Consumers often lean towards no medical exam life insurance because it's 'easier'. And arguably, that's correct. But that ease comes with associated drawbacks.
Here's what you need to know if you're considering No Medical Exam Life insurance.
- You might be inclined to think that no medical exam means no questions — just ask and you're covered. That is not the case. No medical exam insurance comes with a series of prequalifying questions that you must answer to qualify. And in general, if you answer any of those questions 'yes', then you will not qualify for the life insurance. The type of life insurance that has no questions at all is appropriately called 'Guaranteed Issue', and this is not what's normally being offered when the industry says 'No Medical Exam'.
- Because there's a limited number of qualifying questions, they do accept more people who might not be able to qualify for a fully underwritten policy. That means more potential claims. And that means higher premiums. So you can skip the 'exam', but it'll come at a price.
- No medical exam policies normally have a limited number of options/types, and a restricted amount of coverage. If you're looking for choices, no medical exam insurance isn't for you. If you want enough life insurance to cover most young families, no medical insurance isn't for you. You likely won't be able to purchase enough in order to cover your needs.
- Higher probability of your claim being denied. There's a variety of reasons for this, but it's generally understood in the industry that no medical exam life insurance policies have their claims denied at a much higher rate than a fully underwritten policy. This assumption has been confirmed in a conversation I had with a no medical exam life company when they told me their claim denial percentages — far higher than what I've been told percentages are by companies with fully underwritten policies. The best thing a consumer can do if they're applying for a no medical exam policy is to be very cautious and rigourous when answering the qualifying questions. Work with your agent to coach you through every single question.
- Limited benefits. Most no medical exam policies have coverage limited to accidental death only in the first two years. Since death by accidents is rare (most people die due to medical reasons), you're effectively paying for two years without 'real' coverage.
No medical exam policies are a great way to get life insurance for someone who has difficulty qualifying for a fully underwritten policy. But if that's not you, you'll get more and better coverage by taking a few minutes and doing a typical medical exam policy.