Last updated: July 19th, 2022
Reviewed by
Grant Desselle
Licensed Insurance Agent
Table of Contents
The risk is higher for insurance companies when you don’t take an exam. They never have a medical professional look at
Most simplified issue term products have a maximum coverage amount of $1 million. The more coverage you apply for, the greater the chance that a medical exam will be requested.
Most simplified term life insurance products are meant to be sold through a non-face-to-face process. To save money, some companies choose to bypass the medical exam for extremely healthy people. The companies are the ones who pay for the medical exams, so the savings are significant.
Generally, premiums for these products are 5% to 25% higher, depending on the company you apply to. The price differences seem to be getting smaller every year, though, as insurance companies more aggressively target a direct-to-consumer business model.
There are some very important reasons to use an experienced, knowledgeable, independent agent:
No medical exam life insurance products often determine eligibility instantly using an algorithm. This is good and bad. When you get declined, your data goes into the MIB database and you can be disqualified from getting life insurance at another company.
Companies are constantly modifying their algorithms. This means that Company A might approve people at lower rates in one quarter, but then in the next quarter the company tightens up its algorithm and the same person who was approved earlier would now be declined. Agents who work with simplified issue products are aware of when these changes occur and use this information to get you the best policy.
Simplified issue term insurance is one of the biggest opportunities for life insurance companies to increase their profits. New products are introduced on a constant basis, and a good independent agent stays up to date on what’s available.
At certain times of the year, insurance companies make strong pushes to boost their numbers. You can get an amazing deal when you apply at the right time with the right company. An independent agent can provide this information.
Often we see insurance companies make a big splash in the market with new and updated products. They lower prices and make it easier to get approved for these policies. But because simplified issue products carry a higher risk for insurance companies, they sometimes get nervous and suddenly change their processes until they see how their algorithms have worked. This means it could be years before yesterday’s best simplified products are good again. An independent agent makes sure you have the opportunity to apply for the best product when you are applying.
The term life insurance market is competitive, and the most common way companies set themselves apart from one another is pricing. Every day, we see insurance companies lower their rates. Make sure you do some research and run comparisons before you apply for a policy.
You pay the same price for a policy whether you use an agent or not. Agents are compensated by the insurance companies.
Not necessarily. Depending on the product and company you choose, it is possible that you will be required to take an exam before you are approved for a policy. In some cases, this is a good thing. Being offered the option to take a medical exam and being declined are very different outcomes. The option to take a medical exam reduces the chance that you will get declined.
Yes. You will almost always have to answer medical questions when applying for a simplified issue term life policy. The only exceptions are some group life insurance products. In fact, how you answer the medical questions on the application is the main way the insurance company will determine your eligibility. The only products that don’t have medical questions are guaranteed issue life insurance policies, accidental death benefit policies, and some group life products.
On average, the overall application process for a simplified issue term life policy takes 2 weeks, but it all depends on the product you choose. Some companies use algorithms and AI to offer instant decisions. However, most applications for simplified issue policies are referred to an underwriter for review. When you add up the time needed to schedule a possible phone interview and request doctor’s records and a medical exam, the time frame makes sense.
Underwriters for simplified issue term life products use public reports, the application response and algorithms to accurately determine the applicant’s mortality rate. The insurance company’s goal is to determine the odds of the applicant dying during the coverage period. If the applicant outlives the policy term or lets the policy lapse, the insurance company makes a profit.
The main items an insurance company will use to determine your eligibility are your:
MIB report
Rx/pharmacy report
Motor vehicle report
LexisNexis risk assessment score
Answers on the application
It’s hard to say if the medical exam requirement will be moonlighted completely in the future. More and more companies are developing level term life insurance products that don’t require a medical exam because that is where the market is going.
Simplified issue opens the doors to many different avenues for increasing sales, including online, over the phone, face to face, and as product extensions to auto, home, disability, Medicare, and health insurance.
Partnerships are another avenue for simplified issue. Your bank most likely offers life insurance now, and those policies are usually outsourced and pitched as add-on products. Costco and Walmart offer simplified issue term life insurance through partnerships.
Agentless online instant decision
These are online products that you can apply for entirely on your own. Applying is quick, and your eligibility is determined through the use of algorithms and AI. Be aware that it is easy to get declined when you don’t work with an agent. Getting declined on an insurance application makes you ineligible for many other simplified issue products, so be careful.
Rapid and express issue
Rapid and express issue products don’t necessarily include instant decisions. They are easier to qualify for than other types of simplified issue term product types, with the exception of group life insurance. An approved as applied, approved better than applied, approved other than applied, referred to an underwriter for further review, or a declined decision is provided immediately after you complete the application. Generally, there’s just one health class, which means that everybody gets the same rates. These policies are often on the expensive side. If you don’t want to answer too many health questions and you’re OK with paying more, this can be a good option.
No medical exam
This is a broad term encompassing policies that may bypass the medical exam requirement. Since the medical exam is the biggest pain point in the life insurance application process, the term “no medical exam” is the one used most often when describing the simplified issue processes. Other terminology used includes non-medical, no exam, no medical, no physical, without an exam, and without a medical.
Accelerated underwriting
This is a process in which the medical exam is bypassed for people in good health who are applying for lower coverage amounts — typically under $1 million. These policies have the best pricing for healthy people, though there’s a high chance that an exam will be required.
Group term life
To be eligible for a group life insurance policy, you first need to join a group, association, organization, or company. There are few health questions for this type of policy, and the prices are generally good. There are some downsides to group life policies, though. Coverage amounts are low, the group is the owner of the policy (you are just a certificate holder), and the policy is not guaranteed to stay active. Group life is a good option for add-on, or additional, coverage to a policy you personally own. If you are ineligible for other types of life insurance policies, group term insurance is an excellent opportunity for coverage.
The simplified issue term life insurance process is how all insurance products will likely be underwritten in the future. As medical records become more available and easier to access online, more companies will be able to bypass medical exams. Furthermore, the use of algorithms and AI significantly lowers costs for insurance companies. As the algorithms and AI get smarter, we will see higher coverage amounts being offered and lower pricing for term insurance. For now, if you want coverage over $1 million, you’re going to have to take a medical exam.
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
Grant's past experience includes work as a licensed sales agent for Hagerty Insurance. He has reviewed thousands of existing auto policies across the nation and issued hundreds of new ones on everything ranging from classic cars undergoing restoration to modern exotics and motorcycles.
