A simplified issue life insurance policy can be an option if you’re looking to get life insurance quickly and without a medical exam. To apply, you’ll be asked only a handful of health questions.
But these policies do have drawbacks, and there are other options for no-exam life insurance that might be a better fit for you.
What Is Simplified Issue Life Insurance?
As the name suggests, simplified issue life insurance uses a simple form of underwriting. Applicants must answer some health-related questions but do not have to take a life insurance medical exam. But that doesn’t mean an insurer will know very little about applicants. Insurers will then use third-party sources to gather additional information, such as your prescription drug history and driving record. Some insurers might follow up with a phone call to gather more information. Often, though, insurers make an immediate decision to accept or reject applicants.
Traditionally, life insurance companies have relied on lengthy questionnaires with 60 or more questions about an applicant’s health, lifestyle, occupation, mental health, and family medical history as well as multiple third-party sources and a medical exam to verify the information applicants provide.
This full medical underwriting process can take 45 to 60 days—or more if the insurer wants additional information.
But life insurance companies recognized that many people didn’t want to go through such a lengthy process to get life insurance, according to the Society of Actuaries. So they sought to streamline the process by introducing simplified issue products.
Pros of Simplified Issue Life Insurance
Simplified issue is a quick way to get life insurance, but it’s not right for everyone. Here are some advantages.
Quick approval
The biggest advantage of simplified issue life insurance compared to a standard underwritten life insurance policy is that the insurer decides faster.
You may get approved for a simplified issue policy in minutes. That’s compared to weeks when you go through the regular underwriting process.
Application is much shorter
Filling out the health questions in a simplified issue policy takes little time. That’s compared to a standard life insurance policy, which is exhaustive and has many pages. A simplified issue life insurance policy will only ask you a handful of health-related questions.
No medical exam
Some people simply don’t want to deal with a medical professional unless absolutely necessary. Others might be afraid that a life insurance medical exam will reveal an underlying problem.
In these cases, a simplified issue policy may be a good choice. But the insurance company will still ask you some health questions in a simplified issue policy application.
Cheaper than some other no-exam life insurance options
Simplified issue life insurance generally costs less than a guaranteed issue life insurance policy. The applications for a guaranteed issue policy, such as burial insurance or final expense insurance, don’t ask health questions or require a medical exam, so insurers take on more risk. Hence, the higher cost for guaranteed issue life insurance.
More coverage than guaranteed issue life insurance
Simplified issue policies generally have higher death benefits than guaranteed issue policies. A guaranteed issue policy may only offer coverage of $25,000 or less. Those policies are generally meant to provide funds for a funeral and other final expenses.
A small burial insurance policy may cover your needs, but if you want to provide more for your beneficiaries, a simplified issue policy would likely work better.
Cons of Simplified Issue Life Insurance
Simplified issue life insurance can be a fast and easy way to get life insurance. However, that convenience comes with trade-offs.
Graded death benefit
Some simplified issue policies will only pay the full death benefit to your beneficiaries if you had the policy at least two years before death. If an insured person dies less than two years after getting the policy, the beneficiaries will typically get a refund of the premiums paid, with some interest.
Higher costs
Full medical underwriting allows insurers to accurately group applicants into health risk classes. Healthy applicants benefit because they can get the lowest rates with a fully underwritten policy.
Because simplified issue underwriting requires much less information from applicants, it’s harder for insurers to accurately determine each applicant’s actual risk.
As a result, a simplified issue life insurance policy can be twice as expensive as a fully underwritten policy, says Melbourne O’Banion, co-founder and CEO of Bestow, a digital life insurance company.
Limited coverage
Because insurers have limited information about applicants, they won’t take the risk of selling simplified issue policies in large coverage amounts. You may find a cap on coverage at $100,000 or $250,000, according to the Society of Actuaries.
So if you’re looking for $1 million life insurance, simplified issue isn’t the right product for you.
Summary: Pros and Cons of Simplified Issue Life Insurance
When Does Simplified Issue Life Insurance Make Sense?
