Some people think that if you choose life insurance that doesn’t require a medical exam, there is no underwriting involved. For good or for bad, that’s usually not the case. Here, we will discuss the different types of no exam life insurance and what kind of underwriting you can expect for each type. The 4 main types of no exam life insurance are:
- Simplified issue
- Graded death benefit
- Guaranteed issue
- Final expense
How Much Underwriting Is Involved In Each Type of No Exam Policy?
Bear in mind that we are speaking in broad terms, but individual carriers may have their own specific underwriting process. If you have specific questions about no exam life insurance, you can contact the insurance advisors at Sproutt for their expert, unbiased advice.
Simplified Issue Life Insurance
Simplified issue is a type of term no exam life insurance and no medical exam is required. The application process consists of a medical questionnaire that includes specific questions about your health and medical history. Underwriters use the questionnaire as their basis for determining approval and rates, but they also verify your information against various sources.
- The MIB (Medical Information Bureau) database, which includes information from previous life insurance applications
- Rx database search, in which underwriters review your pharmacy records so they know what medications you’ve taken/are taking.
- Department of Motor Vehicles records, so underwriters can check your driving records and make sure you don’t have reckless driving violations.
- Medical records are requested in some cases
In addition to the questionnaire, simplified issue policies require a telephone interview. It usually takes about 20 minutes.
Once the underwriters have gathered all the necessary information, there are 3 possible outcomes:
- Approval
- Requesting a medical exam
- Denial
Keep in mind, if you are denied one particular type of coverage you can still apply for other types of policies or even the same policy with a different insurance carrier.
Graded Death Benefit Life Insurance
A graded death benefit policy is a life insurance policy that only pays out the full benefit if the policyholder dies at least two years after purchasing the policy. If he dies within two years of purchase, only a portion of the death benefit will be paid out. In some cases, only the amount of the premiums will be paid out.
These policies usually have 3 or 4 questions, and if you answer yes to any of them, your application will be denied. The purpose of the questions is to determine whether the applicant has a high probability of dying soon. Questions usually revolve around HIV/AIDS, whether you have a terminal illness, and whether you are living in a hospice or in the hospital long-term.
Knowing what the questions are beforehand will save you time and aggravation.
Guaranteed Issue Life Insurance
With guaranteed issue life insurance, there is no underwriting, hence the word “guaranteed.” No questions are asked and approval is immediate as long as you are under the age limit (which is 80 or 85, depending on the carrier).
No underwriting, however, comes with a rather high price tag. Guaranteed issue policies have:
- High premiums
- Limited coverage
Typically, this type of policy is used as a last resort by people who have been denied other forms of life insurance coverage but still want to leave something behind to their loved ones.
Final Expense Life Insurance
Final expense life insurance is designed to cover a person’s final expenses and not much more. It falls somewhere in between graded death benefit and guaranteed issue when it comes to the underwriting process. The underwriting process involves a few steps, but in some cases, these steps go very quickly and approval can be granted within 24 hours.
The application process includes a medical questionnaire with about 10 questions. These usually revolve around serious illnesses or conditions like cancer, heart attack, drug abuse, HIV/AIDS, mental illness, and chronic diseases.
If the answers to any of the questions are yes, you may be directed to a guaranteed issue policy.
After you answer these questions, most final expense carriers will perform an MIB database check, and Rx database check, and, in some cases, a phone interview.
Bottom Line
With most types of no exam life insurance, there is some underwriting involved. The simplified issue has the most, then final expense, graded death benefit, and finally, guaranteed issue, which has none. While underwriting might seem undesirable, it’s actually not. The more an insurance company knows about you, the better it can assess its risk, and the better your chances of getting lower monthly premiums. Therefore, if the policy you’re applying for includes heavy underwriting, be glad. This means you have the best chance for the best rates.
