The Advantages and Disadvantages of No Medical Life Insurance

No-medical life insurance in Canada has seen an upsurge in popularity in recent years, but how many insurance advisors and consumers really understand the pros and cons of this type of coverage? We lay out five advantages and disadvantages just for you.

Advantages

1. You can obtain coverage without a medical exam. This is a big plus for people who don’t like meeting with nurses or giving blood, urine, et cetera, or who can’t without being disqualified.

2. Plans are now available with a discount to non-smokers. In the past, many no-medical plans use blended non-smoker and smoker rates.

3. No-medical life insurance plans that ask a short series of health questions (such as simplified issue life insurance plans) can provide coverage from day one.

4. Higher coverage amounts are now available. Canada Protection Plan now offers coverage levels on its no-medical life insurance plans of about $300,000.
5. Term 10, Term 20, Term 100, and limited pay no-medical life insurance plans are now available.

Disadvantages

1. Many simplified issue plans and all guaranteed issue plans come with a waiting period for non-accidental deaths. The waiting period is generally two years, meaning that if the insured passes away in the first two policy years, the death benefit is limited to a return-of-premium plus interest. Actually, some direct guaranteed issue carriers, such as BMO Insurance, don’t even return your premium with interest.

2. Though more providers don’t, many guaranteed issue policies still have blended rates, so non-smokers are paying a higher premium then they normally should be.

3. The premiums on all no-medical life insurance policies, including simplified issue policies, are significantly more expensive than traditional life insurance. Therefore, a healthy person should always look at a traditional policy first.

4. Policy options, while better, are still very limited. No-medical life insurance policies are not available as universal life policies, or as particular long-term policies, such as Term 30 or Term 40 plans. No-medical policies are also not available on a joint-life basis.

5. Executives, or higher income earners, are likely not able to get the coverage they need from a no-medical life insurance policy. Having said that, if traditional life insurance is ruled out, something is definitely better than nothing.