Life insurance is one of the most important purchases you can make in your adult life, and yet, many people put off buying it when they are young. Then, as they get older, they develop health problems, and obtaining life insurance becomes more difficult. Either they do not qualify for lower rates anymore or their health is so poor that they are denied coverage altogether. However, just because they cannot qualify for a traditional life insurance policy does not mean they are stuck. In this case, no exam whole life insurance is one of the best ways to get the coverage they need.
What Is No Exam Whole Life Insurance?
No exam life insurance is exactly what it sounds like — life insurance that you can get without undergoing a medical exam. There are two main types of no exam life insurance: term and whole. Term is a type of life insurance that is only valid for a certain period of time, while whole life insurance does not have an expiration date — once you buy the policy, you have it for life. There are both traditional term and whole life insurance policies and no exam whole policies.
No exam whole life insurance is designed specifically for the situation mentioned above — a person who has serious medical conditions that would disqualify them from getting a traditional life insurance policy can get a no exam whole policy.
No exam whole policies, also known as guaranteed issue policies, are granted to anyone (as long as they are within the age limit, which is usually 80 or 85). No medical exam is required and absolutely no health questions are asked — approval is guaranteed. This is what makes it a viable option for older people who have been turned down for traditional policies.
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Pros And Cons Of No Exam Whole Life Insurance
As mentioned above, no exam whole life insurance can save the day for someone whose health conditions prevent them from qualifying for a traditional life insurance policy. No health questions are asked, and approval is guaranteed. Plus, approval can be instant since there is no underwriting, which means that you can get coverage in a matter of minutes through an entirely online application process.
While no exam whole life insurance is certainly convenient, there are several drawbacks:
- Coverage is limited: With these policies, coverage is usually limited to $25,000 or $50,000.
- High premiums: Out of all the types of life insurance, the premiums for no exam whole policies are the highest.
- Graded death benefit: Many no exam whole policies come with a graded death benefit, which means that if the policyholder dies within two years of policy purchase, only a portion of the death benefit is paid out.
Protection From Risk
The common factor among all the cons of no exam whole life insurance is that they each provide a way for insurers to protect themselves from risk.
Here is how it works: Traditional life insurance policies include an underwriting process, which is why approval takes such a long time. During the underwriting process, underwriters review every detail of the applicant’s medical exam, medical history, credit history, pharmacy records, driving records, and more.
The reason for the thoroughness is so that insurers can assess how much risk the person poses to the company. For example, smokers are always considered a higher-risk than non-smokers, because statistics show that smokers have a higher rate of mortality. Smokers can still get life insurance, but they will always get higher rates than non-smokers.
Similarly, every other health/lifestyle issue you have is compared against statistics — heart disease, diabetes, asthma, obesity, speeding tickets, dangerous hobbies, etc. The bigger the risk you pose to the insurer, the higher your rates may be. In some cases, you will pose such a great risk that you will be denied life insurance altogether.
That is the case in which most people turn to no exam whole life insurance. With no exam life insurance, since no health or lifestyle questions are asked, insurers have no way of knowing the risk they are taking. But they assume that the risk is high, which is why the person is choosing a no exam whole policy in the first place. To cover themselves against the high risk, they limit coverage, charge high premiums, and often pay out a graded death benefit.
Is No Exam Whole Life Insurance Right For You?
If you find yourself in a situation in which you have been denied/think you will be denied coverage for a traditional policy, but still want to leave something for your loved ones, no exam whole life insurance is your best bet. While the premiums are high, they come with peace of mind knowing that you’ll have something to leave to your loved ones.