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Finance for Parents

How Does a No-Exam Life Insurance Policy Work?

By Jessica SillersAug 25, 2020

We all take on unpleasant tasks for the sake of our families sometimes, from digging out sink gunk to tackling taxes. In some cases, that can include getting poked and prodded for a health exam as part of the life insurance application process. 

But if you can do the responsible thing without the discomfort, so much the better! No-exam life insurance policies have the ability to let you skip the in-person medical exam

There are several types of “no-exam” insurance available. Some come with a higher price tag or limited coverage, and others don’t. So make sure you understand the different options to find the protection you need.

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Why Get Life Insurance Without a Medical Exam?

Kevin Mahoney, a Certified Financial Planner, usually works with couples who either have a young child or are expecting to start a family soon. In other words, they’re exactly at a life stage where thinking about life insurance becomes especially important.

For many couples, though, Mahoney says, life insurance becomes the task they know they should deal with, but can’t bring themselves to tackle.

“They’re pushing it to the back burner, and part of it is that traditionally they couldn’t just sign up online. They have to go through all these other hoops. It’s a tough sell for me to get them to focus on that and make sure that they’re taking steps in a timely manner to get a policy,” he says. “Enter the no-exam option where suddenly this becomes much more seamless.”

Particularly in a pandemic situation, more and more families are attracted to ways they can help protect those they love without needing to undergo an in-person health exam.

How Accelerated Underwriting Works

Not all life insurance providers offer accelerated underwriting, but this express approach is gaining popularity in the industry. 

You submit detailed information about your health history, as well as financial and lifestyle information (e.g. bankruptcies, DUIs) and they use algorithms and predictive models to crunch the data you’ve provided. If your health and credit are in good shape, the insurance provider may be able to approve your application immediately, without a human underwriter going through it. 

Even if these advanced algorithms can’t make you an offer right away, companies like Fabric will do their best to get you a final answer without that physical exam. For example, that might include asking for your doctor’s records or reviewing your prescription history, and asking you follow-up questions. 

The result can be a fully underwritten term policy with a simpler application and faster approval time. With Fabric, for example, it’s possible to skip a health exam if you’ve applied for less than $1 million in coverage and you meet all other qualifications. 

One benefit, of course, is you don’t have to pee in a cup or get your arm poked! What’s more, coverage and costs are competitive with policies that require health exams, unlike some of the other types of no-exam life insurance that we discuss below. According to Brian Greenberg, CEO of True Blue Life Insurance, “Fabric has the best of both worlds. An online application platform that can approve customers without an exam, and the option to provide more health information if you are not able to get approved right away. Other companies decline applicants if they are not able to qualify right away. ” 

Accelerated underwriting isn’t its own kind of insurance. It’s just an express option for the application to an otherwise typical term life policy. 

The downside is that not everyone will qualify. Some insurance providers may not offer this option for smokers or people who have health conditions (or even a family history of serious issues like heart disease or cancer). 

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Other Types of No-Exam Life Insurance

In addition to the express underwriting option that some companies like Fabric offer, there are other kinds of no-exam insurance out there. These are the main types of life insurance that you can get without a medical exam.

Simplified issue insurance

Simplified issue life insurance is a kind of policy you can generally apply for with less detailed health information than regular term life insurance. Plus, as a rule, simplified issue insurance does not require a physical exam. 

This kind of policy can be a good fit for people who have a harder time qualifying for traditional term life insurance due to age or health, but want a moderate level of coverage. Unlike with guaranteed issue, you should still expect to answer at least some basic health questions on the application or in a phone interview.

The main downsides to simplified issue life insurance are:

  1. Premiums are typically higher than fully underwritten term life insurance. That includes accelerated underwriting options. Policy costs vary, but it’s not uncommon to see a 60 to 70% jump in price for simplified issue compared to term life, especially for higher coverage amounts.

  2. Coverage limits. Traditional term life policies can offer up to $1 million or even more in coverage. Most simplified issue policies cap out around $300,000. That may not be enough coverage for many families with a mortgage and kids’ education to consider.

