No Medical Exam vs. Fully Underwritten Life Insurance Policies

No Medical Exam vs. Fully Underwritten Life Insurance Policies: Which Option Costs More?

Buying life insurance has become faster and easier than ever. Some companies advertise policies that can be approved without a medical exam, blood test or urine sample. In certain situations, an applicant may even receive a decision within minutes.

That sounds appealing for people who don’t want to take an exam, answer a few additional medical questions and wait a possible two weeks for approval?

However, convenience can come at a substantial long-term cost.

Many consumers do not realize that certain no medical exam life insurance policies may charge higher premiums than comparable fully underwritten policies. Saving a little time during the application process could mean paying more every month for the next 10, 20 or 30 years.

Before choosing the fastest application, it is important to understand what “no medical exam” means, how life insurance companies determine rates and why providing more complete medical information may help a healthy applicant qualify for a better price.

 

 

Pros & Cons of No Medical Exam Policies

There are several benefits that come with no-exam life insurance. For example, a no-exam life insurance policy allows you to get life insurance without going through a medical exam and the application is usually processed quickly.

But there are several downsides, too. Not every insurance company offers no-exam life insurance, and those that do generally cap coverage limits at $1 million to $3 million. Also, your medical history, including medical records and prescription history, is still used to determine rates and eligibility.

It is not uncommon for some applicants to begin a no exam application and due to their medical conditions have the application converted into a fully underwritten application because they don’t meet the no exam requirements.

These applications are most of the time used as a ploy by some agents to just make a quick and easy sale which we observe as totally unethical.

 

What Is Fully Underwritten Life Insurance?

If you apply for a fully underwritten policy to get the best rates, it is very possible that the carrier will wave the medical exam if you are healthy. The company pays approximately $200.00 and even more to the para-med companies. They would want to save that expense if at all possible.

Fully underwritten life insurance involves a detailed evaluation of an applicant’s health, lifestyle, occupation and medical history.

The traditional application process may include:

• A detailed health questionnaire
• A telephone or online health interview
• Height and weight measurements
• Blood pressure readings
• Blood and urine samples
• Prescription history
• Motor vehicle records
• Medical records from your doctors
• Information about hazardous occupations, hobbies or travel

Some applicants may also need an electrocardiogram or additional medical testing, depending on their age, requested coverage amount and health history. The role of underwriting is not simply to make the application more difficult. This gives the insurance company enough information to evaluate the applicant accurately.

Once the information has been reviewed, the applicant is assigned a health classification. Common rate classes include:

• Preferred Plus
• Preferred
• Standard Plus
• Standard
• Substandard or table-rated

Applicants with excellent health histories may qualify for one of the preferred rate classes. These rate classifications can produce significantly lower premiums than policies that collect only limited medical information.

What Does “No Medical Exam” Really Mean?

The term “no medical exam life insurance” can describe several different underwriting methods. These policies should not be treated as though they are all the same.

The three main categories are accelerated underwriting, simplified-issue life insurance and guaranteed-issue life insurance.

Accelerated Underwriting

Accelerated underwriting may allow a qualified applicant to obtain competitively priced coverage without completing a medical examination.

The insurance company still evaluates the applicant carefully. Instead of automatically requiring blood and urine testing, the carrier may use:

• Prescription database records
• Motor vehicle reports
• Previous insurance application information
• Electronic health records
• Medical Information Bureau information
• Other authorized third-party data

The company may also use predictive models to determine whether the applicant qualifies for the accelerated process. If the available information is insufficient, the applicant may be asked to complete an examination or proceed through traditional underwriting. Accelerated underwriting is not necessarily a higher-priced simplified policy. Qualified applicants may receive competitive rates without completing an examination.

However, not everyone will qualify. Eligibility may become more limited at older ages, with larger coverage amounts, or when an applicant has a significant medical history. Simplified-Issue Life Insurance

Simplified-issue life insurance normally requires applicants to answer a limited number of health questions, but it does not require a traditional medical examination.

Because the company receives less medical information, it has less ability to separate exceptionally healthy applicants from applicants who may present greater risks.

The company must price its policies to account for that uncertainty.

For this reason, simplified-issue coverage generally has:

• Higher premiums
• Fewer available health classifications
• Lower maximum coverage amounts
• Less flexibility for applicants with complicated health histories

The National Association of Insurance Commissioners explains that simplified underwriting allows applicants to avoid an exam and fluid testing in exchange for generally higher premiums. Guaranteed issue policies can still be useful for someone who needs coverage quickly or cannot qualify for traditional underwriting. However, it should not automatically be the first recommendation for every applicant.

