Most varieties of life insurance require you to go through a process known as medical underwriting. Medical underwriting includesan exam where a medical professionalthoroughly examines your health to help formulate what your premiums might be. However, this process is time-intensive. Waiting for the results can often take one to two months, and if the insurer doesn’t like the outcome, they may attempt to charge you higher premiums.
But for those who need life insurance quickly, simplified issue life insurance may be an option to consider. By nature, simplified issue life insurance does not require a complete medical exam, instead replacing the exam with a short questionnaire. Coverage also often begins in days as opposed to months.
But while simplified issue life insurance may offer an easier application process and quicker processing time, it may not be right for everyone. Learn if simplified issue life insurance could be a good choice for your life insurance needs.
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What Is Simplified Issue Life Insurance?
Simplified issue life insurance is an exam-less type of life insurance, requiring only a health questionnaire instead of a physical health exam in most circumstances. As a result, individuals can quickly and efficiently get the life insurance they need. Simplified life insurance can be either a term or a permanentlife policy, with policy death benefits ranging from $5,000 to $100,000.
However, while simplified issue life insurance provides a quicker enrollment time, there are some drawbacks. Because there is no medical underwriting, the premiums may be higher than they would be otherwise. There are also some scenarios where your beneficiaries cannot access your total death benefit. Further, fewer insurers offer this type of life insurance.
What is Medical Underwriting?
Medical underwriting is a process in which a medical professional thoroughly examines your health, similar to a physical exam. The results of the examination is shared with the insurer to determine your risk profile, which impacts insurability and potential insurance rates.
Life insurance companies see younger and healthier people as less risky to insure than older and unhealthier people because their mortality risk is lower. Therefore, those that fall into the former category pay lower premiums and tend to be eligible for more options than one who are older or who have more health concerns.
What Is Simplified Issue Insurance For?
Simplified life insurance is best suited to individuals who need life insurance fast. Some of the most common reasons for this are:
- You have a legal requirement to purchase life insurance for your children immediately.
- You are attempting to get a secured loan.
- Your older term policy has lapsed and you need coverage in the meantime.
Still, the lack of medical underwriting entices other types of people. These individuals may experience the following:
- You are not be eligible for cheaper forms of coverage due to a pre-existing condition.
- You do not want to participate in medical underwriting because you are worried about uncovering a medical condition.
Let’s take a closer look at what makes simplified issue life insurance a beneficial option for those looking to streamline their life insurance application without medical underwriting.
Legal Mandates
In some states, courts mandate that divorcees pay child support or alimony to their former spouse or children. These payments provide financial support if one party makes more money than the other.
As part of these agreements, judges may require life insurance as part of child support alimony. In this situation, life insurance ensures a steady income stream if the paying party passes away. Those individuals may turn to simplified issue life insurance as often these scenarios require that the financial support is provided quickly.
Secured Loans
A secured loan is a borrowed sum of money backed up by a material item that can be repossessed if the loan payments are not made. That material item is often referred to as collateral. While collateral is often valuable merchandise like a car, boat, or house, financial assets like stocks and bonds can also be used to secure a loan.
Some life insurance policies offer the ability to withdraw funds before the policyholder passes away. In this situation, the lender may allow a life insurance policy to serve as collateral.
Your Policy Has Lapsed
Term policy lengths often last for 5 to 30 years. However, when the term ends, so does your coverage. If your policy ends and you do not immediately have another one lined up, you will be uninsured until you purchase another policy. Simplified life can fill in the gaps between your old and new policies.
Pre-existing Conditions
Many types of life insurance require medical underwriting, and depending on the results, you may not be eligible for coverage if you have a pre-existing condition like high blood pressure, diabetes, or COPD.
Because simplified life insurance requires minimal medical information, it may be easier to qualify for than other types of insurance. However, depending on the insurer, simplified life may still deny your application due to your health.
You Don’t Like Medical Exams
People have various reasons for avoiding the doctor’s office. Whether medical environments and professionals make them nervous or they’re worried about uncovering an underlying condition they were unaware of, many people prefer to avoid visits to the doctor if possible.
Simplified issue life insurance allows applicants to skip this portion of the process, instead allowing them to deal with the application process from the comfort of their home.
Average Cost of Simplified Life Insurance
A 10-year simplified term life policy with a $100,000 death benefit For a healthy, non-smoking, 30-year-old individual costs an average of $197-$236 per month, though men typically have higher premiums than women. Your specific premium will depend on the insurer, your age, health, lifestyle, and the amount of coverage you want.
In contrast, the same policy that includes a medical exam would cost about $96 per month. But like with simplified life insurance, premiums are highly dependent on your personal circumstances. However, insurers that require less medical information upfront generally have higher premiums to offset the insurance risk.
Pros of Simplified Issue Life Insurance
Most of the advantages of simplified issue life insurance lie in the easy application process and access to relatively larger benefits than other options requiring minimal medical evaluation.
Simplified issue life insurance provides:
- Faster approval than other types of life insurance
- The option to forgo medical underwriting
- Lower premiums than other policies that do not require underwriting
- Larger death benefits
Let’s take a closer look at some of the benefits simplified life insurance has to offer.
Easy and Convenient Application Processes
Between speaking with representatives, examining the benefits, and spending several hours at the doctor’s office, getting life insurance can be time-consuming. Simplified issue life insurance allows you to streamline the application process so that it can be done more quickly and with fewer steps.
