What is the difference between medical vs non-medical life insurance?
Let’s go over one of the most confusing and least understood things in life insurance: the difference between medical vs non medical life insurance. I come across this all the time and I have to explain this to clients every day. So hopefully this will help everything make sense.
When you apply for life insurance, there are two different ways you can apply. One is medical and one is non-medical. Neither one way is correct. Like everything in life insurance, it depends on your circumstances and this is why it’s so important to talk to somebody first.
You’ve likely seen an advertisement for a life insurance policy. They might throw out $500,000 for 25 bucks a month. It’s phenomenal and it looks great and you want to apply. That’s a huge policy for that small amount of monthly premium. But if you look at the fine print, those are always fully underwritten, which means they’re subject to a full medical analysis.
How does it work?
They send a someone out to draw blood, take urine samples, height & weight, all your vitals and more. Then they take all that data back to their office and an underwriter pours through it for several weeks. The carrier also orders the APS (attending physician statement) from your doctor, so they can check all of your health history.
Bottom line: they look at everything.
The underwriter looks at your family history, your parents and your siblings. He looks at all of your blood work, your cholesterol levels, your white blood cell count, on and on, anything that’s inside of your blood report and any vitals or numbers that they can pull. Shoot, they’d look at how often you brush your teeth if they could. Just kidding. But not really.
After gathering all this health data on you, ONLY THEN can they make you an offer with a premium amount.
Is it risky?
All that health information can work for or against you. If they find a really good picture of health, they can give you great rates. That’s usually what you see advertised from a life insurance company. It’s often called a “preferred plus” level, which most of us will never qualify for. In most cases when you go fully underwritten, it’s either going to get declined or rated. Rated means it becomes back more expensive than you expected because they found some things in your health they didn’t like.
Now, you might feel healthy. You might not even be on any medications at all. You might have the doctor telling you, “You’re doing great, kid. Keep up what you’re doing, exercise every day,” all those things. But an underwriter looks at your health at a deeper level and from a different perspective than you might expect.