Guaranteed-Issue Life Insurance

Guaranteed-issue life insurance generally does not require an examination or medical questions.

These policies are commonly used to cover final expenses and frequently provide relatively small death benefits. Because the company knows very little about the applicant’s health and generally cannot decline eligible applicants for medical reasons, premiums can be considerably higher.

Some guaranteed-issue policies also contain a graded death benefit. This means that death from natural causes during the policy’s first two years may result in a refund of premiums plus interest rather than payment of the full death benefit. Contract provisions vary, so applicants should review the policy carefully.

Guaranteed-issue coverage may be valuable for applicants with serious medical conditions who have no other options. It is generally not the most economical choice for a healthy person who could qualify for traditional or accelerated underwriting.

No-Exam vs. Fully Underwritten Life Insurance

Fully underwritten or accelerated underwriting will often provide the most favorable pricing for healthy applicants because the insurer has enough information to evaluate the individual more precisely. Simplified-issue pricing tends to be higher because the carrier is working with less information. Limited Medical Information Can Increase the Price

Life insurance premiums are based on risk.

When an insurance company receives detailed medical information, it may discover favorable factors such as:

• Excellent blood pressure
• Healthy cholesterol levels
• Normal blood sugar
• Normal liver and kidney function
• A healthy height-to-weight ratio
• No nicotine use
• No significant prescription history
• Consistent preventive medical care

These results may help an applicant qualify for a preferred rate class.

With simplified underwriting, the insurance company may not receive enough information to confirm all these positive factors. Instead of giving the applicant full credit for excellent health, the carrier may place the person into a broader risk group.

The premium must then account for the unknown information within that group.

In other words, avoiding an examination can sometimes prevent a healthy applicant from proving just how healthy he or she is.

Cost Differences Can Add Up Quickly

A difference of $15, $30 or $60 per month may not appear significant when someone is trying to obtain coverage quickly.

However, term life insurance premiums are commonly paid for many years. A relatively small monthly difference can become a major expense over the entire guaranteed term.

The following table is a hypothetical illustration showing how additional monthly premium accumulates. It is not an insurance quote or an estimate of the difference every applicant will experience.

That’s why consumers should compare the total cost of coverage—not merely the speed of approval.

Saving a few days or avoiding a brief examination may not be worth paying thousands of additional dollars over the life of the policy.

Age Makes Comparing Policies Even More Important

Life insurance rates normally increase as people get older because the likelihood of death increases with age. The NAIC recommends that consumers consider how long they will need coverage while recognizing that mortality risk increases over time. n their 30s may have relatively small differences between certain policies.

As applicants move into their 40s, 50s and 60s, premiums generally become more expensive, making it increasingly important to compare underwriting methods and companies.

Older applicants are also more likely to have factors such as:

• High blood pressure
• Elevated cholesterol
• Diabetes or pre-diabetes
• Prescription medication use
• Sleep apnea
• Heart-related testing
• Arthritis or mobility issues
• Previous surgeries

These conditions do not necessarily prevent someone from qualifying for affordable coverage. However, they make proper carrier selection extremely important.

One company may offer a favorable rate for a particular medical condition, while another may charge substantially more. An experienced independent agent can compare underwriting guidelines before deciding where an application should be submitted.

Why Some Agents Promote No Medical Exam Policies

Some independent agents promote no-medical-exam policies because they can be an easier sale, especially when they don’t mention that they are more expensive. “No medical exam required” is a powerful marketing message. This attracts consumers who dislike needles, are concerned about medical testing or want immediate approval.

Some agents and online agencies promote these policies because the sales process may be faster and easier. While in the long run, fully underwritten policies have more value the no exam versions. In some cases, skipping that 15 minute exam could cost you thousands.

However, speed should not be the only consideration.

The agent should have explained:

• Whether the policy uses accelerated or simplified underwriting
• Whether preferred rates are available
• How premiums compare with fully underwritten coverage
• Whether coverage amounts are limited
• Whether the policy includes a graded death benefit
• What happens if the applicant does not qualify for accelerated approval?
• How much the applicant will pay over the entire policy term

Promoting no-exam coverage without explaining its potential long-term costs can result in an applicant purchasing a policy that is convenient but unnecessarily expensive.

The goal should not be to obtain the fastest policy. The goal should be to obtain the right amount of coverage from a financially strong company at the best available rate.

