Getting life insurance without a medical exam is becoming increasingly possible. Why? Because data is being used in ways unanticipated even just a few years ago. You can now buy life insurance that rates your risk factors using just databases and your answers to a few questions. Instead of taking the time to see a physician, you can get a quick answer. (For more, see Life Insurance Without Physical Exam: What's the Catch?)
Life Insurance Without a Medical Exam: It’s the Algorithms
Exams – those pesky, time-consuming and sometimes-painful medical procedures – have been replaced by number-crunching algorithms based on your answers to health-related questions and information gleaned from a variety of databases and other sources.
The main reason these new procedures exist is because some people don’t want to go to the trouble of having a medical exam, and life insurance companies have decided that collecting less information and getting a sale is better than no sale at all.
Easier, but Not Cheaper
These newer techniques have improved life insurance underwriting, but the system is not perfect. In many cases you pay more for the convenience of online application, even though the process is less expensive for providers.
Competition is changing that, however. If you are unsure of your medical status because you haven’t seen your doctor in a few years, need insurance fast or just don’t like the idea of being poked and prodded, “no exam” online insurance might be for you.
Two Main Types of Life Insurance
Life insurance falls into two broad categories: term life and cash value (whole life, permanent life and variable life are all types of cash-value insurance). Term life provides insurance only and is less expensive than cash value, which includes a savings or investment feature and often also offers loans or partial surrender. (For more, see Cash Value vs. Term Life: Which Is Best?)
Types of “No Exam” Life Insurance
When it comes to “no exam” insurance, three types exist:
- Simplified Issue is available as term or cash value for people ages 21 to 65, with benefits up to $500K. Terms available range from 10 to 20 years (or for life).
- Level Death Benefit Whole Life has a death benefit, costs that are fixed for life and builds cash value. You can apply up through age 80, but benefits are much smaller – in the $5K to $50K range.
- Guaranteed Issue is a policy anyone can get. These policies have death benefits between $5K and $25K and are the most expensive “no exam” policies available.
Pricing Can Be Complicated
Generally speaking, data-driven policies are less expensive for companies to write, especially when compared with the cost of medical analysis, which can run $150 or more. This should make a “no-exam” policy less expensive, but that’s not always the case.
Some insurers charge more than for a traditional, exam-based policy based on the theory that having less information puts them at greater risk. There is also the concern that sick people may apply online, also increasing risk for the company.
There Are Conditions
To help mitigate risk, insurance companies often place conditions on who can buy a policy online. Conditions can include age (many systems limit applicants to those 45 or younger) and self-reported health issues.
Any self-disclosed condition or analysis result that doesn’t fit the company’s risk profile can result in your being rejected for the simplified approval. Instead, you'll be sent through a conventional application process, including a full medical exam.
The Data in Detail
In addition to your answers to health-related questions, online “no exam” systems analyze prescription drugs you take or have taken. The algorithm allows for multiple uses for certain drugs and is quite sophisticated. Other data examined include motor-vehicle records, bankruptcy, criminal court records, professional licenses, college records, property deeds, liens, evictions and even tax filings. In addition to health status, the algorithms used are designed primarily to look for signs of a stable lifestyle, good credit and few – if any – run-ins with the law.
A Back-Up Strategy
If you are unsure about your health status, you may want to secure an online “no exam” policy as a backup before applying for a traditional, exam-based policy. If the latter is subsequently approved and you prefer it, you can cancel the one you bought online. If you are rejected via traditional means, you’ll still have peace of mind knowing that your family is covered.
The Bottom Line
You may have access to “no exam” life insurance through your employer, many of which offer it as a benefit. In some cases you can add to your employer plan at your own expense and still without an exam.
The primary benefits of online “no exam” life insurance are processing speed and convenience. Cost is coming down and may eventually be a major factor as well. As with all life insurance products, obtaining multiple price quotes and comparing them is key.