Life insurance protects your family from inheriting all of your debts. Most insurance companies require some type of underwriting—that is, they give you a health exam and ask you numerous health-related questions to determine your risk, and set your price accordingly. However, you can purchase several types of no-exam policies, also known as “simplified underwriting” policies. These generally cost more because the insurers take a risk by not administering health exams—though they may still require you to answer questions. The upside is that your insurance policy can be issued instantly. In many cases, you can apply online; otherwise, you can work with a broker.
Guaranteed Whole Life:
Guaranteed whole life, also called “graded benefit” whole life, offers life insurance in situations when you would not qualify otherwise. With no health exam and typically few or no health questions to answer, this type of insurance pays benefits based on the amount of premium you pay into the policy, plus a predetermined interest rate. Insurance companies set the rates, which range from 7 percent to 20 percent annually. Death benefits increase over time; it typically takes several years before your policy is able to pay the actual face amount on the policy if you were to die. This is the “graded” part of “graded whole life.”
Single-Pay Life insurance:
Single-pay life insurance policies, also referred to as “modified endowment contracts,” allow you to pay one lump-sum premium in exchange for a death benefit that is either fixed or increases over time. Universal life insurance is a flexible type of single-pay contract. Death benefits and premium payments are adjustable, yet the policy provides permanent insurance coverage for individuals. Traditional whole-life policies with a single-pay option exist as well.
Group Term Life:
You can typically purchase group term life insurance through your employer. The “group” is made up of your fellow employees . You may be limited to purchasing a set amount of insurance— typically $50,000—but your employer may allow you to purchase supplemental life insurance benefits.
Simplified-Issue Term Life:
Simplified-issue term life insurance requires you to answer a few health questions before you can purchase as much as $250,000 of death benefit, although the exact amount varies by company. Your premium payment stays the same for the length of the term you select—such as 15 years. These are private policies that are not available through your employer.