Fully underwritten is most common
Most who have applied for life insurance are probably familiar with the fully underwritten method which, after completing a long and very detailed application, could include a paramedical exam that may also include a blood and urine test. Perhaps all that was required was a saliva swab. It's also possible a full medical exam by a doctor was required.
Most who have applied for life insurance are probably familiar with the fully underwritten method which, after completing a long and very detailed application, could include a paramedical exam that may also include a blood and urine test. Perhaps all that was required was a saliva swab. It's also possible a full medical exam by a doctor was required.
From the time of completing the application until a policy is actually issued can range from 1-2 weeks to several months, depending on how long it takes for all the requirements to be received by the insurance company. Generally what takes the longest time is waiting for medical records.
Fully underwritten is the most common but the others: Simplified issue and guaranteed issue may be options that have not been considered, or maybe were not available at the time of application.
There are advantages and disadvantages to each. Whether it's considered an advantage or a disadvantage depends on one's point of view.
Guaranteed-issue policies are exactly as it says. Anyone who meets the specified criteria is guaranteed that a policy will be issued. There are no health questions to answer and the application is very brief.
Because it is guaranteed and anyone qualifies, it means high risk, low risk, and anyone in between could be priced the same, although there could be different tiers based on a number of factors, such as age, that differentiates price.
Limits
The amount of coverage (the death benefit) is usually very limited and the coverage itself may be conditional. For example only accidental death may be covered and not natural death. It's also possible that a policy must be in force a certain amount of time before the full death benefit will be paid. There may be other conditions as well.
Guaranteed issue policies are commonly issued within 24-48 hours to a week.
Simplified issue policies are somewhere between a guaranteed issue and fully underwritten. The amount of coverage is usually limited but the coverage is usually not conditional, although it could be. The full death benefit usually goes into effect right away. The application is longer than a guaranteed issue application but not nearly as long and detailed as a fully underwritten application. Most often no paramedical exam, blood and urine etc. is required but some require saliva swab depending on the amount of the death benefit.
Applicants can be and are declined if they do not meet the standards set forth by the insurance company. On the other hand, simplified issue applications are not nearly as detailed and don't ask as many questions as a fully underwritten policy application.
Simplified issue policies are also commonly issued within 24-48 hours to a week.
Life insurance companies have different tiers of qualification that are used for pricing: Preferred, standard, and sub-standard (aka rated) are most common. Some companies have additional tiers within each tier, such as super preferred or preferred smoker etc.
Fully underwritten policies offer the most variety of pricing tiers.
Simplified issue policies often have only a smoker and non-smoker rate. Some offer preferred. Some offer sub-standard, that are often known as graded policies, which means a policy must be in force a certain amount of time to be eligible for the full death benefit.
Guaranteed issue policies usually don't have qualification tiers. The applicant either qualifies or doesn't qualify.
Price Example
Following is one example of the pricing of a very well-known insurance company that offers guaranteed-issue, simplified issue, and fully underwritten policies. The example is for a 40 year old male who is 6 feet tall, weighs 175 pounds, is a non-smoker, has no medical issues and would be issued the best priced preferred policy offered. The death benefit is $100,000 and it is for a 20-year term policy.
His cost would be 14.39 per month.
If the same man applied for a simplified-issue policy with the same parameters as above and with the same insurance company his cost would be 33.39 per month.
If the same man applied for a guaranteed issue accidental death policy his cost would be 16.19 per month.
Comparison
For the purpose of comparison, if a man with all the same parameters except for the fact that he had some medical issues that resulted in him being rated standard non-smoker, his cost would be 20.61 per month.
At first glance, one would tend to think that applying for a fully-underwritten policy makes the most sense. That may or may not be the case. Consider: A guaranteed-issue policy is guaranteed to be issued. A simplified-issue policy will be issued as applied for about 85-90% of the time. A fully-underwritten policy will be issued as applied for about 50-60% of the time.
It may make sense to pay the higher premium to protect insurability. Once the policy is issued, it cannot be canceled by the insurance company. From there, if someone feels confident they are in good health, they can apply for a fully-underwritten policy. If it is issued and it saves money, then cancel the more expensive policy in favor of the less expensive policy.