  3. The healthier you are, the likelier that you’ll pay more compared to term life. That’s because simplified issue providers know less about you and are therefore taking a higher risk by offering coverage. As a result, they raise their premiums accordingly. If you can demonstrate good health, you could get a preferred rate with regular term life.

Guaranteed issue insurance

With guaranteed issue life insurance, everyone can get accepted, even if they have serious health issues. This can be a good option for people with major health issues who need coverage for final expenses. 

Expect fairly high premiums (e.g. $100 to $300 per month) and low coverage amounts, often maxing out around $25,000. In most cases, guaranteed issue life insurance will not pay out the death benefit if you die within two or three years of getting a policy (except for accidents). Instead, your loved ones will get a return of the premiums you’ve paid to date, usually with about 10% interest added on. 

Considering the high premiums, low payout and waiting period, you might find that it makes more sense to choose another form of life insurance or even self-insure to cover final expenses like funeral costs.

Group life insurance

If your workplace offers life insurance, you may not have to go through a medical exam to qualify. The main downsides of relying on group insurance through work to cover your life insurance needs are:

  1. You may not get adequate coverage. Basic group life is typically close to the equivalent of your annual salary. That’s probably not enough to cover your family’s financial needs if you pass away.

  2. If you lose your job, you lose the insurance. Your coverage is more secure when it doesn’t depend on you staying at one particular job.

If you can get life insurance at work for free, you may as well take it! You probably shouldn’t plan to make it your only source of coverage, though.

No-Exam Life Insurance Pros and Cons

Life insurance without a medical exam is a great solution for some families, but it’s not always the best solution for everyone. The main benefits of a no-exam policy are:

  1. Convenience. Completing the application without scheduling an appointment makes the whole process easier.

  2. Speed. Insurance providers aren’t waiting on lab results, so you can get approved faster.

  3. Fewer barriers. Whether due to a pandemic or for other reasons, some people simply don’t want to take the medical exam. If skipping it makes securing life insurance less daunting, that’s a good thing.

If you qualify for accelerated underwriting, you can often get the best of both worlds: low prices and high coverage, and a convenient application process. A lot of healthy people who apply for insurance through Fabric can take advantage of this option. 

That said, not everyone has access to accelerated underwriting. If your health or finances don’t meet requirements, insurance providers rely on an in-person medical exam to get the information they need for a thorough assessment. Insurance providers may not offer the same options in all states, so where you live could also affect your access.

When it comes to types of insurance that are specifically designed to skip medical exams for just about everyone, an important benefit is access to insurance. Simplified issue insurance and guaranteed issue insurance can come with much steeper premiums than typical term life insurance and set lower limits on coverage. It’s worth doing research first to see if you qualify for a typical term life policy, even if that means getting a medical exam.

“I don’t want people shortchanging themselves on coverage just because they want to skip that step,” Mahoney says.

Is Now the Right Time to Get No-Exam Life Insurance?

When social distancing makes it tougher to get around, handling life insurance without a face-to-face meeting becomes more appealing. Should you opt for a no-exam policy rather than schedule a home visit from a medical professional? What if you’re struggling to free up time and energy to think about life insurance at all?

Mahoney says, “I try to be sensitive to the realities that people face on a daily basis. If we’re talking about a couple where one parent has lost a job and they have kids at home all day every day, I think life insurance is a high-priority item. If they’re spending all their time just trying to complete unemployment applications online, these are things that can suck up all the available time in a day.” 

In other words, all you can do is the best you can. If you find yourself putting off this important financial to-do item because you simply can’t set aside the time to deal with a potential health exam, then no-exam insurance may be a fit for you—or at least a company that offers accelerated underwriting, like Fabric, so you at least have a chance at skipping the exam. 

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Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific financial advice or to serve as the basis for any decisions. Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want a easy and fast way to purchase life insurance.

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Written by

Jessica Sillers

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