Quick Approval Time
Simplified life insurance may only take a few days to process, in contrast to the weeks or months it takes for other life insurance types. This can be useful for individuals needing life insurance immediately to comply with a legal mandate.
No Medical Exam and No Medical Records
Simplified life allows applicants who are nervous about working with healthcare professionals to skip comprehensive underwriting. The application will likely ask you about any previously diagnosed health conditions. However, most of the information, such as your driving habits and prescriptions, is more innocuous.
It’s Cheaper Than Some Other No-exam Life Insurance Options
While more expensive than term life, simplified life is still a more affordable policy than guaranteed issue life insurance, which is another life insurance type that does not require medical underwriting. Simplified life insurance still utilizes some medical history through a health questionnaire, but guaranteed issue policies may collect even less medical information. Because acceptance is so broad, guaranteed issue life insurance companies charge a higher premium to compensate.
Larger Death Benefits Than Some Other No-exam Life Insurance Options
Simplified life insurance policies offer death benefits up to $100,000. In comparison, guaranteed issue life insurance — which also does not require medical underwriting — tends to have smaller death benefits due to its broad acceptance of applicants, with many policies offering a death benefit of about $25,000.
Cons of Simplified Issue Life Insurance
While many of the advantages of simplified issue life insurance pertain to the lack of a medical exam, so do many of the disadvantages. In general, not utilizing a medical examination to set rates is the ultimate signifier of risk, something insurers do not like. Therefore, simplified life comes with:
- Graded Death Benefits
- Higher Costs
- Limited Availability
Graded Death Benefit
With traditional life insurance policies, your beneficiaries can receive their payout almost immediately after you pass away, even if it’s the day after you’re approved for coverage. In contrast, simplified life has a “graded death benefit,” meaning that the amount you are insured for cannot be fully paid out until a specific point in the future, often about two years.
However, while your beneficiaries may not be able to get the total amount, your insurer will still disburse some benefits if you pass away before the two years are up.
For example, imagine you purchase a simplified issue life insurance policy with a $50,000 graded death benefit that lasts two years. But a catastrophic event occurs and you pass away within a year. In this situation, your beneficiary may receive $5,000 instead of $50,000. If you were to have passed away 24 months after the policy was put into effect, your beneficiary would have received the entire $50,000.
Higher Costs
In general, all life insurance policies that do not require comprehensive medical underwriting cost more than those that do. Simplified life insurance is no different. For example, a 30-year-old, healthy, non-smoker may pay about $96 per month for a 10-year, $100,000 term life policy. That same policy purchased through simplified issue would cost about $236 per month. That’s a 142% difference.
Limited Availability
Simplified issue life insurance is one of the more difficult policies to find because companies that offer simplified issue life coverage tend to be smaller companies that specialize in it. With choosing a smaller company instead of an established insurer, there is an inherent risk of the smaller company being less stable and going out of business. If that happens during the duration of your policy, you would lose the coverage you’ve been paying into and find yourself uninsured.
Limited Availability
Simplified issue life insurance is one of the more difficult policies to find because companies that offer simplified issue life coverage tend to be smaller companies that specialize in it. Further, if the company were to go out of business during the duration of your policy, you would lose the coverage you’ve been paying into and would therefore be uninsured.
Alternatives to Simplified Issue Life Insurance
While simplified issue life insurance may benefit some individuals, it is not the only choice for those looking to forgo medical underwriting. Depending on your situation and needs, other alternatives may be more appropriate.
Group Life
Group life insurance is a type of life insurance offered by employers to eligible employees. These policies insure many people at once under one policy and are usually term coverage that your employer will renew annually as part of your employee benefits package. Because a large number of people are insured simultaneously, group coverage does not require medical underwriting.
The premiums for these policies are also subsidized by the employer, making it much more affordable than individual policies. In fact, individuals often do not pay out of pocket for group coverage. Instead, the employer will pay into it for you or deduct your portion of the premium from your paycheck.
However, group life insurance does have drawbacks. Because it is a term policy attached to your job, you lose coverage if you leave your job. Additionally, you will have limited options for policy coverage and death benefit amount. It is common practice to purchase an additional individual policy to supplement it.
Guaranteed Issue Life Insurance
Guaranteed life insurance does not require medical information and qualification is almost always guaranteed, making it an option for individuals with higher insurability risks.
Guaranteed issue life differs from simplified life in that it has relatively few options when selecting a death benefit, with the maximum available being $25,000. In contrast, simplified life insurance offers up to $100,000 of coverage. Further, guaranteed issue coverage also has a graded death benefit.
Accelerated Underwriting
Accelerated underwriting is not a type of life insurance as much as it is a new method to streamline the application process. Instead of a lengthy medical examination, insurers rely on external sources such as your medical records and prescription drug history to save time on underwriting.
Because the insurer still studies your medical history, accelerated underwriting won’t help you get coverage if you otherwise were not eligible for coverage. However, it will save you time and a trip to the doctor.
Putting It All Together
Simplified issue life insurance is best suited for those whose health status either makes them ineligible for traditional life insurance or makes that option too expensive. This type of life insurance replaces a medical examination with a less invasive health questionnaire. However, plan premiums can be high and availability can be limited. Work with a trusted insurance agent to see if simplified life insurance is a good option to suit your needs, or if an alternative approach would be better.