What’s The Catch With No Exam Life Insurance?

If you can get life insurance without taking an exam, called simplified issue insurance, without donating blood and urine and blocking out 20-30 minutes of your time, why would anyone buy a traditional term life insurance policy that requires an exam?

Seems like a question about two products on a level playing field, and most people that focus their sales efforts on simplified issue try to present it that way. They would like you to believe that you can get life insurance policy “A” online in 15 minutes with no exam at the same price as a traditional policy that requires an exam, interaction with an agent, a signed paper application and 2 to 6 weeks of underwriting depending on your health. Folks, that’s not happening.

Simplified issue is made easy to acquire because it has some built in safe guards to make up for the lack of an exam. Especially with senior life insurance it high prices and bad guarantees. First, their is only one rate class and when you apply you are either approved at that rate class or you are declined. Declined? Yes, and it happens more often than one might think especially with those who don’t want to take an exam for a reason. Maybe their cholesterol is high or they have high blood pressure and they know that would show up on an exam. Which brings us to the second safeguard. They ask medical questions. If you answer yes to a question you will more than likely be declined. If you answer no to a question that really is a yes, that’s fraud and could jeopardize the policy if it’s approved.

The third safeguard is the Medical Information Bureau, the MIB. A lot of people apply for traditional insurance and when something goes wrong on the exam they turn around and apply for simplified issue, no exam life insurance. But the results from the first exam have already been reported to the MIB to keep people from cheating the system. The simplified issue company may not do an exam but they always get an MIB report.

And the last safeguard they have is price. At younger ages it isn’t a deal buster. I just ran a 30 year old male for $100,000 of 20 year term at preferred rates and the best rate is about $11 a month. A good simplified issue policy is about $19 a month. I can see younger people paying the difference for the convenience, but when you get to age 45 the spread is $19 a month for traditional insurance at preferred and $56 a month for no exam life insurance.

Bottom line. So, what’s the catch? First, it’s not as bombproof as they make it sound and second, unless you’re young you’ll pay through the nose for the luxury of not donating blood.