To qualify for most life insurance policies, the applicant must be an acceptable risk to the issuing company. That entails going through the underwriting process, which could include, among other things, some or all of the following: disclosing health history on the application, giving blood and/or urine samples, submitting to height and weight measurement, blood pressure and pulse rate readings, and possibly an EKG.
A young person with no remarkable health history applying for a modest face amount will usually encounter no problems. However, for a middle-aged person with various health issues applying for several million dollars, the underwriting process can be a veritable minefield.
That doesn’t mean that that middle-aged person can’t qualify for life insurance, it’s just that it is a much more complicated process. Very few applicants are flat-out declined, though those with more serious ailments may be offered a policy with a premium several times that of a standard policy.
There is a saying in basketball that you can’t teach height. Well in life insurance, you can’t teach youth. And because “we get too soon old and too late smart,” most young people don’t buy life insurance, which is too bad, because the inescapable conclusion is that the absolute best time to buy life insurance is when you’re young and healthy. The second best time is today.
For those with health issues that may result in a decline or at least a very high rating, there is something known as “guaranteed issue life insurance” and it is exactly what it sounds like: a life insurance policy that asks no medical questions.
There are several restrictions on these types of policies, however. First, only small face amounts are available, usually less than $50,000. Second, they almost always have a graded benefit, in that the full face amount is not payable if death occurs in the first two or three years. Lastly, they are more expensive than fully underwritten policies, which is logical.
There is a third type of policy that has what is known as “simplified underwriting,” which usually ask about three to five short questions regarding cancer, heart issues and AIDS. A negative response to all of the questions qualifies the applicant for the policy.
The policies with simplified underwriting are available with higher face amounts than the guaranteed issue policies, usually do not have graded death benefits and while more expensive than fully underwritten policies, are less expensive than the guaranteed issue policies.
So before you apply for a policy offered on a late-night infomercial, just be sure you understand all the particulars. For the vast majority of people, a fully underwritten policy will have the lowest premium with the highest face amount.