218- What is the difference between medical vs non-medical life insurance?

Life Insurance

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.
Is term life insurance worth it?

A non-medical application is very simple

It’s called simplified issue because it takes just a few days to process instead of several weeks. They come back with a decision and the pricing is either yes or no. No surprises. If you get a quote and it’s approved, it’s going to be that exact price. With a medical application, nobody knows what your price is going to be, not even your agent. If you’re getting blood work done in your application, it’s anybody’s guess how much that’s going to cost until after the blood work comes back. So keep that in mind. Some agents won’t volunteer this information. With a non-medical application, they look at just a few things. Instead of taking all the blood work, they look at the following your prescription history (Milliman report of all your prescriptions). They’re going to do a report on your driving record to make sure you don’t have any DUIs or an excessive number of speeding tickets. Then they’re going to look at your application, all the questions and things you put on the application itself. Next comes the MIB report, which is a Medical Information Bureau. You can get your own free report anytime you want. But the MIB is a history of all your life insurance applications. Let’s say that you apply medically to get a policy and you get declined or rated. Well, all that report goes onto the MIB. So the next time, anytime in the next seven or eight years that MIB report’s in place, the carriers are going to have access to all that data. And so it can come back to really hurt you and diminish your odds of getting approval.

Here’s what I recommend

If you have a policy in place, a good backup plan, get a non-medical policy first. And if you want to venture out down the road and try and go for the fully underwritten product, which is a lot harder to get, potentially improve your rates, you can always replace the existing coverage, but you can never go back. Should you do it out of order, try and remove those MIB hits, it’s kind of like carrying around a foreclosure on your record when you’re trying to get a loan with good rates. That’s the first thing they’re going to do is look at those records. Make sure you’re talking to somebody who is educating you on all this before you jump in and say, “Yeah, go ahead and shoot me up in my veins. Get my blood and urine samples and everything else.” Before you go that far, please talk to somebody who can educate you. If you do it out of order, it can hurt your chances of getting approved. That’s part of what I do when I do an assessment with a client. I help them understand the risk that they’re taking so we can minimize those risks with sound education. That way you don’t do things out of order and wish you hadn’t. Thank you, I hope this clears it up so you understand the difference between medical vs non medical life insurance. If you have more questions about moving forward with a medical versus a non-medical application, you know how to find me. Just hit me up: I’ll be happy to explain it in more detail. Have an awesome day. Don’t forget: your life matters!