Life insurance is an ideal solution to provide a tax-free benefit to your loved ones upon your death. The money can be used to pay debts, funeral expenses, and estate costs or provide a lump sum of cash to your survivors.
But if you’ve applied for insurance lately you know it may not be easy to be approved. You may have to go through medicals, get stuck with needles to provide a blood sample and have your doctor fill out medical reports. Even after going through all this you may still have a hard time obtaining coverage. Your health or lifestyle may require you to pay an extra premium or in the worst case you may be declined coverage. Or maybe you feel you are just “too old” or the premiums too expensive to be considering life insurance.
There is a solution. It’s called non-medical life insurance. You may have seen the ads on television. It’s true; you can apply for life insurance without going through the hassle of divulging your complete medical history. Just answer a few simple qualifying “yes” or “no” questions and that’s it. But you should be aware, there are a few catches.
First of all the cost is higher than traditional life insurance that requires you to go through the medicals. To some, that extra cost may be worth the convenience. But remember, the higher cost does not go away. You will pay a higher premium forever while your policy is in force.
There is an upper limit to the amount of coverage that is offered by no-medical insurance. Typically the coverage limit can be between $75,000 and $225,000 depending on the type of coverage and the company selected. That limit may not be enough coverage to fully protect your family. If not, then you are back to medicals and a traditional life insurance application. However you can select coverage amounts as low as $25,000 to cover very specific needs, such as funeral expenses.
Full coverage can take two to three years to take effect. Some plans will only refund the premiums with interest if death occurs by other than accidental means within the first two years. If death occurs by accidental means within the first two years the face amount is paid instead of a refund of premiums. Some plans will only pay 50% of the face amount if death occurs in the third year.
Depending on your answers to the qualifying questions you may be eligible for permanent coverage with a savings component that can be used by you later in life or used to pay premiums if needed. Term coverage with no cash savings component is the second option.
Non-medical life insurance may be an option for you if you have applied for life insurance and been declined, or your premium was rated or modified, or if you just don’t want to go through the medicals. As with all consumer choices, make sure you know what you are buying and understand the terms and conditions of your selected policy.
The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail firstname.lastname@example.org. Mutual Funds provided through FundEX Investments Inc.