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A chronic illness can affect almost every aspect of your life, including your ability to get life insurance. Even if you don’t have a chronic disease, health concerns like being significantly overweight can reduce your life expectancy and create roadblocks to getting the coverage you need at a price you can afford.
That doesn’t mean you’re out of luck, though. Insurance companies offer various policy options for people with health challenges who want to secure their financial futures. No-medical or no-exam life insurance policies provide life insurance coverage without placing as much weight on your medical history or even looking at it at all.
Although these policies have a few drawbacks compared to more traditional life insurance offerings, like a higher price and lower payouts, they represent an accessible route to coverage. Here’s how these policies work and what you can expect if you go this route.
If you die suddenly, how would it impact your family financially? Would they be able to cover your final expenses and maintain the household without your income?
According to research from LIMRA, an insurance industry organization, 42% of Americans say that the death of a wage earner would cause financial hardship within six months, and 25% say that they’d have financial problems within a month. Despite this, only about half of adults have life insurance, which would provide the cash their families would need to cover expenses like burial, mortgage, and education.
People don’t purchase life insurance for many reasons, most often the cost. Some people don’t think they need it because they are too young or don’t have a family yet. Others avoid buying a policy because they worry about the tax implications or simply don’t know how much coverage to buy.
Medical issues also prevent many people from purchasing a life insurance policy. While some health concerns can exclude you from accessing an underwritten policy, a pre-existing condition won’t always keep you from securing coverage. What it will do, in most cases, is make the policy more expensive.
Most people with life insurance carry a term life policy. These policies remain in effect for a specific number of years and only pay claims if you die within that term. If you live longer than the term, you’ll have to purchase another life insurance policy (which will almost definitely be more expensive) or agree to a rate increase to continue the policy.
According to research from Penn State University, 99% of term life policies never pay out. Still, insurance companies want to reduce their risk, so they typically only extend coverage to people less likely to die while their policies are in effect and charge people at greater risk of dying more for their policies.
Insurers determine your risk level using several factors, but the most significant influence is your medical history, which is why many require a physical exam. Using information gathered by a physician during an independent exam, the insurer will assign you one of the following rating tiers:
As you might expect, most people fall into the standard or regular tier, meaning they’re of average health without significant concerns. Only the healthiest individuals without any family history of significant health issues qualify for the top-tier status.
But what happens when your health exam and well-being issues land you in the substandard category? In most cases, the company will either deny your application or charge a higher premium that may be cost-prohibitive.
Not all health problems will disqualify you from getting an insurance policy, but most pre-existing conditions will have some effect on rates. The circumstances surrounding your medical conditions also influence their overall impact on your insurance rates.
Underwriters take into account:
That said, the simple fact that you have a pre-existing condition will influence your ability to acquire coverage to some extent.
If you have any of these wellness concerns, they will have a minimal effect on your life insurance rates:
Insurers typically won’t issue life insurance policies to people with the following conditions, so a guaranteed issue policy is your best option:
If you have a health concern that will affect your ability to get affordable life insurance or don’t want to take the chance that a medical exam will reveal problems, you have other options. Many insurers offer no-medical exam policies that are easy and convenient to apply for. In some cases, you can even apply for a policy online and receive approval in minutes.
A simplified issue policy is one option for people with health concerns who need life insurance. These policies are best for people with relatively minor or well-controlled conditions because although they don’t require a physical exam, applicants must complete a detailed questionnaire about their health and lifestyle. The insurer will use that information and data they collect from third-party sources like the Medical Information Bureau to determine your eligibility and rates.
Although there is a possibility that the company will deny your application for a simplified issue life insurance policy, as long as you’re in reasonably good health and don’t smoke, the acceptance rate is as high as 90%. Policies vary, but you can apply for up to $500,000 in coverage.
If you have more serious health problems and are over 50, a guaranteed issue life insurance policy may be your best option. Insurance companies don’t ask any health questions or require any exams when you apply for one of these policies; as long as you can pay the premiums, you can get the coverage you need.
Although guaranteed approval is an appealing aspect of a guaranteed issue policy, it’s critical to understand how these policies work when you make a claim. Because of the risk of issuing these policies, most companies only offer minimal coverage (usually up to $25,000). These policies are ideal for covering your final expenses or leaving a small inheritance for beneficiaries.
Guaranteed issue life insurance policies also typically have graded death benefits. They build cash value over time as you make the payments on the policy and will only pay out the total policy value on a claim if you die outside the graded benefit period. If you die sooner, your beneficiaries will only receive a percentage of the policy; for example, 25% in the first year, 50% in the second year, and so on.
Another option for life insurance when you have health and wellness concerns is a group life policy through your employer. Employers offer these term life policies for their employees, which typically pay one to two times your annual salary to your beneficiaries if you die while still an employee. You can enroll in one of these plans at work without a medical exam or any health history questions because the insurer sets the rates based on the group as a whole.
A group life insurance policy lets you acquire coverage without high costs. However, the policy’s value may not cover your family’s needs if you pass, and the policy is no longer in effect if you change jobs. Still, if you have health issues that exempt you from other policies, a group life option offers some financial security.
If you’re in good health, it’s worth applying for a traditional, medically underwritten life insurance policy, as you may secure more coverage than you expect for an affordable rate. However, if the cost is too high or you have health concerns that could prevent you from purchasing a policy, a no-medical exam policy is a worthy alternative.
To learn more and compare quotes tailored to your needs, visit Insurdinary and use our simple quoting tool to compare your life insurance policy choices. When you’re ready to enroll, one of our licensed insurance agents will walk you through the application process for a stress-free, streamlined experience.
If you have more questions about life insurance and options when you have health concerns, contact the Insurdinary team and get all the answers you need to make the best choices for a secure financial future.