Are no medical plans from BMO and others really so no hassle?
No Medical Life Insurance sounds simple at first glance. It sounds like no hassle when it’s advertised as life insurance with no medical tests.
But, hold on! Most no medical plans have health questions. They can be broken down into two types: simplified issue and guaranteed issue. The former has no medical tests, but a series of health questions and the later has no medical tests and no health questions.
We’ve asked our panel of experts to further discuss some of things to watch out for. Our expert panel includes the following members:
Tamara Humphries was born in Sudbury, ON and moved frequently while growing up. Living in cities such as Kingston, Peterborough, London, Timmins, North Bay, Whitby and North York, Tamara developed a deep appreciation for Canada and all things Canadian and has spent considerable time in nearly all of the cottage areas in this vast province.
After achieving the BPHE, Tamara went on to complete the MBA program at York completing a double major in finance and marketing. In 1998 she completed the Certified Financial Planner designation and spent 12 years training and mentoring new advisors in the industry. Tamara still keeps up to date attending many seminars and courses each year.
As a graduate in physical and health education she is very interested in fitness, nutrition, well-being and leading an active lifestyle.
Aman seeks to build lasting relationships with his clients and use his skills to help his clients achieve the best value for their money.
Originally from New Delhi, India, where he acquired a BA (honours) in Economics, he moved to the United Kingdom to do his Masters in Business Administration from Heriot Watt University.
He has tremendous experience of working over four continents and has performed various roles in Marketing and Finance. Apart from fluency in English, he speaks Hindi, Urdu, Punjabi and Russian.
In his free time, Aman is fond of various performing arts, living healthy and is avid world traveler.
Born and raised in London, Ontario Mark’s goal is to provide his community with the financial acumen and peace of mind that comes from sound financial advice.
Mark is often a guest speaker on the Rogers Cable 13 television show “Planmar Financial Forum.”, and highlights his keen knowledge of investment in a free a quarterly newsletter for those looking to increase their financial IQ. Mark is Bachelor of Commerce graduate of McMaster University, and holds several industry designations.
He is service oriented and performance driven and works tirelessly to help his clients achieve their goals.
William was born in Johannesburg, South Africa.
As a former life insurance and long-term care advisor for the Knights of Columbus – the world’s largest Catholic fraternal service organization – he is well versed in the changing needs of Canada’s aging population.
He holds both an Elder Planning Counselor and a Fraternal Insurance Counselor designation and is able to advise on a variety of insurance plans including life, long-term care, critical illness and disability.
In a former life, he was a renowned marketing and advertising guru. He held directorial positions in several multi-national advertising agencies and visited Southeast Asian capitals such as, Manila, Bangkok, Kuala Lumpur and Singapore on their behalf.
William is fluent in both English and Chinese.
The Panel Discussion
We sat down with these five insurance industry luminaries and asked them five distinct questions designed to help you decide if no medical life insurance is a route that you should go down for your life insurance needs.
Who should consider no medical life insurance?
Tamara: “Anyone who is concerned that they may not be able to pass a medical. For instance, a person with a history of cardiovascular problems, diabetes, cancer, dementia, central nervous system disorders like MS, mental nervous disorders like anxiety, which may lead to a disability or schizophrenia. Even people who are generally healthy, but would be considered overweight, are better with non-medical plans.”
Aman: “If your health is not up to the mark and you fear that the conventional way of getting life insurance – doing a medical test – will not get you life insurance. Then, there is No Medical Life Insurance, which is an option for you when you don’t want to give urine or blood in a medical test. It’s a more straightforward method for getting insurance in those cases.”
William: “People who have health problems that would lead to a decline by traditional life insurance, or people whose traditional life insurance application has been declined. There are also people who do not want to answer the many health questions with traditional life insurance. Some people want a quick-issue policy, rather than having to go through a long wait for their doctor that could take four to six weeks or more if their doctor needs to send the insurance company a Attending Physician’s Statement (APS), Plus, some people simply do not want to have their blood taken for testing.”
