One of the little inconveniences of applying for life insurance is that, although free and done at your home or work, there is the need for an exam. With the exception of larger policies most exams consist of blood and urine specimens, a check of your height, weight and blood pressure and a lot of medical history questions. Generally we are talking about a 15-20 minute exam.
When I say “little” inconvenience, it really is. Most people don’t get regular exams and to get one for free, well, it’s cheaper than most health fairs and there is no requirement that you accept the insurance to get the exam results. I’m of course not advocating this as a way to get regular checkups at no cost, but if you’re applying for life insurance it is one of the perks.
The other “perk” if you will, compared to life insurance that doesn’t require an exam, is that a fully underwritten (meaning with an exam) policy is that you are eligible for better rates. When a company has more information about your current health such as that provided by lab results, they can feel confident enough to offer preferred plus rates. Life insurance that doesn’t require an exam is generally underwritten at standard rates. So what does that mean in real numbers and when should a person consider going the no exam route?
For instance, a 53 year male who wants $250,000 of 20 year term insurance policy and is in excellent health can go the no exam route and get that for $2355.00 annually. If they do an exam and qualify for the best rate class, not an unusual occurrence at that age, the same policy would cost $637.50.
Now at younger ages the ease of not taking an exam and doing everything over the phone and internet may be appealing. For instance, a 26 year old female can get a $100,000, 20 year term for $116.00 a year without an exam and if they take one the best they can do is $98 a year. At that age they probably don’t care about the medical value of an exam and for $18 a year difference, why not put a policy in force in 15 minutes and be done with it.
There is a misconception that if you apply for insurance with no exam somehow your medical condition and history is overlooked. Not true folks. They still ask medical questions on the application and they still have access to the medical information bureau and the ability to order your medical records to keep you on the honest side. The fact that they don’t have labs is absorbed by the higher rates.
Bottom line. There is a valid place for life insurance with no exam required, but the convenience should always be weighed carefully against the cost difference.