No medical life insurance

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No price appears on this page, and none is sent by email. What a contract costs depends on the person and the design, and no honest figure can be produced from three answers.

What decides a contract issued without an exam

• Two routes, not one productSimplified issue asks a short set of health questions and can decline an applicant. Guaranteed issue asks nothing and declines no one, and the contract reflects that difference.
• The exam is removed, the assessment is notThe insurer still weighs risk, using the questions, prescription history and other records. The less information collected, the more the unknown shows up in the conditions of the contract.
• Coverage amounts are cappedThese contracts are issued up to limits set by the insurer, generally lower than a fully underwritten policy allows. The limit, not the need, sets the maximum available.

What no medical life insurance actually is

No medical life insurance is life insurance an insurer issues without sending the applicant for a paramedical examination. No nurse at the kitchen table, no blood sample, no urine sample, no tape measure around the waist, and in most cases no request to the family doctor for a report. The application is answered on paper or on a screen and the decision follows in days rather than weeks.

The first thing to understand is that this is a description of the buying process and not a description of the contract. What comes out the other end is ordinary life insurance. It has an owner, an insured person, a named beneficiary and a death benefit, and it is governed by the same insurance law as a policy that took two months and a blood test to issue. Nothing about the money is second class.

The second thing is that one phrase covers two genuinely different products with two genuinely different mechanisms. Simplified issue asks a short list of health questions and decides before it issues anything. Guaranteed issue asks nothing about health at all and instead defers the full death benefit for a period the contract sets. Almost every disappointment in this corner of the market comes from a household that bought one of those while picturing the other.

The third thing is the one the name gets wrong. No medical does not mean no underwriting. The insurer is still assessing risk. It is simply assessing it with fewer tools, later in the process, or by pricing for what it has chosen not to find out. Somebody pays for that missing information, and this page is largely about who.

The four reasons a household ends up on this page

People arrive at no medical coverage by four separate roads, and the road matters, because two of them lead somewhere better.

The first road is a decline or a rating. Somebody applied for an ordinary policy, the insurer came back with a refusal or with an offer priced above standard, and the household concluded that the door is shut. The second road is a condition under active treatment or investigation: a diagnosis in the last year, a test that has not come back, a medication that was changed last month. The third is age, where an applicant is past the point at which the routine market is keen to write a new life. The fourth is time and temperament: coverage is needed by a date, or the applicant simply will not sit for a needle and a questionnaire and would rather pay more than be examined.

The third and fourth roads do not describe a health problem, and a household travelling on them may well qualify for a fully underwritten contract at a price no simplified issue product can approach. Choosing the fast route out of impatience is a choice, and it is one worth making with the cost in view rather than by accident.

The first road deserves a correction as well. A decline at one insurer is not a decline everywhere. Insurers differ, sometimes considerably, on how they treat a particular condition, on how long they want to see it stable, and on what they will do with a family history. A refusal is information about one insurer’s appetite on one day, not a verdict on a person.

What the examination is for, and what skipping it costs

The examination is not an obstacle the industry invented to be difficult. It is the mechanism by which an insurer separates one applicant from another so that a healthy thirty eight year old is not charged for the risk of an unwell one. Fluids, measurements, the answers on a full application and, where the file calls for it, a report from the attending physician: together they let the insurer see the person rather than the category.

What a household buys with that hour of inconvenience is threefold. The lowest price the applicant’s own health will support, which on a long contract is the largest number on this page even though no number appears on it. Access to the larger coverage amounts, because the amounts available without an examination are capped and the caps are low. And the widest choice of contract shapes, from a twenty year term through to participating whole life, most of which are simply not offered on a no medical basis.

What a household gives up by skipping it is the mirror of that list. A higher cost for each dollar of protection. A ceiling on the amount. A narrower shelf of contracts. And, on the guaranteed issue road specifically, the immediate availability of the death benefit itself, which is a different order of concession and is the subject of its own page.

What skipping it buys is time and certainty of process. A fully underwritten file can take several weeks, longer if a doctor is slow returning a report, and a household that needs coverage in place before a closing date or under the terms of a separation agreement does not always have several weeks. That is a real advantage and it is the honest case for this route.

Simplified issue and guaranteed issue, side by side

Simplified issue asks. The application carries a short list of health questions, usually broad ones about treatment, hospitalisation, diagnosis and medication over a stated number of years, and several of them are knockout questions: a yes ends the application at that insurer. If the answers pass, the contract is issued and the full death benefit is payable from the day the coverage takes effect, subject only to the ordinary provisions every policy carries.