Mark: “Everyone, regardless of age or health! It is a good idea to look at non-medical insurance carriers. Many people are unaware of the problems that may arise in underwriting for insurance that requires a medical. Just because you think you are ‘healthy,’ doesn’t mean an underwriter will. Non-medical insurance can provide a bridge until you know you have been insured under a policy that has a medical. Having a non-medical policy as a preemptive safety net is important because you may not qualify for the same preferred status if your traditional insurance application is declined, rated or postponed.”
Are their big premium differences among various no medical life insurance providers?
Tamara: “Yes, it is important that the broker know the differences between companies. But, more important than the premium, is the questions that are asked. The companies have different parameters for what they will accept, so it is important to choose a company that has friendly questions for your condition. After all, one non-medical company may approve your claim, while another would decline for the same condition.”
William: “There can be a substantial premium difference between no medical and traditional life insurance, depending on the age of the applicant, the plan and the insurance company offering it.”
Mark: “No. In the age of brokers and the internet, each company has to be competitive to survive. Every company is jockeying for its own niche in the market. One company may be less expensive for one group of people, (perhaps a male, non-smoker, age 40 to 50) while another company will be less expensive for another group of people (say a male non-smoker, age 50-65). This is why it is important to deal with a broker who can look at all companies and compare them.”
Aman: “The premiums are within a common range and the difference is generally not quite a lot…same ballpark.”
Do you think most people understand the difference between Guaranteed Issue and Simplified Issue Life Insurance?
Aman: “Not really! People need knowledgeable brokers.”
William: “No, I do not think many people understand the difference.”
Mark: “No, but that is a good example of why it is important to have an educated, well informed broker working for you.”
Tamara: “No, I think it creates a lot of confusion for people. But, a general guideline is, if you don’t want to answer any questions, you will have a limited benefit provision.”
Should a client still take a policy if it has a two-year waiting period on non-accidental deaths?
Aman: “Yes, it still helps!”
Tamara: “Yes, definitely they should. Also, they should not delay purchasing that plan, even with the limited benefits. If they die in the first two policy years of natural causes, the premiums are returned with interest, tax-free. Some companies provide 10% interest on those premiums and you’ll never find another safe investment to pay 10% tax-free.”
William: “When told there is a two-year waiting period, many applicants will hesitate to take the insurance. Actually, I think this thinking is wrong. People should be buying life insurance for the longer term. People are not buying life insurance after they have been diagnosed with a terminal illness. If you don’t die within the first two years, the waiting period has no effect on you, so why not just take the insurance? On top of that, there is usually a full refund of premiums paid, with interest, if natural death occurs within the first two years. Plus, most no medical life insurance plans will pay if the death is an accidental death within the first two years of the policy.”
Mark: “If there is no other option that the client can afford without undue hardship, then yes, these type policies can be attractive. Clients should look at it as a savings plan without tax consequences to the beneficiary. If they pass away within the first two years, their premiums are paid out as the death benefit, so they avoid the estate and therefore, probate. If the client lives past the first two years of the policy, then the full death benefit kicks in.”
How do the policies sold by companies directly, like BMO Insurance’s Guaranteed Life Plus, stack up with what brokers like you can offer?
Mark: “Those products sound great, until the policyholder finds out a year later that his death benefit has decreased, but he still has to pay the same amount. Then, subsequently, year after year, the death benefit decreases. I would only ever recommend these type of policies to someone who would like to cover a debt and is actively paying that debt down every year.”
William: “Policies sold directly by the insurer are different from the plans sold through brokers. The difference can be the amount of insurance coverage. For example, you cannot buy whatever amount you choose, you have to select from several fixed coverage amounts. Insurers who sell plans directly, usually advertise their plans heavily, so the average consumers are not aware of the difference between plans sold by brokers and plans sold through the direct market. To skew impressions even further, the advertising in the plans sold direct are usually tailored to look very attractive.”
Tamara: “When I explain the various insurance company contracts to people, they tend to stay away from this BMO plan because it is so confusing. The plan has a basic death benefit which is enhanced if the death is accidental. It Is not as great as what you see on TV, as that ad is a little misleading. For instance, a $25,000 death benefit is really $5,000 for death and only $25,000 for accidental death. The trouble is, the insured purchasing the plan is generally dead at the time of the claim and the last thing you want is for the beneficiary to be thinking they are getting one amount, when really it will be far less.“