No Medical Life Insurance and The Fine Print
More and more insurance companies are delving into Simple Issue Life Insurance products (otherwise known as “No Medical” or “Quick Issue Life Insurance”). These can be great products for clients that may have a difficult time acquiring an insurance policy that is fully underwritten. Usually with Simple Issue insurance products (also know as “No Medical”), a policy will be issued to an individual as long as they can answer no to a short list of qualifying questions on the application. Thus, no blood or urine samples are required from the applicant and no medical records are accessed during the underwriting of the policy. Because the insurance company is taking on more risk than they usually take if the policy was medically underwritten, the premiums are usually higher than a standard policy that is fully medically underwritten.
These Simple Issue products are a great option for clients that would be difficult to insure based on their health status. For example, clients that have had a history of cancer will most likely get declined or heavily rated when applying for fully underwritten insurance, but there are Simple Issue (“No Medical”) products that they would still qualify for if they have been cancer-free for an extended period of time.
Despite all of these benefits, applicants should be aware of the fine print associated with these products. Many of these products have exclusions that the buyer should be aware of. For example, some quick issue insurance policies will exclude any death during hazardous activity (ex. Scuba diving, sky diving, etc.). Also, some of these quick issue policies are issued on a deferred basis. This means that within the first 2 years of the policy, only death by accident will be covered while death by illness will not be covered. After 2 years, the policy comes into full affect and death caused by illness is covered.
As mentioned earlier, these simple issued products can be great for clients that have a tough time receiving fully underwritten life insurance, but it is important that they are made aware of the fine print associated with these policies. Although insurance companies are making it easier for individuals to acquire life insurance, it should be noted that this convenience could come with added risk to the purchaser. Thus, it is important that individuals ask their advisor as many questions as possible about the product and review all their life insurance options before entering into a non-medical life insurance contract. It is also important to deal with an advisor that you know is well versed in these types of products and that does the proper job explaining to you the policy. You want to be sure that your Life Insurance advisor is not just doing this as a “one off” policy, but rather is experienced with these types of Life Insurance policies and contract wording.
Article Written by: Mike Castagna