What is Simplified Issue Life Insurance?
The basics of simplified issue coverage
The most common types of life insurance (e.g., term, whole) require a medical exam during the underwriting process. This visit to an insurer-approved physician gives the insurance company a way to check your current health status so they can assess your risk level and price your policy accordingly.
Simplified issue coverage skips the medical exam. Instead, you fill out a detailed medical questionnaire.
This comes with some pros and cons.
Simplified issue life insurance pros
On the positive side, this no-exam coverage can be faster and easier to get. The simplified issue process streamlines things, enabling you to get coverage in a matter of days rather than weeks.
Plus, if you have a health condition that disqualifies you from other types of life insurance coverage, the lack of a medical exam can be a boon. You’re more likely to qualify for simplified issue life insurance even if you have a serious health condition.
Simplified issue life insurance cons
Because they limit the amount of data insurers can gather to evaluate their risk level in insuring you, these policies cost more.
To further mitigate their risk, insurers usually cap these death benefits much lower than other types of life insurance. It’s not uncommon for simplified issue policies to come with a maximum death benefit of $50,000.
That means paying more money in the form of premiums for a lower amount of coverage. As a reference point, term and whole life policies often come with death benefits of $500,000, $1 million, or more.
In terms of dollars paid for dollars of coverage, simplified issue policies can’t compete with the more common forms of life insurance. But if it’s the only type of life insurance for which you can qualify, it does give you a way to ensure your final expenses don’t become a financial burden for the people in your life.
Simplified issue features to know
Age requirement. You need to fall into the insurer’s specified age range (e.g., age 45 to 85) to qualify for simplified issue life insurance.
Waiting period. Some insurers specify that the insured needs to have their policy in place for a set amount of time (e.g., two years) before their beneficiaries become eligible for the death benefit. If you die before that time has passed, your beneficiaries may receive a return of the premiums you had paid up to that point or nothing at all, depending on your policy’s terms.
Cash value. While most other permanent life insurance policies include a cash value component — a savings and investment account within the policy — simplified issue policies might not. Cash value varies between insurers and policies, so check to see if that’s a feature your potential coverage would include.
Qualifying for simplified issue life insurance and its benefit
While simplified issue policies have lower qualification parameters than a lot of other types of life insurance, there’s a chance your application can be denied. For example, your application might be rejected if you have:
A terminal condition
A condition that requires long-term care
If your application for simplified issue coverage gets denied, you can explore guaranteed issue life insurance. As its name suggests, getting approved for these policies is all but guaranteed as long as you fall within the required age range. But guaranteed issue coverage generally costs more than a simplified issue policy.