A Simple Trick That Could Save You a Fortune on Life Insurance: Patch Advisor

If you signed up for a quick-and-easy life insurance policy, covering just the bare essentials your family would need in the case of your death, you might feel pretty good about your decision. Many people neglect to get life insurance, and it's better to have a small financial cushion for your family than none at all.

But if you stick with a simple and low-hassle "final expenses" plan, you could be leaving hundreds of thousands of dollars on the table. Getting that money for beneficiaries could take little more than a half hour of your time.

What's the catch?

You just have to be basically healthy for your age, and you have to be willing to take an insurance company's medical exam.

If those two conditions apply to you, there's a good chance you can qualify for a significantly higher policy payout than you'd get from traditional "final expense" coverage.

How much higher? Just running the numbers on a few online life insurance quote calculators, a man in his fifties, who doesn't smoke, and is currently in good health, could increase his policy's payout by $200,000 while paying around the same premium each month.

All by taking a quick trip to the doctor.

Here's how it works:

How much would $100,000 in life insurance cost you?

Final expenses plans are offered as a painless option for life insurance, explained Beverly Campbell, the vice president of product management for MetLife Insurance. It is usually in the $10,000 to $25,000 benefit range, enough to cover burial and funeral expenses, as well as end-of-life care or outstanding debt.

"Typically a consumer who does not want to go through a medical exam, they want to get insurance in as simplified a process as can be, is going to look at what we called 'guaranteed-acceptance whole life insurance,' and that’s what the whole industry refers to as 'final expense,'" she said.

Insurers benefit from providing these plans because otherwise some people might not buy insurance at all, explained Chris Huntley, founder of Huntley Wealth & Insurance Services.

“In my personal experience, for many people, the process of shopping and applying for life insurance is already tedious and boring, so to add a mandatory exam on top of that, that will push some prospective buyers away,” he said.

Customers often like these plans because they're generally hassle-free.

"A customer is going to fill out a very simple application," Campbell explained. "There are no disqualifying questions, they’re guaranteed acceptance in the program. It takes about ten minutes to buy it."

But Campbell noted that customers might also be motivated to buy a final expenses plan out of necessity.
"They may have had some health issues in the past and found that they’ve not been qualified for a fully underwritten product, or even what we call a simplified-issue term, which is typically a seven- to eight-question application, where they could get turned down if they had prior health issues," she said.

If you're one of these people, sticking with final expenses plans might be right for you. But if you refuse to undergo a medical exam, your insurance company will treat you as if you're a high-risk client, even if you're healthy and likely to live for a long time.

"Fully underwritten" life insurance plans take into account an individual's unique risk profile and price the benefits accordingly. If you're high-risk because, say, you've had serious health problems in the past, you may be out of luck getting these policies.

This is why insurers ask for the medical exam. If they didn’t conduct medical exams, then people would be more likely to wait until they’re very sick to buy life insurance. And a life insurance company with only sick customers would not be able to stay in business for long.

So what might a medical exam find that could raise your rates? Factors such as high blood pressure, risk of diabetes as determined by your blood sugar, height-to-weight ratio and the presence of nicotine or others drugs in your blood all figure into the calculations the insurers make, a process called “underwriting.”

Sorting through the different pricing implications of all the different factors can be complicated for both the insurance company and for you. And you may benefit from seeking some professional advice.

“A website can quote you any rate, but you have to be able to qualify for that rate,” said Huntley. “Say you have diabetes or high blood pressure. Every insurance company ‘rates’ that differently.

“You want to apply to the company that will be the most lenient on your particular condition,” he said. “That’s where a knowledgeable, independent agent comes in handy.”

It's worth taking your time and exploring your options, because putting in just a little more time can mean a lot more financial security for your family.

Photo Credit: Kate Hiscock via Flickr