28 Jan Life insurance without medical exams

Q. When I see these commercials for insurance plans that don’t have a medical exam, it sounds too good to be true. What do I need to know?
— Underinsured

A. When something sounds too good to be true, it usually is.

But in the case of policies that don’t require a medical exam policies, they do serve a purpose and fulfill a need – at a cost.

For example, a guaranteed issue life insurance policy does not require a medical exam or even medical questions to be answered, said Michael Green, a certified financial planner with Wechter Feldman Wealth Management in Parsippany.

With this type of insurance, all you need to do is complete the application, pay the premium, and you will be covered, Green said.

“These types of policies are mainly for individuals who are unable to obtain traditional coverage due to health issues,” Green said. “Unfortunately, guaranteed issue life insurance policies are very expensive, sometimes five times more than other life insurance policies.”

He said there are often other restrictions on these policies. For example, he said, if you die within the first two years of purchasing this type of policy (other than in an accident), your premiums may be returned, and the death benefit may not be paid.

Green said a simplified issue life insurance policy is issued without a medical exam, but the applicant must answer a few medical related questions to qualify for this type of policy.

“Much like the guaranteed issue life insurance policy, this type of coverage can be very expensive,” he said. “Most times it can be two to four times higher than other insurance policies.”

On the plus side, the issuance of these policies is done without any blood bring drawn, and usually have a quick turnaround time, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

That means people with significant medical issues — and wouldn’t make it through the underwriting process — have a chance at some coverage, she said.

“There are limits to the amount that you can purchase as well, so you may need greater coverage than what is available to you,” D’Agostini said. “The limit is often based on your age at the time of application.”

Unless you apply for a “guaranteed issue” policy, D’Agostini said you can still expect a phone interview, and your history will be checked with the Medical Insurance Bureau, the Motor Vehicle Records and the Pharmacy Database.

There’s another type of policy that does not require a medical exam, Green said. It’s called a final expense insurance policy.

“These policies are usually purchased by individuals near death who do not already have a life insurance policy,” he said. “The benefit is used to pay for funeral, burial and other final expenses.”

Green said insurers who do not require a medical exam do charge more for coverage because the insurance company is taking on more risk than if they had required a medical exam.

Even if you have medical issues, take a look at more traditional types of policies first. You might be surprised to find a policy that’s more suited to your needs — and that accepts you for coverage.

“When seeking life insurance coverage, look for more cost effective options first before settling on a policy just because the insurer does not require a medical exam,” Green said.

Consider meeting with an advisor or insurance broker who is familiar with all your options, and can help you decide how much insurance you need and what kind is best for you.

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This story was first posted in January 2016.