When No Medical Exam Life Insurance May Make Sense

A no-exam policy is not automatically a bad choice. It can be appropriate in several situations.

It may make sense when:

• Coverage is needed immediately
• An applicant qualifies for accelerated underwriting
• A medical examination cannot be conveniently scheduled
• The requested death benefit is relatively modest
• If the applicant has difficulty completing traditional testing
• Simplified underwriting is more favorable for a particular medical condition
• Traditional coverage is unavailable
• The applicant understands and accepts the additional cost

The best option depends on the applicant’s age, health, coverage needs and urgency.

When Fully Underwritten Coverage May Be a Better Choice

A fully underwritten policy may be the best choice when:

• The applicant is in good or excellent health
• The lowest possible premium is the main priority
• A large death benefit is needed
• The applicant wants access to preferred rate classes
• Coverage will remain in force for 20 or 30 years
• The applicant has favorable medical results that could improve the rate
• There is still enough time to complete the traditional application process

Completing an 15 minute examination may require a small amount of additional effort, but the resulting savings can continue for decades.

Do Not Choose a Policy Based Only on the Medical Exam

The phrase “no medical exam” describes an application feature. It does not tell you whether the policy is competitively priced.

Before applying, compare:

1. The monthly premium
2. The total premium over the guaranteed term
3. The amount of coverage
4. Available rate classification
5. The policy’s conversion options
6. Included living benefits and riders
7. The financial strength of the insurance company
8. Whether the premium is guaranteed
9. No waiting periods or graded benefits
10. The insurer’s underwriting guidelines for your health history

The lowest advertised price may not be available to everyone, and the fastest approval may not produce the best long-term value.

Frequently Asked Questions

Is not having a medical exam for life insurance always more expensive?

No. Simplified-issue and guaranteed-issue policies generally cost more because the insurance company receives limited medical information. Accelerated underwriting, however, may allow qualified applicants to avoid an examination while still receiving competitive rates.

Can I get preferred rates without taking an exam?

Possibly. Some accelerated underwriting programs offer preferred rate classifications to qualified applicants. Eligibility depends on the company, age, coverage amount, health history and information found in authorized electronic records.

What happens if I do not qualify for accelerated underwriting?

The company may offer you a different rate, request additional records or ask you to complete a medical examination. Being removed from the accelerated process does not automatically mean that coverage will be declined.

How long does a life insurance exam take?

A basic examination often takes approximately 15 to 30 minutes. This may include height, weight, blood pressure, blood and urine samples, and questions about your medical history. Requirements vary by company, age and coverage amount.

Does the applicant pay for the examination?

In most traditional life insurance applications, the insurance company pays for the required examination.

Can good laboratory results lower my premium?

They may help. Favorable blood pressure, cholesterol, blood sugar and other results can support a better health classification, although the insurer will consider the entire application.

Should someone with a health condition avoid full underwriting?

Not necessarily. Many medical conditions can be approved at competitive rates when they are well controlled. The best approach is to compare companies before submitting a formal application.

Is guaranteed-issue life insurance the same as simplified issue?

No. Simplified issues normally include health questions and may be declined for some applicants. Guaranteed issue generally does not require medical questions, but coverage amounts may be smaller, premiums higher and benefits limited during the initial policy years.

Is faster approval worth paying more?

That depends on how urgently coverage is needed and how large the premium difference is. Applicants should calculate the total additional cost over the entire term before making a decision.

What is the best way to compare my options?

Work with an independent life insurance agent who can compare multiple companies’ underwriting programs and rate classifications rather than offering only one product.

Our Final Thoughts

No exam life insurance can provide speed and convenience, but the words “no exam” do not automatically mean that a policy is a better deal.

A healthy applicant who chooses a simplified-issue policy solely to avoid blood testing may pay higher premiums for the next 10, 20 or 30 years. Even a modest monthly difference can add up to thousands of dollars.

At the same time, modern accelerated underwriting programs may allow qualified applicants to avoid an examination without automatically sacrificing competitive pricing.

The smartest approach is to compare all three possibilities:

• Fully underwritten coverage
• Accelerated underwriting
• Simplified-issue coverage

At Best Choice Life Insurance, we compare multiple insurance companies and underwriting programs to help applicants find the right balance between affordable premiums, appropriate coverage and a convenient telephone application process.

Before paying extra for faster approval, find out why completing a 15 minute medical exam could help you qualify for a much better rate. A few additional steps today could save you money for many years to come.

All the best,
Jack Venturi