When shopping around for life insurance, you probably have run across a version called no medical exam which has fewer requirements compared to standard life insurance and can often be obtained quickly since there is no qualifying health examination.
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However, there are drawbacks that you need to be aware of before making your decision about purchasing this type of life insurance.
Disadvantages of No Medical Exam Insurance
The most obvious drawback is that this type of insurance is one of the more expensive, often 30% or more compared to life insurance that requires a medical exam. The reasoning is simple, life insurance companies will assume that you are a greater risk if you choose this form of insurance.
It is the weighing of different risk factors that culminate in the premiums you pay for your policy. However, there are other drawbacks to this type of policy as well.
Age Limit: Some companies will not offer this type of insurance to seniors over a certain age such as 65, 70, or 75. You’ll want to carefully examine the qualifications so that if you are close to the maximum age that it will extend well into your senior years.
No Benefit Period: Another big drawback is that many of these policies have a two-year period where the benefits are limited to the premiums paid in, plus interest. While the interest can be substantial, such as 20% or more, it’s still a far cry from the actual benefit level that doesn’t kick in until the period is over.
For example, if you are paying $200 per month with 10% interest and you pass away eight months into the life of the policy, your beneficiaries will receive $1,600 plus $160 for a total of $1,760.
As you can tell, this is a small amount of benefits which makes it difficult to purchase the policy if you are ill.
Benefit Limits: Another restriction is the limits placed on the total benefits that you may qualify. Many insurance companies place strict limits of $50,000 or $100,000 for example which means that it may not be enough to cover your mortgage or unsecured debt that is passed on to your family.
You will either purchase more policies or try to qualify for life insurance with a medical examination.
Why Get No Exam Life Insurance?
Rather than a “one size fits all” type of policy, you should consider it a last resort when you need life insurance that you cannot qualify for with a medical examination.
If you have been disqualified from receiving life insurance due to results of your medical exam or have specific needs that can only be addressed with this type of policy, only then should you consider no exam life insurance to be right for your needs.