due to health issues and lifestyle, the lower premiums you can expect to pay.
For example, someone who has a potentially life-shortening condition such as high blood pressure is more likely to result in a payout than someone with no health problems. Therefore, insurance companies require a complete medical exam to identify health issues that pose a higher risk of death.
What Does a Life Insurance Medical Exam Entail?
A typical life insurance medical exam is fairly in-depth. Although it may not require more than 15 to 45 minutes to complete, you can expect the exam to gather a significant amount of data about your health through medical questionnaires and tests.
The insurance company usually covers this medical exam, which requires you to:
- Provide information about current and past medical conditions and medications you are using
- Give the contact information for doctors you have seen in the past five years
- Have your weight, height, and blood pressure taken
- Provide a urine sample
- Have a blood sample taken for testing
For those over 50 or filling out a life insurance application for a high amount, an electrocardiogram (EKG) may be necessary. In some instances, your insurer may also require an X-ray or stress test before making you a final insurance offer.
No-Exam Life Insurance Policies
If you are worried that a medical exam will disqualify you from obtaining life insurance, you can explore alternative life insurance options. Many companies offer life insurance without a medical exam. These policies can give you peace of mind that your passing won’t leave your family with unpaid medical or funeral bills.
Final expense insurance, simplified issue, and guaranteed issue are the three main types of no-exam life insurance. These alternative life insurance options are tied into accelerated underwriting processes and offer varying levels of coverage with different benefits and drawbacks compared with each other and traditional life insurance.
Underwriting is a term used in the financial and insurance sectors to refer to a cost-benefit analysis process and risk determination. Underwriting allows the life insurance company to set coverage limits, determine premium amounts, and add exclusions and conditions for coverage based on your health, age, and other factors.
Life insurance companies use an accelerated underwriting process to use data you provide in combination with third-party data and industry algorithms to determine your coverage options. This method means that rather than using data gleaned from a required exam, the company either uses health information you provide through questionnaires or offers you a policy outright, regardless of your health status.
Simplified issue life insurance takes days to initiate coverage, which is much faster than traditional options that take up to eight weeks. Dropping the medical exam from the application process accounts for saved time. A health questionnaire and an inspection of your medical history replace the medical exam.
Insurance companies take the insured’s lack of medical exam to indicate higher risk, so simplified issue life insurance has higher premiums than traditional options. Some insurance companies offer term and permanent simplified issue policies. Applicants may also add riders to their policy.
A life insurance rider is an additional coverage unique to an applicant’s life. One example of a rider is the accelerated death benefit. This rider allows the insured to use some of their death benefits to pay for medical expenses while still alive. Not all simplified issue policies contain rider options, so shop around to find the correct policy options for you.
Also known as No Questions Asked life insurance, guaranteed issue policies have no medical questionnaire, no medical history investigation, and no medical exam in the application process. The trade-offs for the relaxed application process are higher premiums, lower coverage amounts, and a two- or three-year waiting period before death benefit coverage begins.
During the waiting period, the payout in the case of your passing only consists of the premiums you paid plus 10% interest. After the waiting period, the policy’s death benefit is active. A life insurance’s death benefit is the amount it pays to your dependents and loved ones. It is determined by the insurance company, and sometimes you can opt for a more significant death benefit by paying a higher premium.
Guaranteed issue life insurance has a waiting period to protect the insurance company from people in their final days applying, paying one premium, and then receiving large death benefit payouts. People with severe health concerns might opt for guaranteed issue insurance if they do not qualify for other life insurance options.
Final expense insurance
Final expense insurance is sometimes called funeral insurance because it is only meant to cover the insured’s funeral, burial, and final medical bills. Final expense insurance usually has a death benefit of a couple of thousand dollars to $25,000.
This type of insurance is for people aged 50-85. Its intent isn’t for use as a retirement fund like some other insurance policies. It is a permanent policy with cash value, but the premiums and death benefit are small, so the cash value is low.
There are guaranteed issue and simplified issue final expense options. This combines final expense insurance coverage with the application processes of simplified and guaranteed policies. Death benefits are typically less for guaranteed policies compared to simplified policies. While the name implies the payout is for funeral or burial costs, a final expense insurance payout is a no-strings-attached sum of money.
Why Might You Need Alternate Life Insurance?
There are many reasons you may want a life insurance policy without a medical exam. The primary reason is that health conditions barred you from other life insurance policies. In this case, the three no-medical exam life insurance options provide coverage where otherwise you would have none. Old age can disqualify applicants for some insurance policies, so the elderly turn to no-exam life insurance.
If you need a life insurance policy fast for an upcoming trip, to fill a gap in coverage once a term policy matures, or to fulfill a court order, then you should look to no-exam policies. Some jobs that require constant travel, like diplomats or missionaries, are routinely denied traditional life insurance policies due to the perceived risks of foreign travel. If your traveling disqualifies you for traditional coverage, then guaranteed coverage may be your best life insurance option.
Obtain a Life Insurance Quote from Finance is us
Life insurance gives people peace of mind in their final days because they know their loved ones have financial protection. If traditional insurance with extensive medical exams is not an option, you can still protect your family with alternative life insurance options.
No matter what type of life insurance you are searching for, get a quote with Finance is us. We can help you find the right insurance policy at the right price. Obtain a quote for life, car, or home insurance from our easy-to-use platform and get an insurance policy that meets your needs.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.