Simplified issue life insurance

If you want to skip the medical exam and get coverage within days, this could be a solution.

Getting life insurance can be a lengthy process, but a no medical exam policy skips a few steps to cut down on that time. If you need coverage quickly or you’re hesitant to take a medical exam, a simplified issue policy might suit you. Popular among the Baby Boomers population, this type of coverage is offered in small amounts and is often used to pay for funeral costs, medical bills and debt, or can even help you get approved for a loan.

What is simplified issue life insurance?

The short answer: A policy that doesn’t require a medical exam to apply.

A simplified issue life insurance policy skips the medical exam, instead presenting you with a health questionnaire. It’s usually straightforward and made up of about 20 yes or no questions, such as if you’ve been hospitalized recently, if you’re terminally ill or if you’ve been diagnosed with a serious disease such as diabetes, AIDS or HIV. Along with asking about your medical history, most providers will want details on your drug, alcohol and tobacco use. Some carriers will ask about your height and weight.

Every insurer has its own set of standards. Generally, answering yes to specific questions — like if you’re disabled or in a wheelchair — will disqualify you from coverage or lift the price of premiums.

Approval isn’t guaranteed, but most people who apply for simplified issue life insurance are accepted.

How does the underwriting process work?

For traditional life insurance policies, the underwriting process often involves a medical exam, which provides a picture of your general health. A health practitioner records your height, weight, pulse and blood pressure. They’ll also take a blood and urine sample, and ask questions about your personal and family medical history.

When it comes to simplified issue life insurance, without the help of a medical exam, insurers assess your eligibility in other ways. Once you’ve submitted your health questionnaire, they’ll cross-reference your answers with the Medical Information Bureau and pull information from pharmacy records and the DMV. They’ll then use current statistics to predict how long you’ll live based on your age and sex.

While it’s less specific, this information allows insurance companies to determine how risky you are to insure.

What’s the difference between simplified issue and guaranteed life insurance?

Simplified issue life insurance offers coverage without the need for a medical exam. Rather, you’ll simply fill out a health questionnaire. If your answers are good enough for the underwriters, you’ll be granted coverage.

Guaranteed issue life insurance takes this concept one step further. Also known as a burial policy, you don’t have to take a medical exam or answer any medical questions. It’s just that — guaranteed — so long as you pay your premiums. Available for people 50 and older, this type of coverage is usually marketed to the elderly and ill, who would otherwise not be eligible for life insurance. This policy is also an option if you have little savings and want to use life insurance to cover funeral costs and nothing more.

Another major difference is the coverage amount. Guaranteed issue life insurance is issued in small amounts, usually $5,000 to $25,000 — though some providers will go as high as $50,000 in special cases. On the flipside, simplified issue applicants can often get coverage between $25,000 and $500,000.

Lastly, there’s the price. The easier a policy is to secure, the more expensive it is. With guaranteed issue, the insurer has no idea who they’re insuring, so the premiums tend to be much higher. As for the death benefit, it’s usually far less compared to other types of policies.

How do simplified issue premiums compare to traditional life insurance?

The premiums for simplified issue life insurance are typically higher than traditional insurance, and there’s a logical reason for this. Since insurance companies don’t ask for a comprehensive picture of your health and medical history, you’re riskier to insure. With limited information, insurers err on the side of caution and charge a higher premium.

That being said, the premium reflects your age at the time you purchase the policy. If you’re young and healthy, a simplified issue policy may only cost a few extra dollars per month. But if you’re older and have health issues, the price difference between premiums can be much bigger.

If you fall into the “young and healthy” category, be careful not to overpay for simplified issue insurance. In most cases, this type of coverage is costly but offers minimal coverage, so it might make more financial sense to wait to be approved for traditional insurance.

Is simplified issue life insurance right for me?

Simplified issue life insurance might suit you if:

• You want or need coverage quickly. With simplified issue insurance, you can usually get coverage within days, rather than the four to eight weeks it takes for traditional life insurance. By eliminating the medical exam, it also cancels out the time waiting for results, scheduling follow-ups and having your records reviewed by the insurer.
• You don’t want to take the medical exam. While it’s a pretty basic checkup and usually free, some may find the medical exam invasive. Others refuse to be pricked with needles unless it’s absolutely necessary. This may also be a factor if you suspect the health practitioner will delve deeper into your family’s medical history.
• You haven’t had a physical in a while. If you’re a senior and haven’t seen a doctor in awhile, you may want to opt for a no-exam policy. If you have high cholesterol or blood pressure levels, you could see significantly higher rates.
• You need a life insurance policy due to a court order. When you need to lock in life insurance ASAP, a simplified issue policy works.
• You only want to use life insurance to cover your final expenses. If you’re sick or elderly, you may want a policy that will simply take care of your funeral costs and medical bills and pay off your debt. In that case, it might be worth looking into a simplified-issue plan.
• You’re looking to get a loan. Do you need collateral for a loan? If you can’t wait four to eight weeks for approval, a simplified issue policy is a good option. It assures your lender you have the collateral to pay back the loan.

How do I buy simplified issue life insurance?

In most cases, you can purchase a policy online or over the phone. Since you probably won’t have to speak to an underwriter, it’s usually quicker to fill out the health questionnaire online.

Since the provider is assuming more of a risk, the coverage amounts are capped. The cap for simplified issue life insurance varies from company to company, but most cap somewhere between $250,000 and $500,000, though some go up to $1 million.

Your premiums stay the same for the life of the policy, and your coverage won’t lapse, so long as you pay your premiums on time. With this type of policy, many insurers give you the option to pay monthly, quarterly, semi-annually or annually.

Most major insurers offer simplified issue policies. As always, be sure to compare providers before making a decision.

Pros and cons

Bottom line

Life insurance is deeply personal, and for some people, a simplified issue policy is the perfect fit.

If you need coverage quickly — in days over weeks — or don’t want to take a medical exam, it’s worth looking into simplified issue insurance. It’s also a decent option if you’re elderly and ill and could be denied coverage because of a medical exam. While the process is quicker and less complicated, in most cases, you’ll pay for the cost of convenience with a higher premium.

Frequently asked questions

• How long does simplified issue life insurance last?

  It depends on whether you’ve chosen a term or permanent policy. Term coverage lasts for a set period, such as 10, 15 or 20 years, while permanent policies offer lifelong protection. With simplified issue life insurance, whole life and universal life are the most common types of permanent policies.

• Can anyone buy simplified issue life insurance?

  No. You’ll need to answer knockout questions, such as whether you’re in a wheelchair, have a disability or have been recently diagnosed with a serious disease like cancer or HIV. And lying will backfire: Even though it’s a simplified policy, the insurer has the right to look up your medical records to confirm you’re telling the truth.

  Simplified issue life insurance is typically available to people 18 and older. Some providers will allow 70-year-olds to take up a 10-year term policy.

• Will I have to wait for my coverage to take effect with simplified life insurance?

  Once your application is accepted, your coverage kicks in immediately. This differs from other types of life insurance, where the wait can be four to six weeks long.

• What are the death benefits of simplified issue life insurance?

  With a term life policy, the death benefit tends to be between $50,000 to $500,000, though some providers go up to $1,000,000. For universal life, it usually falls between $25,000 and $50,000. This death benefit is fixed, so long as you make your payments.

• But wait — isn’t this the same as the group life insurance policy I have through my employer?

  While group life insurance policies don’t require a medical exam, they usually offer little coverage, meaning your family might be in a financial bind if you die unexpectedly. Also, if you leave your job, you’ll forfeit your coverage.