Guaranteed issue does not ask. There is no health questionnaire, no examination and no decision to wait for, and within the issue ages the contract sets, the insurer has agreed in advance to issue it. In exchange the contract defers the death benefit. For a period the contract states, a death that is not accidental generally produces a return of the premiums paid, commonly with interest, rather than the amount on the front of the policy. After that period the full amount is payable.

The difference stated in one line: simplified issue asks the questions now so that the family does not have to wait, and guaranteed issue asks nothing and makes the family wait instead. That is the whole trade, and everything else about the two products is detail.

A third shape sits alongside them and confuses the picture. Final expense coverage is a purpose rather than a mechanism. It describes a small permanent policy meant for the costs that fall due in the days after a death, and underneath it is either simplified issue or guaranteed issue. Two contracts sold under the same friendly name can therefore behave in completely opposite ways on the only question that matters, which is when the money arrives.

The three provisions that decide a claim

Households compare these contracts on the premium. Claims are decided on three provisions, and a family that reads three clauses before signing should read these.

The first is the deferral, and it appears only on a guaranteed issue contract. It says what is payable if the insured person dies during the early years of the policy, and the answer is generally the premiums back with interest unless the death was accidental. It is described at length on the guaranteed issue page because it deserves more room than a summary.

The second is the contestability provision, and it appears on every life insurance contract in the country. For a period stated in the policy and running from the day the coverage takes effect, the insurer may examine the answers on the application against the medical record if a claim is made, and may void the contract where a material answer was wrong. After that period the insurer generally loses that right, except in circumstances of fraud where the law preserves it. This is the provision that gives the health questions on a simplified issue application their weight.

The third is the misstatement provision, which deals with an inaccurate age or an inaccurate answer on smoking. It does not usually void the contract. It adjusts the benefit to what the premiums paid would have bought on the correct information, which means a household that shaded an answer to lower a premium has quietly reduced the amount its family will receive.

A suicide provision runs alongside all three, for a period the contract states and generally from the effective date, and it applies to fully underwritten policies exactly as it applies to these.

How to answer a simplified issue questionnaire

The questions are short, and they are broad on purpose. A typical one asks whether the applicant has, within a stated number of years, been diagnosed with, treated for, tested for, or advised to seek treatment for a listed group of conditions. Every verb in that sentence is doing work. Advised to seek treatment catches a conversation that never led anywhere. Tested for catches a result that came back clear.

The practical method is to answer from the record rather than from memory. A pharmacy will print a medication history covering several years in a few minutes and at no cost, and that single sheet resolves most of the dates a person would otherwise guess at. Where a hospital stay or a specialist referral is involved, the date and the reason belong on the application in the words the file would use.

Where a question is genuinely ambiguous, the safe course is to answer it the wider way and let the insurer decide what to do with the information. An insurer that knows something and issues anyway has accepted it. An insurer that was not told has accepted nothing.

The reason to be exact is not moral tidiness. It is that a policy issued on an inaccurate answer is a policy the family may find is not there. Premiums are usually returned in that situation. The protection is not. A decline today is an inconvenience; a claim refused in the contestability period is a household that spent years paying for something it did not have.

Why it costs more, stated plainly

An insurer prices for what it does not know. When an applicant is examined, the pool that person joins is a pool of people who were examined and found acceptable, and the price reflects that. When nobody is examined, the pool contains a much wider band of health, including people who would not have been issued a contract at all on a full application, and the price has to carry all of them.

There is a second force at work and it has a name: anti-selection. The person most motivated to buy a contract that asks no questions is often the person who could not answer the questions favourably. Insurers know this, they can measure it, and they build for it. That is why the cost for each dollar of protection rises as the questions fall away, and why the guaranteed issue route, which asks nothing, sits at the far end of that scale.

The third consequence is the ceiling. Because the insurer cannot see the individual, it limits how much it will put at risk on any one life without an examination, and that limit is well below what a fully underwritten contract will support. A household whose real need is income replacement across the years the children are dependent will usually find that no medical coverage cannot be bought in the size the need is measured in.

None of this makes the product bad. It makes it specific. It is protection bought at a higher unit cost by a household that either cannot buy it more cheaply or has decided the time saved is worth the difference, and a family that understands the trade is buying with its eyes open rather than being sold to.

The four routes, and how each one behaves

Four routes lead to a life insurance contract in Canada, and they differ on what is asked, on who can be refused, and on when the money is actually available to a family.

