You may have been hearing a lot recently about no exam life insurance, and the reason for that is that it’s one of the fastest-growing types of life insurance. No exam life insurance is extremely easy to apply for — you just need to fill out a form online and maybe have a short phone conversation. No medical exam necessary, no pokes or prods. Most importantly, you get to skip the medical exam that’s required for regular life insurance policies.
How does it work?
No exam life insurance operates on the same basis as regular life insurance: You pay monthly premiums, and in return, a lump sum will be paid out to a designated beneficiary in case you die.
Types of Life Insurance
Just like there are different types of regular life insurance, there are different types of no exam insurance. The two most popular in both categories are term and whole.
Term life insurance is purchased for a certain amount of time, or term. Policies are usually sold in terms of 5 years, so you could purchase a 5-year term, 10-year term, 15, 20, 25, etc. The length of your term will affect how much you pay in monthly premiums, as will the amount of coverage you pay for.
Whole insurance, on the other hand, has no expiration date and is valid for the person’s entire lifetime. It’s usually more expensive than term policies, which is probably why it’s not as popular. However, those who can afford it can get high amounts of coverage and also enjoy the cash value that the policy accrues. The cash that accrues as part of whole life insurance is tax-deferred, so you don’t need to pay taxes on it until it’s withdrawn. The cash value can be used for any number of things, including paying life insurance premiums, paying off debt, investing, etc.
When it comes to no exam life insurance, both term and whole policies work similarly to their regular counterparts. One of the main differences is that no exam whole life insurance doesn’t accrue a cash value.
Read on to find out more about the different types and what you can expect to pay. If you’d like to get a free quote, you can do so here.
How Price is Determined
Another difference between no exam policies and others is in cost, and that’s largely to do with how the amount of monthly premiums is determined.
With regular life insurance policies, applicants fill out a lengthy application that includes questions about their health, lifestyle, and finances. They also undergo an exam, courtesy of the life insurance company. All of this information is sent to underwriters. They compare each detail against millions of statistics. The goal is to determine what the statistical likelihood is that the applicant will die early. If the likelihood is high, premiums will be high too. If the likelihood is low, premiums will also be low.
For example, two people who are the same age, have the same occupation, same credit score, and the same good health are likely to be given the same monthly premiums. But if you change just one factor, their premiums will also change. If one smokes, for example, and the other doesn’t, the non-smoker will get lower premiums because smokers have a higher rate of mortality. Similarly, if one has high blood pressure and the other doesn’t, the one with high blood pressure will likely get higher rates.
When it comes to no exam life insurance, insurers don’t have all this information available to them. So they aren’t able to complete in-depth underwriting. This means that the insurer is taking on more risk by insuring people they don’t know much about. That’s why premiums tend to be higher.
The exact cost, however, depends on many factors, including:
- The type of no exam life insurance
- The term, if applicable
- The amount of coverage
- Age
- Gender
- Occupation
- Dangerous hobbies
Types of no exam life insurance
There are several types of no exam life insurance, including simplified issue, guaranteed issue, and graded death benefit.
Simplified issue
This type of no exam life insurance is most similar to regular life insurance, since there are a few health questions on the application and partial underwriting. As such, the prices are also the most similar to regular life insurance, and in some cases they can be quite competitive. Simplified issue is a term policy and coverage can go up to $1 million. The only caveat is that not everyone can be approved.
Guaranteed issue
Everyone can be approved for this type of life insurance, as long as they are under the age limit of 80 or 85. It takes just minutes to apply for guaranteed issue and approval is immediate. Applicants don’t have to provide any health information, which means no underwriting is involved. It also means that monthly premiums are quite, quite high. For this reason, guaranteed issue is usually considered a last resort by people with serious health issues who can’t qualify for other types of life insurance.
Graded death benefit
This is usually a type of guaranteed issue policy, but it costs slightly less because of the graded death benefit factor. Having a graded death benefit means that if the person who is insured dies within two years of buying the policy, the full death benefit won’t be paid out. Rather, only a portion will be. If the insured dies after two years of buying the policy, the full death benefit will be paid out.