Life insurance is one of those things you don’t want to need, so you put off buying it. The problem is that, in the insurance industry, procrastination costs you. Medically underwritten policies are less expensive if you’re in good health, but difficult to get if your health is less than optimal. Some might find themselves uninsurable due to lifestyle choices or even the hobbies they enjoy. There are a few different options when it comes to buying life insurance, and your health will determine which way you’re going to go. Understanding the difference between medically underwritten and non-medically underwritten policies will ensure you’re able to make the best possible choice in estate planning.
Medically Underwritten Life insurance
Your policy rate is determined by much more than simply your age and whether or not you’re a smoker. A medically underwritten policy can account for a number of factors, including:
- Personal medical history
- Family medical history
- Nature of work
- Hobbies (specifically high-risk ones)
- Body mass index
- Age
In these policies, the insurance company will require a medical exam, lab tests, or both. Based on the results of your exam and your health history, you’ll be assigned to a category. The basic categories that you can be assigned to include:
- Preferred Plus/Elite: You have no chronic medical conditions, a healthy height and weight, and have no family history of cancer or other serious illnesses prior to the age of 60.
- Preferred: You have excellent health, but your weight might be a little over normal charts. There is a subcategory of preferred—preferred smoker. This has the same criteria as preferred, but it includes the use of tobacco within the past 12 months.
- Standard Plus: Slightly better than average health.
- Standard: Average health with a possible family history of cancer or heart disease before 60. Minor chronic medical conditions may be OK. There is also a sub-category, named standard smoker, which includes the criteria for the standard category, but allows for tobacco use within the last 12 months.
- Substandard: This individual is considered a high-risk, either due to a history of medical problems, advanced age, or high-risk activities. People with a substandard rating will have a hard time getting a medically underwritten policy.
The big benefit of medically underwritten life insurance is obviously price. Premiums on these policies may be lower because the insurance company has a better idea of your overall health and can more accurately predict your risk. However, if you are in poor health, you won’t be able to get these policies. While health insurance companies may be restricted from refusing coverage, life insurance companies are not. This is why some companies offer non-medically underwritten policies.
Non-Medically Underwritten Life Insurance
“Non-medically underwritten” is a bit of a misnomer since a non-medical policy might not require an exam or any laboratory tests, but there will be a certain level of underwriting involved based on the results of your application. During the application process, the insurance company may get permission from you to obtain medical records to verify information on the policy. Often, someone might confuse non-medical policies with high-risk policies, when that is not the case. Non-medically underwritten policies are more a matter of convenience than getting around poor health.
In non-medical, there are some carriers that offer rates which are competitive with those that are underwritten, without requiring an exam. It’s possible to get up to a million dollars worth of coverage with only minimal medical underwriting, which is why even those in good health often choose non-medically underwritten policies. While non-medically underwritten policies aren’t necessarily high-risk, most high-risk policies are non-medically underwritten. If you’re considered medically uninsurable, a high-risk policy may be an option.
When High Risk Is Your Only Option
There are some uncontrollable factors that might turn you into a high risk life insurance candidate and some lifestyle choices that could push you into the uninsurable category. Some to consider:
- Tobacco use
- Dangerous professions (firefighter, underwater welder, forestry worker, etc.)
- Serious, long-term illnesses (cancer, diabetes, MS, etc.)
- A long history of poor health
- High risk hobbies (skydiving, scuba, snowboarding, etc.)
A high-risk policy will often be a non-medically underwritten one, and a lot of different factors will go into the eventual policy which is offered. When you’re looking at a high-risk scenario, your best bet is to work through an independent agent so that they can act as an advocate for you. Also, small lifestyle changes can help to get you out of high-risk categories.
Smoking, for example, can significantly increase the cost of a policy. Generally, if you’re able to stay away from tobacco products for 12 months, you can get into a much friendlier rate category. Hobbies are another area that you may want to look into, especially if you’re no longer as passionate about those hobbies as you once were.
A few lifestyle changes and a consult with someone who has specialized knowledge in life insurance can help you get the best rates possible, with minimal inconvenience. Contact a Howard Kaye advisor to discuss your life insurance options.
