Regular
- Pros
- Most Affordable
- Most Options Available
- Most Favorable Terms within Contracts
- Cons
- Application Process may Include a Medical Exam
- Standard Approval Requires Excellent Health
- Application Declines and Premium Surcharges Happen
Simplified
- Pros
- Issuance is Fast
- Application Only Requires a Medical Questionnaire
- Competitively Prices for those with Mild Chronic Health Conditions
- Premium Surcharges are Rare
- Cons
- Less Options
- Contract Terms May Not Be as Favorable
- Unsuitable for the Ill, Injured and Dying
Guaranteed
- Pros
- No Medical Questionnaire
- Approval is Guaranteed
- Issurance is Fast
- Cons
- Very Few Options
- The Benefit is Often Deferred for the first 2 Years with Illness Deaths
- It's More Expensive
Understanding Underwriting
Not all life insurance is made the same. Many may of heard of term vs permanent coverage but few have ever gotten into the discussion of how their policy is underwritten. What does this even mean?
Underwriting is the process by which the insurance company decides which risks they want to take on. This includes your life insurance application. Think of yourself as the insurance company, assuming you were investing in insuring someone’s life, wouldn’t you want to know what that person’s all about? Forget from their standpoint but from your own. You would devise a series of objective questions to help you determine their statistic likelihood of outliving their peer group or not. This is what underwriting is and what insurance companies do, albeit some better than others.
Regular
Regular health class typically refers to fully underwritten life insurance. This process will often include a paramedical exam done by a third party such as Watermark, ExamOne or Dynacare. The examination may include blood and urine samples, blood pressure reading, and ECG or whatever may be relevant to you. Drivers records may be requested, and criminal records checked.
Many companies still do a thorough examination though more and more insurance being issued based the ever-expanding ecosystem of data. The Medical Information Bureau (MIB) is used by insurance companies to track applications, health data and outcome but also aids the establishment health and mortality statistics.
Insurance companies also often request an attending physician statement (APS) from your general health practitioner (GP). This is when they request information pertaining to your health directly from your family doctor. Rest assure that you physicians office is being compensated for this.
All in all, this process can take anywhere from 1 day to 3 months depending on your health. Despite being an inconvenience, this process is ideal financially because it allows you the most opportunity to prove good health. Proving good health is what gives you leverage in this conversation.
Fully underwritten life insurance is like a selling a home, you probably want to stage it. Leverage your broker to be prepared and this process will benefit you.
Health Check List
- Do You Have Any Chronic Conditions?
- Do You Take Any Medication?
- Is the Ratio of Weight to Height Normal?
- Have You Been Hospitalized in the Last 2 Years?
- Have You Ever Had a Stoke, Heart Attack or Cancer?
- Do You Drink Over 25 Drinks a Week?
- Do You Consume Illegal Drugs?
- Are Your Cholesterol Levels Normal?
- Is Your Blood Pressure Normal?
- Do You Have Mineral Deficiencies or Hormonal Imbalances?
- Are You Exercising at Least 4 Times Per Week?
- How’s Your Mental Health?
- Are You Still Growing?
- Are You Holding On to Anything Not Worth While?
- Are You Lonely, Stressed or Bored?
- Does Your Identity Allow for Progress?
- Are You Regularly Confronting Challenges?
These questions go way beyond planning your finances because after you have your finances figured out is where the personal challenge begins. Financial security is only in fact but the 2nd step of the Malow Hierarchy of Needs. It is important to review the nature of our mind, body, and spirit from time to time, so we can heal, grow, and prosper.
Simplified
Who Will Qualify and Benefit
- Those who have received a rating surcharge but have been approved for fully underwritten (regular health class) life insurance
- Those who have stable yet chronic health conditions with a known prognosis and treatment path
- Those who are overweight but otherwise healthy
- Those who suffer from Fibromyalgia but are otherwise healthy
- Those who suffer from mental illness, who's condition is stable with a known treatment path
- Those who have been in remission from Cancer for over 5 years and are otherwise recovered and healthy
- Those who are healthy but otherwise partake in what would be considered a risky lifestyle
- There are plenty of other scenarios...
Simplified life insurance as in its title is much simpler to apply for than regular life insurance. There is no process of having to do a physical exam with a nurse or the insurance company requesting parts of your medical file from your doctor. Upon completion of the application, your broker should be able to tell you if you are approved or declined. The process of getting simplified life insurance is quick and in its name, simpler.
Not all simplified life insurance is made the same. Some carriers do not ask certain health questions on their applications while other do. If your broker is well informed, they may be able to minimize the impact of a specific health conditions by finding policies that don not ask about them on their applications.
Some simplified life insurance is deferred. If you die in the first 2 years due to illness, premiums paid are returned to the beneficiaries and not the entire death benefit. In the first 2 year, the full death benefit is only payable if death is accidental. Deferred life insurance usually has a 2-year waiting period when death is caused by illness. Many life insurance carriers will have a medical questionnaire for simplified and a less stringent one for deferred.
Guaranteed
All guaranteed life insurance is deferred. If you die in the first 2 years due to illness, premiums paid are returned to the beneficiaries and not the entire death benefit. In the first 2 year, the full death benefit is only payable if death is accidental. Guaranteed life insurance usually has a 2-year waiting period when death is caused by illness.
Guaranteed life insurance is most suitable for those who are acutely sick or think they may be in the process of dying but are willing to fight for life for as long as they can. Some people are repeatedly told by doctors that have less than 2 years live but keep on living far beyond projections. In some cases, those people have loved ones that they may want to shelter from the financial impacts of them dying. Those people are who this life insurance is designed for.
No Medical Questionnaire
- You can be in a hospital
- You can be in a long term care facility
- You can be paralysed
- You can have extreme lifestyles (exclusions may apply)
- You can have a degenerative disease
- You can just not want to divulge health
- You can be dying
- Exclusions may apply to extreme lifestyles and suicide