Underwriting and Application Considerations
Most consumers should assume Regular health class when applying. Companies will automatically issue at lower premiums should the consumer qualify.
A typical term life insurance policy has a variety of available health or underwriting classes referred to as Regular, Regular Plus, Preferred, and Super Preferred. Health class is determined automatically by the life insurance company without regard to what class was applied for – consumers will receive lower premiums if they qualify. Contracts are the same across these health classes.
Requirements are not always published, vary by company, and are difficult to predetermine. This means that it’s difficult to impossible to determine your health class prior to issue. Most consumers should assume Regular health class as it’s what most consumers receive. Should they qualify for the lower premium health classes, they will receive it automatically when the policy is issued.
No Medical Exam Life Insurance
Fully underwritten policies are available up to $1MM of coverage with only a phone questionnaire for underwriting requirements. For most consumers this will provide the best policy coverage, at the lowest premium.
Consumers should consider a fully underwritten life insurance policy before a no medical exam policy. Due to confusion over industry terms, consumers may be able to purchase a fully underwritten policy under conditions that they perceive of as no medical policies. Here’s a breakdown of underwritten vs. no medical exam policies beside benefits and underwriting requirements:
Policy type Requirements Policy Features
Fully underwritten, $MM coverage Phone interview, blood and urine test Low premiums, full coverage
Fully underwritten, up to $1MM coverage Phone interview. Low premiums, full coverage.
No medical. Yes/No Questionnaire. High premiums, limited coverage in first 2 years, limited or no conversion and renewal choices.
Guaranteed Issue Issued to everyone High premiums,
Application Medical Questions
Stop, listen to the question, and answer the specific question in detail. Failing to do so can leave you open to having your claim denied.
Most life insurance policies will involve a telephone interview consisting of a variety of medical questions. It is vital that you listen to each question (sometimes the questions have multiple parts) and answer it in detail. Yes/No answers are not sufficient. If you need to, ask them to repeat the questions.
This is probably your best single way to ensure that your claim is paid upon death, as it limits the probability of a life insurance company claiming information was not disclosed. Being truthful is insufficient – completeness is also required.
Example medical question: Have you ever had any tests, investigations, injury, treatment, or surgery on your eyes?
What many people answer: No. (If that’s your answer, you didn’t answer the question that was asked).
What many people should actually answer: I have had no injury, treatments, or surgery. I get my eyes tested by an optometrist every 2 years and have no known issues/I wear contacts/I wear glasses.
Life insurance policy ratings
If you have a known or suspected condition or circumstance that may impact your life insurance policy, you should discuss this with your broker prior to applying. You should not simply go directly to a no-medical exam/guaranteed issue policy, as better choices may be available.
Life companies offer two different types of ratings – a flat extra, or a multiple of premium. Ratings may be permanent, or they may be temporary. Ratings can also be removed if the underlying condition changes.
Some conditions that consumers believe will impact their premiums, actually won’t. For the most part, companies care about impacts to mortality and consumers do not always have a good understanding. For example, some people who have had breast cancer may be eligible for a regular life insurance policy after 5 years.
Some conditions may be treated differently by difference companies. For example, some companies rate diabetes better than others. Some companies will rate someone for weight, where another company will offer standard premiums.
Some conditions may result in a decline of an underwritten policy , at which point consumers would then investigate various non-medical life insurance policies.
If your broker is unable to predetermine the best company for your circumstances, you can request a medshare. A medshare allows you to complete multiple company applications, while having a single medical questionnaire or medical exam shared across all the companies.
Life Insurance Policy Riders
Discounts are available for spouses buying a policy at the same time. Inexpensive insurance is also available on children as an add-on.
- Spousal Riders: You can add a spouse to a policy as a rider to a base policy. Most companies offer a discount for this (it saves one monthly administration fee from the premium). Quotes for this discount are not readily available online so should be confirmed by your broker.
- Layering: You can add additional coverages of different durations to your policy, which allows you to decrease coverage over time. For example, you could purchase $50K of permanent life insurance and $450K of 20 year term. This would result in $500K total coverage for 20 years, then decreasing to $50K for the rest of your life.
- Children’s Protection Rider (CPR): This rider covers your children for a small amount (typically $10k-$50K) until they are adults. Amounts, and conditions vary by company so you’ll need to discuss with your broker. CPR is generally inexpensive.
- Accidental Death Benefit: A hangover from the 1800’s and early 1900’s when people were scared dying on a train trip. This benefit pays depending on how you die and is thus not appropriate for most people who need the insurance without regard to how they passed.
- Guaranteed Insurability Option: This option allows you to purchase additional life insurance in the future without a medical exam. It is generally only used for business needs.