Simplified issue life insurance

Simplified issue life insurance is coverage you can get without a medical exam, based on answers to a short list of health questions plus electronic checks of your records. Unlike guaranteed issue coverage, the insurer can still decline you, and a "yes" to certain questions will end the application. It costs more than a fully underwritten policy for healthy people but less than guaranteed issue, and it is a common route for older buyers and for people who want fast approval.

How it works

With full underwriting, an insurer may send a nurse to take your height, weight, blood pressure, blood and urine, then read your doctor's records. Simplified issue skips the nurse. Instead:

1. You answer a short questionnaire, often 5 to 15 yes/no questions about diagnoses, hospital stays, and tobacco use. A "knock-out" answer, such as recent cancer treatment, a diagnosis of heart failure, or use of oxygen, usually ends the application.
2. The insurer checks databases: your prescription history, the MIB report of past insurance applications, and motor vehicle records. These checks can contradict your answers.
3. A decision comes quickly, often minutes to days. You may be approved at one price, offered a graded product, or declined.
4. Coverage starts when the policy is issued and the first premium is paid.

Simplified issue is not the same as accelerated underwriting: approval without an exam, which is a fast-track version of full underwriting, often for healthier, younger buyers. See also no-medical-exam term life insurance: how it works for the term version.

Who buys it

• Older buyers who want a modest policy for final expenses and do not want a blood test. See final expense insurance: what it covers and costs.
• People with some health issues that keep them out of the best price class but who are insurable.
• Anyone who dislikes exams or needs a fast answer.

Face amounts are lower than in fully underwritten policies, and age limits are lower for term versions than for whole life. Many carriers issue simplified whole life into the 80s, but the range depends on the company.

What it costs, honestly

The insurer is taking more risk because it has less information, so it charges for that. For a healthy person, a no-exam policy is usually priced higher than the same coverage with a full exam, since the exam would have earned the buyer a better rate class. For a person with common conditions, it may be cheaper than a rated fully underwritten policy, since the insurer does not add as many surcharges. The only way to know is to compare quotes.

A hypothetical comparison, not market prices:

Cost per $1,000 per year is the monthly cost times 12, divided by the number of thousands of coverage. For the simplified row, $105 x 12 = $1,260, and $1,260 / 15 = $84.

The catch: graded benefits and denial risk

Simplified issue is often sold in tiers. An applicant with no concerning answers may get a level benefit that pays in full from day one. An applicant with a borderline answer may be offered a modified or graded tier at a similar premium. Read the tier you are offered. A graded death benefits: why the first two years matter means natural death in the first two or three years pays only premiums plus interest.

Because there is no exam, the insurer verifies later. If you die within the first two years, the insurer can review the application and the medical records. A misstatement that matters can lead to a denial or a reduced claim. Answer honestly, even if a question seems intrusive; see what happens if you lie on a life insurance application and the two-year contestability period.

How to apply well

1. Write down your diagnoses, medications, and dates before you start, and have your doctor's names ready.
2. Read each question twice. "In the last 5 years" and "ever" have different meanings.
3. Ask the agent which tier you qualify for and what the first two years pay in dollars.
4. Get a full-underwriting quote as well if your health is decent. Ask the agent for both.
5. Do not apply to many companies at once without a plan. Each application appears in the MIB database, and a decline can affect the next application.
6. Use the free-look period. The the free-look period: returning a policy for a refund lets you cancel for a refund, usually within 10 to 30 days depending on the state.

When it makes sense

Suits: someone in mixed health who wants $10,000 to $50,000 or more of permanent coverage, wants a fast decision, and would pass a short questionnaire. Also someone who needs some coverage this week.

Does not suit: someone in excellent health who wants larger coverage. A fully underwritten policy usually costs less. It also may not suit someone who has serious current diagnoses; guaranteed issue or savings may be the realistic path, see guaranteed issue life insurance: no health questions, with limits and Declined for life insurance? What to do next.

If you are 65 or older, life insurance for seniors: what's available after 65 lays out the full menu of options.

Key takeaways

• Simplified issue means a short health questionnaire and database checks instead of a medical exam, and you can still be declined.
• It generally costs more than full underwriting for healthy people and less than guaranteed issue.
• Check which tier you are offered; a graded tier pays a reduced benefit for natural death in the first years.
• Answer truthfully, since the insurer can review your records if a claim arises early.
• Get at least one fully underwritten quote for comparison.