What is Simplified Underwriting & Guaranteed Issue Insurance?
What is simplified underwriting and is it worth it?
A simplified underwriting insurance policy is a policy that you don’t have to have a paramedical exam in order to qualify for. This form of policy is also called a “no medical exam policy”. With a simple health questionnaire and some verification of those answers, you can have your life insurance policy issued in a fraction of time compared to the traditional life insurance process.
A paramedical exam is when a medical professional checks your general health such as blood pressure, height, weight, pulse rate and usually a urine and blood sample. They are looking for high blood pressure, elevated cholesterol or glucose and other early warning signs of your general overall health. Essentially, they are evaluating if you are a good insurance risk or not.
With simplified underwriting, you avoid this process and simply answer some questions on your overall health such as: smoking history, have you been diagnosed with any serious illness, AIDS or HIV etc…
Why wouldn’t you use this form of insurance underwriting you may ask? Some carriers pricing may be slightly higher as they are assuming more risk without a full paramedical exam. However, many carriers are simplifying the process and NOT increasing premiums for clients looking for less than $1,000,000 in coverage. Essentially they are trying to reduce their costs in issuing a policy, so you could not only save time and energy, but also get the same pricing as a full medical exam.
It’s important to work with your insurance professional to identify the best route for you to apply.
What is a Guaranteed Issue Policy?
Guaranteed Issue policy is a term life insurance policy where a policy is offered to any eligible applicant without regard to health status. The key difference between this policy and others is that the insurer cannot deny an applicant coverage as long as the applicant can afford to make their payments.
The disadvantage to these policies are the premiums are much more costly and the benefits are greatly reduced compared to a traditional life insurance policy. Also, death claims may be graded meaning the insurance company may not pay a claim for the first year or two. Most policies range from $5,000 to $50,000 in death benefit coverage and are typically not issued to individuals over the age of 100.
While these are great ways to cover final expense costs and/or provide some funds to a loved one, they typically are not the most financially beneficial way to go if you can qualify for traditional life insurance or simplified underwriting plans.