Life insurance is an essential part of financial planning for many people. It provides a safety net for your loved ones in the event of your unexpected death. When you apply for coverage, one of the first things to understand is how the insurance company will evaluate your health. Most policies fall into two groups: simplified issue and fully underwritten. In this article, we will outline the differences between these two types of policies to help you make an informed decision.
Simplified Issue Life Insurance
Simplified issue life insurance is a type of policy that does not require a medical exam. Instead, applicants answer a short series of health-related questions on the application. These questions typically focus on pre-existing medical conditions, medications, and lifestyle habits. The insurer may also check prescription and medical history databases. Simplified issue policies are designed to be quick and easy to obtain, and many insurers offer an instant or same-day decision.
BENEFITS
- Quick and easy application process
- No medical exam is required
- Coverage can be obtained quickly
- Often a good fit for people who want to skip the exam and get a fast decision
- May be an option for some people with health conditions that could make full underwriting more difficult, depending on the carrier and your answers
DRAWBACKS
- Death benefit amounts are often capped lower than with fully underwritten policies
- Premiums may be higher than a fully underwritten policy for applicants in good health
- Certain health answers can still lead to a decline or a limited coverage offer
- Fewer options for customization
Fully Underwritten Life Insurance
Fully underwritten life insurance is a type of policy that requires a medical exam, plus a review of your medical and prescription history records, to determine eligibility and pricing. The underwriting process is more thorough than with simplified issue.
What is a paramed exam?
The medical exam is also referred to as a paramed. A paramed, short for paramedical examination, is a basic health exam that is required for fully underwritten life insurance policies. The exam is performed by a trained medical professional, often a nurse or paramedic, and is usually scheduled at your home, workplace, or another convenient location. It involves several tests to evaluate an applicant’s health and help determine their eligibility for coverage.
The purpose of a paramedical exam is to gather information about an applicant’s health status and identify any potential risk factors that could affect their life expectancy. The insurer uses this information to determine the appropriate premium rates for the applicant, based on their risk level. The exam typically includes a variety of tests and measurements, such as:
The test information is sent to a lab to be processed. The results of the paramedical exam are then sent to the insurer and used to determine the applicant’s eligibility for coverage, as well as the appropriate premium rates. If the applicant is found to be a higher risk, the client could be ‘rated’ as a higher risk, resulting in a higher premium, or may be declined coverage altogether.
It is important to note that not all life insurance policies require a paramedical exam. Simplified issue policies, for example, do not require an exam and instead rely on the health questions on the application, along with a prescription and medical history check, to determine eligibility. Fully underwritten policies, which can offer higher coverage amounts and, for healthy applicants, lower premiums, require both an exam and a review of your medical and prescription history records.
The purpose of the medical exam is to evaluate an applicant’s health and identify any pre-existing medical conditions that may affect life expectancy. The full underwriting process also involves a review of your medical and prescription history records, financial history, and other factors that may affect your risk level.
BENEFITS
- Higher coverage amounts are generally available than with simplified issue policies
- Premiums are often lower for applicants in good health
- Offers more coverage and customization options
- Pricing is based on your individual health and risk profile
DRAWBACKS
- Requires a medical exam and a more detailed underwriting process, including a review of medical and prescription history records
- Takes longer to get approved and for coverage to start
- Premiums may be higher, or approval harder, if you have significant health conditions
- Approval is not guaranteed
Which One Fits You?
When choosing between simplified issue and fully underwritten life insurance, it is important to consider your unique needs and circumstances.
Simplified issue is often a good fit if…
You need coverage quickly, want to avoid a medical exam, or have a health condition that could make full underwriting more difficult.
Fully underwritten is often a good fit if…
You are in good health, want higher coverage amounts and potentially lower premiums, and are willing to complete a medical exam and a more thorough underwriting process.
Ultimately, the right choice depends on your individual needs, health and budget. Compare quotes from multiple insurers before making a decision, and consult a licensed insurance professional who represents multiple carriers to help determine the best option for your situation.
Coverage, pricing and eligibility vary by carrier and individual circumstances.
