What do you need to know when shopping for a simplified-issue policy?
You can buy both term life insurance and whole life insurance through simplified-issue. It's best to know which type of policy (term or whole) and how much life insurance you'd like to buy before you start shopping.
Rates vary, and even a small difference in price can add up over time. An additional $10/month means you'll pay an extra $120/year. That's $1,200 in total if you buy a 10- year term life policy.
Different companies have different questions they ask to determine eligibility and rates. So if you have any underlying health issues, it pays to review the questionnaires of a few different policies.
Some simplified-issue life insurance plans won't pay the death benefit unless you've held the policy for a certain period of time6 typically at least two years. If you pass away before then, your beneficiaries would simply receive however much you had already paid in premiums, minus a fee. This is called a graded benefit. If you want or need a policy that will kick in right away, you need to avoid policies with a graded benefit.
Where do you find a policy?
It used to be hard to quite hard to find a simplified-issue life insurance policy. However, thanks to recent changes in the market, this is no longer the case.
"We have seen simplified and automated underwriting expand considerably over the past few years both in the number of companies offering it and the types and size of policies available," says Catherine Theroux, spokesperson for LIMRA,7 a research trade association.
"LIMRA research finds life insurers offer simplified underwriting for face amounts ranging from $25,000 to $10 million," Theroux explains. "The coverage depends on the applicant's age and reported health. "
If you have an insurance company or agent you work with for other types of insurance (car, homeowners, health), it's worth asking if they sell simplified-issue plans. For a list of other companies, check out this list of companies that offer simplified-issue term life insurance.2 While it's not comprehensive, it's a great place to start. Your financial planner may be able to point you toward some good resources as well.