These topics don’t get much discussion when it comes to no medical exam insurance but they ARE still important.
Below we’ll discuss some common pitfalls to watch out for and how these relate specifically to shopping for no exam life insurance.
- Conversion options
- Company ratings
- Accidental death coverage
- Guaranteed issue confusion
1) Conversion Options
With any term life insurance product, you will want to understand your conversion options upfront. No medical exam policies are no different.
Even if you have ZERO interest in a permanent or whole life policy, having the ability to convert to one at a later date is a valuable benefit.
The vast majority of conversions don’t require new evidence of insurability. This is important. If you purchase a 15-year term policy now, while in good health, do you really know what your health picture will be like 15 years down the road? Probably not.
During the 15-year initial term, you could develop a condition that causes you to pay much higher rates next time around, or worse, not be insurable for any coverage except the expensive guaranteed issue policies.
So even if you don’t care for permanent policies, think of the conversion option as a kind of “insurance on your life insurance“. Should something develop for the worse in your medical picture, you are protected from losing your life insurance.
Many simplified issue policies that don’t require a medical exam will, in fact, still have conversion options. Many are included in the base price of the premium. Some require an additional fee to have that right.
Make sure you understand the details of any policy before you apply.
Riders are options to customize the base policy to fit your needs. Although typically not as plentiful, they DO still exist on no exam life insurance.
There are many different types of riders in existence. Some might be a good fit for you, and many will just inflate the cost of your premium payment. If you want to learn more, see our guide for a detailed breakdown of the many rider types.
Some riders will be automatically included in the non-med policy and are nice extras to have. Others come at an additional cost. Our article on the top companies and policies for no medical life insurance will go into more detail on the riders offered by individual companies.
Just because a rider is included for “free” doesn’t mean it’s actually free. This is likely reflected in the cost of the base premium.
Our advice: Always look at the rider options but only add what you really need. Do NOT choose your policy or insurance company solely based on riders. They are “extras” and not the main course.
3) Company Ratings
Whether it’s a multi-million dollar whole life policy or a $50,000 quick no exam policy, you want to know your insurance company is going to be around to pay out the death claim should something happen to you.
Agencies such as Moodys, A.M Best, Fitch, and Standard & Poors maintain credit ratings on most of the major insurance companies. A.M Best is the most widely respected when talking specifically about insurance carriers.
The higher the rating, the better. Typically, we will only advise our clients to consider insurance companies with an A.M. Best rating of at least A-.
Our breakdown of no exam companies provides information on A.M. Best, Standard & Poors, as well as Better Business Bureau ratings so you can understand the number of customer complaints if that is important to you.
4) Accidental Death Coverage
This can be confusing.
There are policies that only pay a death benefit in the event of an accidental death. These are not true or full life insurance policies. There are also some products that offer a “hybrid” policy where a portion of the death benefit is “true” life insurance and the rest is accidental death coverage.
It’s easy to be attracted to the low rates these companies advertise but please be careful and understand exactly what you are buying.
Many no exam policies will offer an additional death benefit to be paid in the event of an accidental death. This is above and beyond the normal face amount that pays out for death from any cause. Typically this will be attached to the policy as a rider.
5) Guaranteed Issue Confusion
Life insurance with no medical exam, no questions, and everyone is approved right away.
that sounds amazing, right?
All those things are in fact true. What they don’t make clear up front sometimes, are 3 very important things.
- High cost – Guaranteed Issue life insurance is the most expensive policy type by far.
- Low coverage cap – Most companies only offer up to $25,000 in death benefits.
- Waiting period – If you die in the first 2-3 years, your beneficiaries do NOT receive the full death benefit. Instead, they get all premiums that were paid into the policy returned, plus some interest.
Guaranteed issue life insurance does have its place.
But it should only be considered once all other options have been exhausted. Depending on your medical situation, you may be able to answer a few questions and be approved for a Graded Benefit policy. This will save you lots of money.$$
No medical exam policies are still actual life insurance policies. Many do have options for customization and conversion privileges.
It’s in your best interest to understand everything that is included when choosing a no medical exam insurance company and policy type.
Any questions? Consult a professional independent agent who lives and breathes this stuff.