When you apply for a traditional life insurance policy, your application is reviewed by a team of underwriters. This is true no matter which insurer you go through. All traditional life insurance policies need to be underwritten. However, when applying for no exam life insurance, you have a chance of buying a policy that is not fully underwritten. Policies that are not fully underwritten are usually easier to be approved for and grant approval much quicker.
What is Underwriting?
Underwriting is the process in which insurers determine your eligibility for life insurance. If you are eligible, underwriters go a step further and assess the minute details of your health to determine what health class you fall into.
Determining your health class essentially means assessing how much of a risk you pose to the insurer. People who are in great health, statistically, pose very little risk to the insurer. These people are given the highest class rating and get the lowest monthly premiums. People with some health complications pose varying degrees of risk, which underwriters assess through statistical comparison.
Depending on how severe your health issues are, you can be denied coverage, or given very high monthly premiums. If you’d like to get an idea of how much you’ll be charged for life insurance given your personal medical situation, click here to get a free quote.
Full Medical Underwriting vs. Simplified Underwriting
Much of the information reviewed by underwriters comes from the questionnaire on your application and from the medical exam that’s required as part of the application process. In fact, the process is called “full medical underwriting” because the information that is assessed comes from a medical exam taken for the express purpose of getting life insurance. Full medical underwriting is necessary for approval for traditional life insurance policies, and it’s the reason why the approval process takes so long. In most cases, 4-6 weeks.
Simplified underwriting is similar to full medical underwriting, except it’s a much simpler process (as the name implies).
Simplified underwriting isn’t available for most traditional policies, but it is available for no exam policies. No exam policies are exactly what they sound like — they allow you to skip the medical exam as part of the life insurance application process. Instead, you need to answer a short questionnaire.
In some cases, insurers collect information about you from third parties, which is how they are able to assess their risk. These third parties include the MIB, an insurance database that stores old life insurance applications, the Department of Motor Vehicles, pharmacies, and financial institutions. All these checks are done with the applicant’s consent, for the sole purpose of assisting the underwriting process. But even with collected information, no exam policies are not considered fully underwritten.
When underwriters don’t have a current medical exam to review, the underwriting process is shortened, and well, simplified. It is also much quicker. Instead of taking 4-8 weeks to get a response from an insurer, people who apply for no exam life insurance policies can get their answers much quicker. In some cases, approval is immediate, while in other cases, it can take a few days or a few weeks.
The quick approval time is one of the most appealing aspects of a simplified underwriting policy. People who need to finalize a divorce settlement of secure an SBA business loan often need to secure life insurance very quickly. In these situations, simplified underwriting is ideal. Of course, there are those who imply want to finish with the entire process as soon as possible instead of waiting for nearly two months to get coverage.
Pros and Cons of Simplified Underwriting No Exam Life Insurance
As with any life insurance policy, there are pros and cons of simplified underwriting policies.
- No inconvenient medical exam or blood tests
- Short application process
- Fast approval
- Coverage can go up to $500,000
- Potentially higher premiums – Since insurers don’t have a full picture of your medical state, they are not able to fully assess their risk. This means that premiums can be higher. However, if you’re in good health, premiums can be very similar to fully underwritten policies.
Deciding if a Simplified Underwriting Policy is Right For You
A simplified underwriting policy can be a good option for people who need life insurance quickly, who don’t like medical exams, or who don’t have the patience for a long, drawn-out life insurance application. It is an especially good option if you are relatively young and in good health, since you can then get very similar rates to fully underwritten policies. Since only you know your particular situation, it’s up to you to decide whether simplified underwriting is the right choice for you.