Simplified issue life insurance can make sense for some people. Candidates for this type of policy include:
- Those who don’t want to take a medical exam
- Those who don’t like needles
- Those who can’t wait weeks or months for coverage
- Those who are in poor health and wouldn’t qualify for a decent rate with traditional underwriting
Because simplified issue policy applications have fewer questions than fully underwritten policy applications, you won’t be asked about minor health issues—which can make this type of coverage more accessible.
But a yes answer to any questions about more-serious conditions will likely result in a rejection.
What Will I Be Asked for a Simplified Issue Policy?
While the exact type and number of questions will vary by company, here are some common questions asked on simplified issue life insurance applications:
- Is the person currently receiving health care at home? Do they require assistance with activities of daily living, such as bathing, dressing, feeding, taking medications or use of the toilet?
- Is the person currently in a hospital, psychiatric, extended or assisted care, nursing home, prison or correctional facility?
- Has the person ever tested positive for the HIV virus or been diagnosed by a member of the medical profession as having AIDS or the AIDS Related Complex (ARC)?
- Has the person ever tested positive for or been diagnosed by a member of the medical profession as having Alzheimer’s or dementia, cirrhosis, emphysema or chronic obstructive pulmonary disease (COPD)?
- In the past 12 months, has the person been advised by a physician to be hospitalized or to have diagnostic tests, surgery or any medical procedure that has not yet been completed or for which the results are not yet available?
- In the past 24 months, has the person been diagnosed or advised by a physician to have treatment for cancer (other than Basal Cell Carcinoma), heart attack, stroke or TIA (Transient Ischemic Attack), alcohol or drug abuse?
- Has the person ever been declined, postponed, rated or modified for insurance?
- Within the past seven years, has the person been convicted of, pleaded guilty to or entered a plea of no contest to any felony?
- Is the person currently on probation or placed on probation within the last 12 months?
- Has the person had a driver’s license suspended or revoked within the last five years?
- Has the person been convicted of reckless driving or driving under the influence of alcohol or drugs in the past five years?
- Has the person been told they have a terminal medical condition or end stage disease of any type expected to result in death within the next 24 months?
Alternatives to Simplified Issue Life Insurance
Simplified issue life insurance isn’t the only option if you want to get life insurance quickly without a medical exam. Here are some other avenues.
Accelerated underwriting
The accelerated underwriting process collects more information from applicants and third-party sources than simplified issue underwriting does. Yet it’s faster than traditional underwriting because it uses data modeling to assess the risk of applicants. And you can generally skip a life insurance medical exam if you’re young and healthy.
Many life insurers are using accelerated underwriting now, especially for younger and healthy applicants.
The life insurance quotes for accelerated underwriting policies tend to be comparable to rates on fully medically underwritten policies. However, coverage amounts may be limited to $1 million.
Guaranteed issue life insurance
The application process for guaranteed issue life insurance is even easier than for a simplified issue policy. There are no health questions and no medical exam. And you can’t be turned down for coverage.
Guaranteed issue life insurance is more expensive than even simplified issue insurance, and coverage amounts tend to be limited to $25,000 or less. Plus, applicants typically need to be at least 50 years old. It’s geared toward people in poor health who want life insurance to pay for funeral or other final expenses.
Average Cost of Simplified Life Insurance
Forbes Advisor found an average cost of $28 a month for a 10-year simplified issue policy of $100,000.
Here are the lowest average simplified issue term life insurance quotes for policies that we found from four companies.
Cost of $100,000 simplified issue policy for a 50-year-old male non-smoker in average/good health
The average cost of simplified life insurance depends on multiple factors, including age, health, length of coverage and amount of coverage. Life insurance quotes will also vary by company, so make sure to shop around.
Is Simplified Issue Life Insurance Worth It?
The ease of getting a simplified issue life insurance policy makes it appealing. But you may be able to get cheaper life insurance with a company that’s going accelerated underwriting.
Before you opt for a simplified issue policy, look at other types of life insurance. An independent life insurance agent can get quotes from multiple companies for a more traditional policy, and will know which insurers are most likely to give you a good rate based on your health.
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