- Should you buy simplified issue life insurance?
- What is simplified issue life insurance?
- What is the average cost of simplified life insurance?
- How to buy simplified-issue term life insurance
- Pros and cons of simplified issue life insurance
- Simplified issue vs. guaranteed issue life insurance
- Is simplified issue life worth it?
Should you buy simplified issue life insurance?
Simplified issue life insurance is designed for those who:
- Don’t qualify for traditional life insurance due to their health
- Are older and may pay more after a medical exam
- Want coverage as quickly as possible.
The application process is fairly simple and typically only involves answering a few health-related questions. However:
- Premiums for simplified issue term life insurance are much higher than those for traditional term or permanent policies because of the increased risk to the insurer of not knowing about possible medical issues
- Coverage amounts may be limited due to the lack of full underwriting
EXPERT TIP: If you're in good health, you will likely pay much less if you go through the full underwriting process for a traditional policy.
What is simplified issue life insurance?
A simplified issue life insurance policy is a no-medical exam policy that is issued quickly. Traditional life insurance requires a lengthy application process that includes a medical exam.
Simplified issue life insurance is issued more quickly because there are fewer steps.
"One of the biggest advantages of simplified issue life insurance is that the insurer decides faster — sometimes in minutes, compared to several weeks for traditional underwriting. Also, the application is much shorter: A simplified issue life insurance policy will only ask you a handful of health-related questions and there is no medical exam," Seth Buckley, president at Buckley Financial, a life insurance brokerage, says.
Insurers use algorithms and databases to assess your health rather than an exam. You fill out an application, usually online.
What is the average cost of simplified life insurance?
Life insurance rates depend on a wide variety of factors. Even without a medical exam, your health history will play a role. So does your age, lifestyle, and even your hobbies. And, of course, the amount of coverage you purchase will affect your rates.
"As a rule, simplified issue is always more expensive than fully underwritten policies. The insurance companies are taking more risk by not having all of the medical records, and charge a higher premium per thousand of protection to hopefully offset the increased risk," Kim Wilhelm, owner of Final Expense Direct, a life insurance agency in Houston, Texas.
Below, we’ve provided sample annual rates for a simplified 10-year term life policy with a $100,000 death benefit. Rates are provided for a 30-year-old male and female, regular health category.
| Company | Plan | Male | Female |
|---|---|---|---|
| American-Amicable | Easy Term 10 | $233 | $189 |
| MassMutual | Haven Simple | $142 | $108 |
| Fidelity Life | Insta Term | $175 | $158 |
| National Western | Rapid Issue Life Term | $205 | $180 |
| Columbian Life | Safe Shield | $285 | $232 |
| Foresters | Strong Foundation | $251 | $207 |
| United of Omaha | Term Life Express | $214 | $182 |
As you increase the death benefit and the length of the term, rates will go up. Whole life will be even more costly because it lasts your entire life.
How to buy simplified-issue term life insurance
To buy a simplified issue policy, follow these steps:
- Request quotes. Get several quotes to compare from multiple insurers; you can often do this online.
- Compare and choose the policy that's right for you. Look at the cost as well as the company's reputation.
- Complete the application. Many insurance companies offer online application for simplified issue life insurance. You'll have to provide some personal details and answer a few medical questions.
- Wait for your approval. This could be in minutes or a few days, depending on the company and policy details.
- Pay your premiums. If you're paying monthly, set up automatic payments so you don't forget.
Simplified issue life insurance policies range from whole life options designed to pay final expenses to term life policies that can provide up to $1 million.
Pros and cons of simplified issue life insurance
If you're considering a simplified issue policy, make sure you've reviewed the pros and cons first.
Advantages of simplified issue life
There are several advantages to choosing a simplified issue life insurance policy.
- Convenience. The application is easy to fill out, and you don’t have to worry about a medical exam.
- Availability. These policies are available from a wide variety of insurance companies, including those that sell policies online and to a wide age range.
- Contactless. No one comes to your home or office, and you can get a policy issued without contact.
Disadvantages of simplified issue life
- Limited offerings. These policies may not have as many options for riders as a fully underwritten policy.
- Price. The cost of simplified issue life insurance is likely to be higher, especially for young, healthy people. Without the information provided by a medical exam, insurance companies take on more risk insuring you and charge you more.
Simplified issue vs. guaranteed issue life insurance
The difference between simplified issue and guaranteed issue is that you can't be turned down for a guaranteed issue policy. While simplified issue insurance has a much easier application process and lighter underwriting requirements, you may still be turned down based on your health history or other factors.
Guaranteed issue is most common in final expense insurance, a type of whole life policy intended to provide a small death benefit for final expenses.
Is simplified issue life worth it?
For young, healthy people, a simplified issue policy is not the most cost-effective way to get coverage. "Healthy applicants will benefit from fully underwritten policies because they can qualify for the best rates," Buckley says.
So when does simplified issue life insurance make sense?
It might be the best option if you have health problems that make it difficult to qualify for a fully underwritten policy.
"Individuals who qualify for simplified issue policies would be declined for fully underwritten policies in most cases," Wilhelm says.
Bear in mind that there will still be some health questions, so you might have to look into guaranteed issue life insurance instead if you have serious health problems.
"One disadvantage of simplified issue life insurance is that some simplified issue policies will only pay the full death benefit to your beneficiaries if you had the policy at least two years before death. If an insured person dies less than two years after getting the policy, the beneficiaries will typically get a refund of the premiums paid, with some interest," Buckley says.
If you’re willing to pay more for the convenience of a quick turnaround time and skipping the medical exam, then simplified issue is for you.
If you decide to go ahead with simplified issue life insurance, make sure you shop around. Get quotes from multiple insurers and choose the option that works for you.
