Most of the articles about insurance myths talk about typical car insurance legends, such as higher insurance for red cars. Barely anybody focuses on the misinformation about no medical life insurance!
Before we start, here’s a quick recap. No medical life insurance is a type of insurance that does not require a medical test. There are two types of no medical policies:
- Simplified Issue No Medical Life insurance has no medical exam, but still has a medical questionnaire that you need to complete. You will answer a series of questions based on your medical history, current medical status and the state of any preconditions.
- Guaranteed Issue No Medical Life Insurance does not have a medical exam, nor does it have any medical questions. In other words, everybody can qualify for it, but the downsides of such easy access to this insurance are higher premiums and lower coverage.
Now let’s dispel some myths!
- Myth: If you have a medical precondition, you need no medical life insurance.
False! Today, many preconditions will still allow you to apply for a rated traditional life insurance policy, which is a bit more expensive than a standard policy but typically cheaper than no medical life insurance. People with such preconditions as diabetes, heart disease, etc. can often apply for traditional life insurance and simply get a rated policy.
- No medical life insurance always means no medical exam and no medical questionnaires.
False! There are two types of no medical life insurance, and only the guaranteed issue no medical life insurance policy has neither questions nor medical exams. A simplified issue no medical life insurance policy has no exams, but does have a medical questionnaire.
- No medical life insurance has exorbitant costs.
False! Although the costs of no medical life insurance per $1,000 in coverage is likely to be higher than a standard life insurance policy, it is not necessarily exorbitant; the maximum coverage you can buy is lower than the coverage of standard life insurance.
- If you purchase no medical life insurance, you are immediately covered.
False! Most simplified issue policies, and all guaranteed issue policies, have a two-year waiting period. If you die within the first two years, your beneficiaries may receive the premiums paid into the policy, but not the benefit. This is to deter terminally ill patients that know they will pass within two years from getting life insurance. Sounds a bit harsh, but the reality is, insurance works because underwriters need a set amount of time to invest the premiums. If everyone rushed to get life insurance when they were terminal, the system would collapse and nobody would be covered.
- No medical life insurance offers a similar amount of coverage as traditional life insurance.
False! Given that the majority of people looking for no medical insurance already have preconditions, insurers limit amount of coverage for these policies. Nevertheless, no medical life insurance policies often offer enough coverage for final expenses, debt repayment and legacies. Traditional life insurance can come with several million in coverage. A simplified issue no medical policy offers coverage between $200K-$300K. A guaranteed issue policy is capped at $20K-$25K.
- No medical life insurance is only good for those who cannot get any other type of insurance.
False! Sometimes people decide to go for a no medical life insurance policy if they are not comfortable with a medical exam or need a quick, easy-to-get policy without a lengthy underwriting process; for example, if you have a trip coming up and want to be insured before you leave.
- All no medical life insurance policies are equal.
False! There are differences in various life insurance policies. For example, different simplified issue no medical life insurance policies use various questionnaires to assess risks associated with their customers. Also, coverage, cost and other aspects of the policy differ across providers. One must shop, or have a broker shop for you, among the no medical policies to find the one you will most likely qualify for, and the one that will best suit your needs and budget.
- It does not matter if I get a no medical life insurance policy from a broker, an insurance agent or by calling an insurance call centre.
False! This is one of the biggest myths out there. It does make a difference how you shop for insurance. An insurance broker is the only one who searches for insurance for you across different providers and, thus, offers more choices. He/she knows which insurance policies are the better choice for your health preconditions and lifestyle. An insurance agent or a contact center representative, on the other hand, are only able to offer you a policy from the provider they work for, making it difficult for you to get an objective perspective and a competitive price.
- I can purchase this type of insurance once I know that I am terminal.
True! You CAN purchase it, but you need to consider that most policies will pay nothing to your beneficiaries should you die within the first two years. Only your premiums will be typically returned. That clause varies among policies, so you need to read and understand your policy very carefully. In some cases, terminal patients do not know when they will pass, and in those cases, no medical policies make the most sense.
- Getting a no medical life insurance policy can be complicated and includes a lot of paper work.
False! Unlike other life insurance types, getting a no medical life insurance policy is by far simpler than getting a traditional policy. The easiest policy to purchase is a guaranteed issue no medical policy – since you do not need to complete any exams or questionnaires. In fact, some companies will sell it to you directly on the phone, but we’d suggest you use an insurance broker (see myth #8)!
- A no medical life insurance policy has enough coverage to take care of my family if something happens to me.
