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Income replacement, paying off debt, and financial security for their loved ones, are some of the reasons why people choose to buy life insurance policies.

A life insurance policy is a contract in which the insurer pays out a sum of money to a designated beneficiary either when the insured person dies or after a set period.

What Are The Main Types of Life Insurance Policies

There are two main types of life insurance policies: term and whole. Just as their names suggest, term policies provide coverage for a designated period term, while whole policies remain in effect throughout the life of the insured.

Traditionally, before taking out a life insurance policy, companies would mandate a medical exam take place before allowing full coverage to take effect.

This was ostensibly meant to protect the companies’ financial stake from imminently life-threatening conditions, such as:

• Diabetes
• Heart Disease
• Cholesterol
• Blood Pressure
• HIV
• as well as other diseases affecting the heart, pancreas, liver, kidney, and bladder

While companies today still offer potential policyholders the option of participating in medical exams, there is a growing group of insurance carriers who do not.

According to LIMRA’s 2018 Insurance Barometer Study, half of all consumers indicated they were more likely to buy a life insurance policy if they could avoid the medical exam, and approximately 1 out of 3 adults purchased or attempted to purchase life insurance online.

Because of their less stringent requirements, no-exam life insurance policies have become increasingly popular, especially among those who have pre-existing conditions, the elderly, and the terminally ill with little savings.

Types Of Life Insurance Policies With No Medical Exam

For those who’d rather skip the doctor, there are two types of life insurance policies to choose from: simplified and guaranteed issue.

Simplified Issue vs Guaranteed Issue

Although both simplified and guaranteed issue life insurance allow consumers to purchase a policy without a physician’s evaluation, there are key differences between them.

With a simplified issue policy, you will need to complete a health questionnaire, which usually consists of 20 yes or no questions, in which you’ll be asked things such as if you drink or smoke, if you’ve been hospitalized recently, if you’re terminally ill, or if you have been diagnosed with a serious illness like heart disease, diabetes, AIDS or HIV.

These questions are used to determine your overall health and to price your premiums accordingly.

Although most people who apply for a simplified issue policy are accepted, approval isn’t guaranteed. Depending on the insurer, answering “yes” to some of the questions could get you disqualified. Additionally, the insurer has the right to access your medical records to verify that you’re being truthful with your answers.

On the other hand, with a guaranteed issue policy, there is no evaluation and no questions asked. Just like its name suggests, with this type of policy you’re “guaranteed” acceptance, regardless of your health.

However, premiums for this type of policy are much higher than with a simplified issue policy, and oftentimes, benefits are graded. This means that were the insured person to pass away within 2 or 3 years of purchasing the policy, then the beneficiary (or beneficiaries) will only get the amount equivalent to the premiums paid up to that point, or a percentage of the death benefit.

What Are The Advantages?

As previously stated, neither of these policies require a medical evaluation to get accepted, which makes the underwriting process much quicker.
With a traditional life insurance policy, the entire underwriting process can drag on for weeks or even months. With no-exam life insurance policies, you can get coverage within 24-48 hours, which is ideal for those who need coverage fast.

Both simplified and guaranteed issue are also ideal for those who may be rejected for traditional coverage, such as those who have pre-existing conditions, a history of drug or alcohol abuse, parents who’ve died before the age of 60, have high-risk jobs or hobbies, are elderly, or are terminally ill and need money to cover their final expenses.

Both policies are highly accessible since coverage can begin at age 18, and some carriers will offer policies up until age 90. They’re also easy to obtain since they can be purchased online or over the phone and have an extremely high acceptance rate. 
Additionally, they’re a good option for those who are concerned about their privacy and prefer to keep their family history, lifestyle, and health to themselves.

What are the Disadvantages?

Aside from their speediness, convenience, availability, and privacy, both simplified and guaranteed issue policies have their drawbacks.

High Premiums

When you apply for a traditional life insurance policy, you’ll have to undergo a physical evaluation, which is used to determine your level of risk, and eligibility for coverage. The level of risk correlates directly with the cost of your policy. By not requiring an evaluation, the insurer is taking a higher risk, which will result in more expensive premiums.

Lower Coverage Amount

Since the insurer has little to no information to determine your level of risk, most companies will limit the amount of coverage they’ll provide. Some insurers will allow you to get up to $500,000 for simplified issue policies, but most will offer a maximum of $250,000.

Also, since guaranteed issue policies are considered even riskier, limits are usually much lower than for simplified issue policies, offering maximum death benefits of up to $25,000.

Fewer Rider Options

Both simplified issue and guaranteed issue policies follow a certain template, meaning that there is not much room for customization, and rider options are extremely limited.

Graded Benefits

As previously discussed, guaranteed issue policies usually offer graded benefits, which means that if the insured person dies within a set period of time after coverage starts, the beneficiaries will not obtain the full death benefit amount.

Should You Get a No-Exam Life Insurance Policy?

If you’re relatively young and healthy, the best option is to apply for a traditional life insurance policy, since the medical exam is free and it could save you a significant amount of money. In addition, you will have access to more coverage options than with no-exam policies.

You could also apply for coverage through a group policy, which ordinarily doesn’t require you to provide any health information and can be obtained through an employer during open enrollment. However, you must keep in mind that coverage will end if you leave your job.

If you applied for traditional coverage and got denied, have a serious or chronic illness, have a pre-existing condition, are over the age of 45, or need coverage fast to use it as collateral for a loan or due to a court order, then a simplified issue policy might be right for you.

If you already exhausted all your options, are over the age of 65, or have a terminal illness and still need coverage to leave a small inheritance for your family or to cover your final expenses, then a guaranteed issue policy could be your best option.

No matter which route you choose, the most important thing is to research and evaluate your options before purchasing any policies. If you’d like to learn more about no-exam life insurance policies and explore what the best carriers have to offer, be sure to check out our list below.