Is simplified issue life insurance worth it?

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Is simplified issue life insurance worth it?

We’ve explained before how applying for life insurance is basically broken down into just 8 steps: you determine your coverage needs, get quotes, apply, take a paramedical exam, give additional health details, have your final rate determined, approve your policy, and get insured.
But say you want to skip one of those steps. And that step happens to be the paramedical exam. Can you still be insured? A simplified issue life insurance policy can get you where you want to be, and with a few caveats you’ll be covered without needing to take a paramedical exam.

What exactly is simplified issue life insurance?

A simplified issue life insurance policy is another name for a no medical exam policy, which is a little more straightforward. It does exactly what the name implies: gets you life insurance without the need for a paramedical exam. With a quick health questionnaire and a check with medical database such as the Medical Information Bureau, you can be insured in a fraction of the time compared to the traditional insurance process.

So what exactly are you missing out on if you’re not taking the paramedical exam? A paramedical exam is performed by a life insurer to get an idea of your current health. They’ll do basic things like take your pulse, your height and weight, and your blood pressure. They’ll also take a blood (and possibly urine) sample. What they’re looking for are things like high blood pressure, elevated cholesterol or glucose, and other things that could be warning signs for health issues. They want to know how risky you are to insure – how likely you are to die while you’re covered – so they can price your premiums accordingly.

Instead, you’ll be presented with a health questionnaire. You’ll be asked some basic questions about your health, such as if you smoke, if you’re terminally ill or have been diagnosed with a serious illness, if you have AIDS or HIV, and so on. Depending on the insurer, answering yes to some of these questions will disqualify you from receiving simplified issue insurance, or it may just raise your premiums. Prudential estimates that around 70% of their simplified issue applicants are approved.

Why would you want simplified issue life insurance?

If you’re looking to get coverage quickly, or you have reservations against taking the paramedical exam, simplified issue life insurance could be the option you’re looking for. Those two points are related; since you’re skipping the paramedical exam, it speeds the process along. That makes it ideal for someone who can’t wait the 3-8 weeks it typically takes to get life insurance coverage.
If you’re in poor health, it could also be in your best interest to skip the paramedical exam. Simplified issue life insurance is usually more expensive than traditional life insurance (more on that in a bit) but if your health will raise your premiums higher than what you’ll get with simplified issue life insurance, you might be in a rare situation to save some money.

How do you buy simplified issue life insurance?

Most life insurers offer a simplified issue option in addition to their traditional life insurance policies: if you take a look at major insurers like Amica, MetLife, USAA, Liberty Mutual, or Wells Fargo, you’ll see this product offered.
In some cases you’ll be able to go through the entire process online. The health questionnaire can be filled out at your convenience, and because you don’t need to set up a paramedical exam, not all insurers will require you to speak to an underwriter.

What alternatives are there to simplified issue life insurance?

There are really only two alternatives to simplified issue life insurance: one that follows a similar path, and one that sort of goes in the opposite direction.

Traditional insurance

What we mean by that is an insurance policy that you get by going through the 8 steps outlined earlier. No shortcuts allowed. This means taking the paramedical exam, and possibly requires an attending physician statement if the insurer requests follow-up information after the exam.
Of course, this defeats the purpose of looking into simplified issue insurance, because the whole point is to skip the paramedical exam. But if you’re determined to get insured and are looking into all of your options, going the traditional route is always available.

Guaranteed issue life insurance

Guaranteed issue life insurance takes the "no paramedical exam" idea of simplified issue insurance and takes it one step further: you don’t need to answer any medical questions either. It truly is guaranteed, as long as you pay your premiums. That means the process is even less invasive and goes even quicker.
The perfect instance of getting guaranteed issue life insurance can be seen in its alternate name – "burial insurance." The elderly and ill, who would not otherwise be eligible for life insurance, or those with little savings can use guaranteed issue life insurance to pay for funeral costs, which can reach five-figure prices in many cases.
Of course, this relatively easy coverages comes at a cost, literally. Guaranteed issue life insurance is sometimes referred to as a "last resort"; because the insurer really has no idea about what they’re insuring, guaranteed policies are very expensive and the death benefits are usually less than what you’ll get with other insurance types. The extra few weeks you save might not be worth the increase in premiums that you’ll pay over other insurance types.

What’s good about simplified issue life insurance?

  1. The most obvious benefit of a simplified issue plan is that you get to skip the paramedical exam. It’ll save you the time of having to get the results processed, and you won’t have to worry about scheduling the appointment. It can also work out for you if you think you’re current health will work against you in terms of premium costs.

  2. Because you’re getting rid of those pesky lab results, you can get coverage more quickly with a simplified issue plan. Typically you’ll be covered within days, as opposed to the weeks (or longer) with a standard insurance plan.

  3. If you’re dead set on not taking a paramedical exam and your only other alternative is a guaranteed plan – you remember, the plan that also doesn’t require a paramedical exam – the cheaper option is almost always going to be a simplified issue plan.

What’s bad about simplified issue life insurance?

  1. There are some wrinkles to the simplicity that a simplified issue life insurance plan provides. The main catch is that they’re more expensive than a standard life insurance plan. With a standard plan, the insurer is doing their due diligence and getting a comprehensive look at your medical status and history. They have a pretty good idea at how risky you are to insure and can provide a more accurate premium quote. With the limited information they get from a standard issue plan, insurers err on the side of caution and charge a little more.

  2. The coverage you get is also more limited with a simplified issue plan. Again, the insurer knows relatively little about you, and they don’t want to cover you with a million dollar policy. Some insurers offer as high as $400,000 coverage, but most top out closer to $100,000.

  3. Riders are bells and whistles you can add to a policy for extra protection in certain areas. They cost a little extra on top of the regular premium and might not always be worth it, but they do allow some level of customization to your policy. If you go with a simplified issue plan, you may find that your rider options are more limited than with other plans.

Is simplified issue life insurance worth it?

Simplified issue life insurance could be right for you...under the right circumstances.
If you’re looking to get coverage quickly, simplified issue insurance is your best bet. Since much of the regular approval process is taken up with scheduling your paramedical exam, waiting for results, potentially needing more information from your doctor, and having that all reviewed by the insurer, you can save a lot of time by cutting out the exam. You can usually get coverage within a few days with a simplified issue plan.
There’s also the issue of simply not wanting to take the paramedical exam. Despite it being a relatively basic checkup, some people find the process invasive, especially if the insurer requires a more detailed look at your health history. It could also be the case that you don’t have time to wait around for the exam to be scheduled.
Overall, though, if you don’t mind the paramedical exam, a standard insurance plan is your best bet. It will provide more accurate coverage and will almost always be cheaper. Plus, you’re basically getting a "free" physical, and it’s always nice to check up on your health. If you have the choice, you should probably take a pass on simplified insurance to get the most out of your life insurance. But if taking a paramedical exam is out of the question, it’s good to know there’s an option that still offers you some level of protection.

Image: Clint Budd