I had an email from a potential client today that said “I am looking for reasonably priced life insurance where there are no health questions and/or physical exam.  If your group can fullfill these requirements than you can contact me”.

There are a lot of people who think life insurance companies are too nosy. Consider people purchasing business life insurance where the company would like you to simply divulge every financial detail of the business. I actually share the business person’s concern that much of what the companies ask for is unnecessary to the life insurance company and rather confidential.

“No health questions and/or exam?” “Reasonably priced?” I’m thinking he wishes his mother would still do his laundry too.

Since all life insurance pricing is based on mortality assumptions, the more a life insurance company knows about the risk, the more reasonably they can price the product. If they don’t know anything about the risk, it follows that the only way to  cover themselves and the risk pool they represent (that would be you), is to offer less reasonable rates and products to those who don’t want to talk about their health or be examined.

To meet his needs we’re really talking about a guaranteed issue product. Guaranteed issue, just as the name implies, will issue insurance to anyone with usually the only caveat being that they have to fall between 40 and 60 years old. How can they do it? First, it is a whole life policy, so the premiums are high. The death benefit is generally limited to $50,000, so the risk is held down. And lastly, they have a 2-3 year waiting period before the death benefit is activated, giving them some cushion before they really assume the risk. During that waiting period, if a death occurs, the company will normally return all premiums paid plus a modest amount of interest to the beneficiary. That’s what you get with no questions and no exam.

Another option is no exam but some questions. Usually call a simplified issue policy, it relies on the application and information from the medical information bureau. These policies can be applied for on line and issued within hours. They are generally at standard or worse rates no matter how good your health is and they are generally capped at $250,000 to $300,000. This is the type of product that is usually used to underwrite children’s life insurance.

Bottom line. The best prices for life insurance, whether term insurance, universal life or whole life, will come with a full medical disclosure and an exam. Make the company comfortable with the risk and they will reward you with the best rates.

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