Neutral! The truth is that no medical life insurance policies do not have extensive coverage. A guaranteed issue policy will not offer more than $25K coverage, and simplified issue offers between $200K-$250K. If you want to make sure that your beneficiaries (especially if you have small kids) are being taken care of, it might be not enough. The costs to raise a child in Canada add up to nearly $250K as this article shows! At the same time, no medical life insurance policies offer a good solution if you want to take care of final expenses or make sure that the rest of your mortgage is paid off, should anything happen to you.
- I always need to apply for traditional life insurance first and, only if declined, look into no medical.
False! That’s where broker expertise is required. The trick is that if you are declined for traditional life insurance, some simplified issue plans will not be available to you either as they ask a particular question: “Have you ever been declined for life insurance?” The best approach is to discuss with a broker if he works with providers who do not ask this question, or you can skip applying for traditional life insurance and move ahead with a simplified issue policy if there is a suspicion that you might be declined for traditional insurance.
- Once getting into no medical life insurance, I will never be able to get to get a traditional policy.
False! Many preconditions are considered severe if they occurred recently (heart attack, cancer etc.). Once you can demonstrate that your situation has been stable for a significant period of time (a few years), you can apply again for a standard life insurance policy. In some cases, it will be a bit more expensive (rated), but it will still be cheaper than a no medical life insurance policy, and it will come with more coverage.
- No medical life insurance is just a waste of money because you are not getting decent coverage.
False! If you are able to get a simplified issue life policy, your coverage can be as high as several hundred thousand, which is a considerable amount. Would you rather have $200K or nothing?
- No medical life insurance is the only insurance type available for those who have serious preconditions.
False! Actually, there are more no medical products on the market. You can look into no medical critical illness, no medical disability insurance and many others. All these insurance types serve particular purposes – you need to discuss them with your insurance broker.
Expert opinion from Jack Bendahan
“No medical life insurance is great, but potential clients often have the misconception that these policies have no life insurance questions. That fact is these policies have no medical tests but do ask health questions which can range from a few questions to over 30 health questions. In most instances the applicant is better off seeing if they can qualify for a fully underwritten traditional life insurance policy.
Most carriers allow the broker to make a preliminary inquiry. A preliminary inquiry is an informal request made by an insurance advisor to an insurance company when the broker does not want to submit a formal application. Preliminary inquiries can be a terrific way to gauge a client’s rating or potential decline.
Key takeaway work with a broker who is familiar with the hard to insure market”
– Jack Bendahan, Expert in high-risk life insurance cases
Expert opinion from Margaret Nikkanen
“When searching for insurance protection, many people believe that they must have a medical examination to be eligible for life insurance and that is the requirement with simplified issue insurance products.
In my experience recently, there are individuals who are eligible for medically underwritten traditional insurance however they either have busy work lives or don’t really feel comfortable divulging personal information and having medical tests. Therefore, the solution is to apply for simplified issue products which do not require medical tests only a health and lifestyle questionnaire. These types of policies are approved and placed very quickly compared to traditional insurance products.”
– Margaret Nikkanen, Insurance Professional
Expert opinion from Steve Hazlehurst
“The main myth is clients will come to me because they saw an advertisement on TV, usually from an American channel, asking if they can get coverage for $9.99 per month. Generally speaking, no medical coverage will be more expensive than traditional coverage, because it requires fewer questions and less evidence of good health. For some people, this is what they are looking for. Price may not be their #1 factor when making a decision, and they just want something unobtrusive that’s quick and easy.
Now that being said, since I work with quite a few of the companies on the non medical side, each will have their sweet spots. A client may find themselves in a product with a waiting period and higher monthly cost with one company, but be able to slide into an immediate coverage solution at a lower cost with another. It’s important that an advisor has a good understanding of each company’s questionnaire, or at least that they are leveraging their resources within the carriers that they do business with. Sometimes a client will be able to get a better deal with a non medical company, if they tick all the right boxes. It all depends, and each case is different, but I really believe that’s where the value of working with a broker will show true.”
– Steve Hazlehurst, founder of Hazlehurst Consulting
Remember, working with an insurance broker is even more important when you need no medical life insurance since he/she can navigate you to the insurance products that are right for your pre-condition and situation. Talk anonymously to an insurance broker today and get a free, absolutely no-obligation insurance quote to find out how much you’d pay. Your rate can be far lower than you think because our partner brokers work with over 20 respected Canadian life insurers.