Non-Medical Life Insurance
What is Non-Medical Underwriting?
Non-medically underwritten life insurance are policies that upon initial application do not require the insured to subject themselves to a paramedical exam. This is a exam that requires a nurse to collect the bodily fluids (blood and urine) and vitals from the proposed insured for diagnostic testing. A non-medical policy is not to be confused with a guaranteed issue policy, which is a policy that asks no medical questions whatsoever, in return for a graded death benefit and increased premium rates.
What are the Benefits of Non-Medical Policies?
As reported by major life insurers in the U.S., over 70% of new term life insurance applicants opt for non-medically underwritten policies. The lack of additional testing and processing in a non-med policy cuts the amount of time between application and issue by almost 3/4. Thanks to the implementation of A.I. in underwriting, there are many companies who offer instant or 24 hour underwriting decisions on coverage. It is not just time however that can be saved. Blood and urine testing results often expose previously unknown deficiencies or abnormalities in the health of the applicant. These conditions or negative biomarkers likely would not have been known otherwise to the insurer without the paramedical exam results. The testing metrics used by life insurance underwriters are often more stringent than medical providers. Results that may indicate normal, or slightly above/below normal on a blood and urine panel provided by a medical provider, could very well be cause for major or minor concern when measured against life insurance underwriting guidelines. Once discovered, these testing results add on to the risk score of the applicant, effectively increasing the premiums they would be required to pay up, even resulting in a total denial of coverage. The deeper dive into blood and urine testing can cause adverse results on a application where one based on just prescription and criminal history would not. Non-medical underwriting can save applicants time, stress, and potentially above average costs of insurance.
What are the Negatives of Non-Medical Policies?
In the same way that paramedical exams can expose an applicant to adverse health ratings, they can also allow the applicant to enjoy health rating discounts . Traditionally life insurers reserve their top health ratings for those who are willing to undergo testing and demonstrate optimum age and gender based scores. This means that those who have known conditions that are being successfully controlled and treated lack the diagnostic testing to alleviate the insurer’s concerns over those conditions. Applicants may experience a opportunity cost in lower than achievable risk ratings by not allowing a paramedical exam to demonstrate their good health.
If a medical exam is a non-starter for the applicant, this limits the options for coverage they will have. Life insurers have widely different death benefit amounts and age ranges at which a paramedical exam is required. In general, as you increase the desired coverage amount and age of the applicant, you decrease the number of available companies who are willing to offer Non-medical exams for those plans.
Every life insurance company in the United States has the ability to contest claims that occur within the first two years of a policy’s life. They reserve this right to protect themselves from fraud, or the willful lying to obtain death benefit payout. The more information an insurer collects on the applicant, the less ability they have to investigate or contest a claim. Opting in to submit blood, urine, and vital diagnostic testing gives the insurer so much information about the applicant that it becomes significantly more difficult for an insurer to make the case that they were misled or lied to about the applicants risk profile. This not only speeds up the claim payout period but also greatly reduces the chance a claim could be denied in those first couple of years.
Should you opt for Non-Medical life insurance?
In the current age all of the top life insurers offer some version of a policy that can be applied for without a medical exam. This is quickly becoming the default for those under the age of 55 and applying for less than $2 million in death benefit. These companies are often also offering their top risk ratings for those who fit that category. If young and healthy, a medical exam might do more harm than good because there is a greater potential that on paper one appears more healthy than diagnostic testing might reveal. If there are pre-existing conditions or an applicant is in the senior market, an exam might allow for a better risk rating than what would of otherwise been awarded. If you have recently taken a blood and urine panel through your private medical provider, a great way to avoid uncertainty is to provide those results to the agent and have them reference those against the underwriting guidelines of the desired plan.
