No Medical Life Insurance vs Traditional Life Insurance Rates

The term “no medical life insurance” has been floating around for some time now. Many are aware that it exists but are not sure of what it comprises. Today we will break down the ins and out of no medical life insurance and show you how it compares to traditional insurance both in policy types and rates.

What is No Medical Life Insurance?

No medical life insurance is a policy anyone can apply for without having to take a medical exam. On the other hand, traditional life insurance is fully underwritten – which means you need to take a medical exam and pass it in order to qualify for the best rates.

The problem with traditional insurance is that not everyone can pass the medical exam. Common ailments like obesity, diabetes, cancer, and heart failure can derail an application. No medical life insurance was created to ensure everyone could get insurance, regardless of their health or lifestyle.

Two Types of No Medical Life Insurance

There are two types of no medical life insurance:

  • Simplified issue: some health and lifestyle questions to answer on the application, but no medical exam and no visit from a nurse. Once you are done with a medical questionnaire, you are good.
  • Guaranteed issue: no lifestyle or medical questions on the application. Acceptance is guaranteed. The policy does not pay out during the first two years following activation. If the life insured dies during those two years, the premiums paid are returned to a beneficiary.

No Medical Vs. Traditional: Policy Detail Comparison

Underwriters base a policy’s premium on the life insured’s risk factors. The more likely the policy will need to pay out sooner, the higher the premium. When the underwriter cannot do a full risk assessment with a medical, it is assumed that the life insured is in a high-risk category, resulting in a higher premium.

In terms of coverage amounts, the most robust coverage is always with a fully underwritten policy. A simplified issue policy, however, caps at between $500,000-$1,000,000; guaranteed issue policy caps are even lower.

No Medical Vs. Traditional: Rate Comparison Scenarios

To see how rates differ among traditional, simplified issue, and guaranteed issue, let’s look at a case study. Meet Jane Smith is a 35-year-old female non-smoker seeking a life insurance policy that will cover her family’s needs for 20 years including outstanding mortgage payments. She decides on a $1,000,000 benefit with Term 20 coverage.

Scenario #1: Traditional Life Insurance rates

Under a traditional life insurance policy that is fully underwritten like Manulife’s Vitality, Jane’s T-20 (Term 20 Insurance) coverage for a $1,000,000 benefit is just $46.59/month. To get this rate she must answer a set of medical questions and pass medical tests. If she can show that she is in great shape (e.g. based on her current physical condition / body-mass-index), she can even qualify for superior, preferred rates with some insurance providers.

Scenario #2: Simplified Issue Life Insurance rates

Now, let’s assume that Jane is diabetic. To control her diabetes she eats healthfully and exercises daily. However, she must take insulin as part of her treatment. Additionally, Jane’s great grandmother passed away from complications due to cancer. With a family history that includes cancer and with Jane’s diabetes, her broker advises that she should apply for a simplified issue life insurance policy.

With a policy like Manulife’s Quick Issue Term, Jane can apply for a maximum of $500,000 for a premium of $32.21/month. While it is less than the $1,000,000 coverage she would like, this simplified policy has many benefits. It provides ample coverage for her mortgage and money for her dependents, it can be obtained very quickly, and should Jane’s diabetes become even better controlled, she can apply for a traditional policy with a higher benefit later on.

Jane’s broker has access to the applications of numerous providers in Canada offering simplified issue, so the broker knows what questions each insurance carrier will ask. Some may ask about diabetes, others may not.

The broker knows that Jane has many options and matches her with best one. For example, the broker also checked with Canada Protection Plan (Simplified Elite Term) for T-20, $500,000 of coverage. The premium is $56.70 but comes with different rider options that Jane may or may not prefer over Manulife’s Quick Issue Term. It all comes down to the best coverage of needs, not just the price.

Guaranteed Issue Life Insurance rates

Jane is diagnosed with cancer. With treatment she has some years left, but her life and health are compromised. She could pass away in two years, or she could pass away in five or 10.

Her only option is guaranteed issue. If she passes within two years of the policy’s activation, the premium she paid will be returned to her family. If she passes after the two years, her family (beneficiaries) will receive the death benefit.

Jane’s broker chooses Humania. Even with Jane’s cancer, Humania is willing to provide up to $300,000 of T-20 coverage for $222.48/month, and also offers critical illness, disability, and debt insurance (coverages which may become very important to Jane as her illness progresses).

Which is Better? Traditional or No Medical?

Thus, let us summarize Jane’s options across these different scenarios including its pros and cons.

Traditional Life
Simplified Issue Life
Guaranteed Issue Life
Maximum coverage $1,000,000 $500,000 $300,000
Costs $46.59/month $32.21/month $222.48/month
How much coverage
will you get for
You will pay get approx. $215,000 coverage for
$10 per month
You will pay get approx. $155,000 coverage for $10 per month You will pay get approx. $13,130 coverage for
$10 per month
  • Getting required amount of coverage
  • Low costs
  • Relatively low costs
  • No medical exam
  • No medical exam
  • No medical questionnaire
  • Has to complete a long questionnaire and pass medical exams
  • You will pay get approx. $155,000 coverage for $10 per month
  • Not having the full coverage needed
  • More expensive coverage

One is not better than the other; it depends on your circumstances. While fully underwritten insurance is cheaper and offers more of a benefit, some people simply cannot obtain traditional coverage, or just don’t want the hassle of a medical exam and the weeks it takes to process an application. Simplified issue is quick and easy to get and is best for those with health complications. Guaranteed issue ensures that even the terminally ill can obtain coverage.

To learn more about getting coverage no matter your situation, speak with a life insurance broker. Brokers are free – there is no consulting fee. They are compensated by the insurance companies and they can access every carrier in Canada. This means they can always offer impartial advice that is in your best interest.