Buying life insurance is easier now than it has ever been – including buying online!
Although it is a few years old now, a concerning study was published in 2014 that revealed far fewer Canadians were buying life insurance than three decades ago, yet one-third of Canadian households would face financial difficulty if the primary household earner were to pass away. Why would people NOT buy insurance despite having a need? Some of the most common reasons we have heard are:
- No time – Many people feel that buying insurance would require one or several meetings with an advisor, usually on personal time, and they can’t seem to find the time.
- Too expensive – Many people think that insurance is expensive, and they are more concerned with outliving their money than dying prematurely. So, they save for retirement but don’t think about the impact that an unexpected death could have on their family.
- Don’t want to go through a medical exam – Nobody likes needles! Having to provide blood, urine, and/or saliva samples to a nurse is not something anyone looks forward to, as straight-forward as it may be.
Fortunately, buying insurance has become more convenient and affordable than ever, with the introduction of Simplified Issue life insurance products and improved, automated underwriting processes designed to overcome these objections and fears.
What is Simplified Issue Insurance?
While this term is used in different ways and the products that fall under the umbrella have evolved, it basically describes any insurance product that can be sold to the owner (insured) without requiring a medical exam. In some cases, a very short and simple medical questionnaire is used to determine if the policy will be issued. In other cases, the questions asked are reflexive, meaning the response you give to one question may determine the question that is asked next. Based on the responses you give, you may be offered an insurance policy with a specific price for a specific term, with no further underwriting…and no medical exam! (Currently, only term life insurance policies (not permanent) are issued on a simplified basis. Read this to learn the difference.)
Pros and Cons
The obvious benefit to Simplified Issue life insurance is its simplicity – answer a few questions and you will be issued a policy. The process is much smoother than it used to be, which involved a face-to-face visit with an agent, a lengthy questionnaire, and a medical exam. Today’s simplified issue products can be bought online, and policies can be issued in minutes with no need to meet an agent in person. Most providers offer the ability to speak to a licensed insurance representative if there are questions. What could be simpler?
The downside of simplified issue products is that they often have age and amount restrictions. That means that you are limited in terms of the amount of insurance you can buy – most companies will only offer $250,000 or $500,000 of insurance on a simplified basis. While this may be enough to top-up coverage you have with your employer, or to cover a short-term need like a mortgage or final expenses like a funeral, it may not be enough for those with a growing family, larger mortgages, and tax liabilities that may be incurred from growing investment portfolios.
Another downside of simplified issue policies is that they can be a bit more expensive than traditionally underwritten life insurance. This is because the insurance companies price for the fact that they are not getting full information (as would be provided from the results of a medical exam) when they underwrite the policy. That is, they are taking on more risk, and this risk is priced into the cost of the policy.
Evolution of the Product
The lines between Simplified Issue and traditional products are greying as insurance companies streamline their application processes, go online, and increase the amounts of insurance they will offer with limited medical underwriting. Two of Canada’s largest insurance companies recently announced that they will insure Canadians up to 40 years of age with up to $1 million of life insurance with no medical exams. They both use a reflexive underwriting questionnaire – advisor-guided but via an online application – which allows them to quickly make decisions about which cases need to be referred to an underwriter for additional tests and which can be issued without medical exams.
These developments are good news for Canadians. The industry has responded to the demand to make insurance more affordable and easier to buy. It’s an old adage, but still true – there will never be a cheaper time to buy insurance on your life than right now – the longer you wait, the more expensive it gets.
To see how much insurance you might need, and to explore the options to buy online or with the help of an advisor, go to invisor.ca/insurance today.