The row that surprises people is the last one. Final expense is a use, not a method, and the only way to know which method is underneath a particular contract is to look for a deferral clause. If one is there, the family waits. If it is not, the family does not. That single question is worth asking out loud before anything is signed.

Tax, the beneficiary, and why the designation matters more here

The death benefit of a life insurance policy paid to a named beneficiary is generally received free of income tax in Canada, and that is equally true of every route above. It is also true of the return of premiums a guaranteed issue contract pays during its deferral period. Premiums are not deductible, which is the other half of the same rule.

Naming a person rather than the estate does two things. The money passes outside the estate, so it is not delayed by the administration of the estate and does not attract probate charges where a province levies them, and it is generally out of reach of the creditors of the estate. Naming the estate gives up both of those and turns a fast, protected payment into an ordinary asset waiting its turn.

That distinction carries more weight on a no medical contract than almost anywhere else, because these policies are usually bought for costs that fall due within days. A payment that arrives promptly to a named person does the job. The same amount waiting on an estate does not.

Two housekeeping points follow. A designation made years ago and never revisited is the commonest defect found on an old policy, and the usual causes are a separation, a death, or a second marriage. And naming a minor child directly creates a problem rather than solving one, because a child cannot give a valid discharge to an insurer and the money ends up held by somebody appointed for the purpose. Naming a trustee for the child is the ordinary answer, and the wording belongs on the designation itself.

This is general information about how these contracts work and not tax or legal advice. The treatment of a particular estate is a question for a lawyer or a notary and, where tax is involved, for an accountant.

Where this route does the job, and where it does not

It does the job where a person has been rated or declined on a full application and the household still needs protection in place. It does the job where a condition is under active treatment or too recent for the ordinary market to look at. It does the job where the applicant is older and the amount needed is modest and defined, which is the situation most often described on the coverage for seniors page. And it does the job where coverage has to exist by a date and there is no time for a full file.

It does not do the job where the need is large. A household replacing an income across fifteen or twenty years is measuring the need in multiples of what these contracts will issue, and buying a small no medical policy against that need leaves most of it uncovered while producing the feeling that it has been handled.

It does not do the job where the applicant has never actually applied. A person who assumes a diagnosis will disqualify them, and buys accordingly, may be paying a permanently higher cost for an assumption that a single application would have tested.

And it does not do the job where a family will need the money in the first years and the contract underneath is guaranteed issue. That is not a matter of preference. It is what the contract says.

The order to work through, and the coverage already in the house

The routes above are not a menu of equals. They are a sequence, and working through them in order is what keeps a household from paying for a concession it did not have to make.

The full application comes first unless there is a known reason it is pointless. Even an offer that comes back rated above standard is frequently better value than a contract issued with no questions, because a rating is still priced against the individual and a no medical premium is priced against the whole pool. Finding out costs an hour and some weeks of waiting.

Simplified issue is the next step where the full application is refused or comes back at a price the household cannot carry, and where the applicant can answer the knockout questions honestly and pass them. The questions differ between insurers, which is worth knowing, because an application that ends at one company can succeed at another with a differently drawn list.

Guaranteed issue is the route that remains when the questions cannot be passed. It is not a failure or a lesser product. It is a different instrument with a different mechanism, and the one condition attached to using it well is that everybody concerned understands the deferral before anything is signed.

Before any of that, count what is already in the house. Coverage through an employer, a certificate attached to a mortgage, a small policy bought decades ago and forgotten, a benefit attached to a professional association. Some of it ends with the job and some of it pays the lender rather than the family, so it is not all equal, but it is all part of the picture and the picture should be assembled before anything new is bought.

The six mistakes this page exists to prevent

Treating one decline as the end of the matter. Insurers differ on conditions, on how long they want to see one stable, and on what they do with a family history, and a refusal describes one company’s appetite rather than a person.

Buying a guaranteed issue contract without knowing that the death benefit is deferred. This is the expensive one, and it is the reason the guaranteed issue page exists in the form it does.

Answering simplified issue questions from memory. A medication changed last spring, a test ordered and never followed up, a referral that went nowhere: those are exactly the details that decide a contested claim.

Buying the premium instead of the amount. Choosing a figure because the monthly cost is comfortable, rather than because it covers what it is meant to cover, produces a policy that pays for part of a funeral and nothing else.

Naming the estate as beneficiary, which surrenders the speed and the protection that make a life insurance payment useful in the first place.

Treating the purchase as finished. Health changes, and a person insured without questions this year may qualify on a full application in three years at a materially different price, which is a conversation worth having rather than a policy worth forgetting.

Questions people ask

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