On the other hand, if someone applies for a fully-underwritten policy and is declined or rated substandard for whatever reason, they will not be able to go back and apply for the simplified-issue policy, although they may still qualify for a guaranteed policy.
In other words, it may make sense to insure that you will be insured. The cost is obviously a concern but putting oneself in the driver-seat may cost a little more but it may be a safer way to go. It's something to consider.
Fully underwritten is the most common but the others: Simplified issue and guaranteed issue may be options that have not been considered, or maybe were not available at the time of application.
There are advantages and disadvantages to each. Whether it's considered an advantage or a disadvantage depends on one's point of view.
Guaranteed-issue policies are exactly as it says. Anyone who meets the specified criteria is guaranteed that a policy will be issued. There are no health questions to answer and the application is very brief.
Because it is guaranteed and anyone qualifies, it means high risk, low risk, and anyone in between could be priced the same, although there could be different tiers based on a number of factors, such as age, that differentiates price.
Limits
The amount of coverage (the death benefit) is usually very limited and the coverage itself may be conditional. For example only accidental death may be covered and not natural death. It's also possible that a policy must be in force a certain amount of time before the full death benefit will be paid. There may be other conditions as well.
Guaranteed issue policies are commonly issued within 24-48 hours to a week.
Simplified issue policies are somewhere between a guaranteed issue and fully underwritten. The amount of coverage is usually limited but the coverage is usually not conditional, although it could be. The full death benefit usually goes into effect right away. The application is longer than a guaranteed issue application but not nearly as long and detailed as a fully underwritten application. Most often no paramedical exam, blood and urine etc. is required but some require saliva swab depending on the amount of the death benefit.
Applicants can be and are declined if they do not meet the standards set forth by the insurance company. On the other hand, simplified issue applications are not nearly as detailed and don't ask as many questions as a fully underwritten policy application.
Simplified issue policies are also commonly issued within 24-48 hours to a week.
Life insurance companies have different tiers of qualification that are used for pricing: Preferred, standard, and sub-standard (aka rated) are most common. Some companies have additional tiers within each tier, such as super preferred or preferred smoker etc.
Fully underwritten policies offer the most variety of pricing tiers.
Simplified issue policies often have only a smoker and non-smoker rate. Some offer preferred. Some offer sub-standard, that are often known as graded policies, which means a policy must be in force a certain amount of time to be eligible for the full death benefit.
Guaranteed issue policies usually don't have qualification tiers. The applicant either qualifies or doesn't qualify.
Price Example
Following is one example of the pricing of a very well-known insurance company that offers guaranteed-issue, simplified issue, and fully underwritten policies. The example is for a 40 year old male who is 6 feet tall, weighs 175 pounds, is a non-smoker, has no medical issues and would be issued the best priced preferred policy offered. The death benefit is $100,000 and it is for a 20-year term policy.
His cost would be 14.39 per month.
If the same man applied for a simplified-issue policy with the same parameters as above and with the same insurance company his cost would be 33.39 per month.
If the same man applied for a guaranteed issue accidental death policy his cost would be 16.19 per month.
Comparison
For the purpose of comparison, if a man with all the same parameters except for the fact that he had some medical issues that resulted in him being rated standard non-smoker, his cost would be 20.61 per month.
At first glance, one would tend to think that applying for a fully-underwritten policy makes the most sense. That may or may not be the case. Consider: A guaranteed-issue policy is guaranteed to be issued. A simplified-issue policy will be issued as applied for about 85-90% of the time. A fully-underwritten policy will be issued as applied for about 50-60% of the time.
It may make sense to pay the higher premium to protect insurability. Once the policy is issued, it cannot be canceled by the insurance company. From there, if someone feels confident they are in good health, they can apply for a fully-underwritten policy. If it is issued and it saves money, then cancel the more expensive policy in favor of the less expensive policy.
On the other hand, if someone applies for a fully-underwritten policy and is declined or rated substandard for whatever reason, they will not be able to go back and apply for the simplified-issue policy, although they may still qualify for a guaranteed policy.
In other words, it may make sense to insure that you will be insured. The cost is obviously a concern but putting oneself in the driver-seat may cost a little more but it may be a safer way to go. It's something to consider.
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