Buying a life insurance policy is a wise financial decision as it provides financial security to your family when you are not around. However, you might be in urgent need of a life insurance, and a medical test may take a lot of your time. People who want to avoid the time-consuming process of answering a medical questionnaire as well as medical tests may opt for simplified issue life insurance policy.
The main feature of such a life insurance plan is it requires minimal health information from an applicant while completely avoiding any medical exams.
What is a Simplified Issue Life Insurance?
Simplified Issue Life Insurance is a life insurance plan that you can get approved with minimum health tests. All other life insurance plans require you to undergo medical tests that are mandatory. This type of insurance plan is tailored for people who need a life insurance quickly and people who don't want to take a medical exam.
Why do you Need a Simplified Issue Life Insurance?
Insurance companies conventionally use lengthy lists of questions concerning the applicant's physical health, mental health, and medical history. They also prescribe various medical tests to verify the authenticity of the information that the applicant provides. This process can take anywhere from 45 to 60 days in most cases, sometimes even more if the insurer wants additional information.
However, it didn't take long for insurance companies to realize people's aversion to going through this lengthy process to obtain life insurance. Simplified Issue Life Insurance was introduced as a way of simplifying the process.
How does the Simplified Issue Life Insurance Work?
Under this simplified process, applicants must answer only a few questions about their health. They don't need to take a medical exam. Insurance providers then contact third-party sources to obtain additional information about the applicants, like driving records and drug history.
Advantages of Simplified Issue Life Insurance
The main advantages of a simplified issue life insurance are as follows:
- It doesn't require a medical test.
- Insurance starts as soon as the applicant's document is approved.
- Less time consuming as compared to standard life insurance plans.
Drawbacks of Simplified Issue Life Insurance
Like every insurance plan, a Simplified issue Life Insurance has a few drawbacks too. Let's discuss them in brief.
- Conditional Death Benefits
Some simplified issue life insurance policies will pay your beneficiaries only if the policy has been two years old before the death of the policyholder. If the insured person dies within two years of purchasing the policy, the beneficiaries will receive the premium amount that the insured had paid.
- More Expensive
A simplified issue life insurance policy is more expensive than traditional life insurance schemes. This is because lesser information from applicants renders the job of classifying them difficult.
- Limited Coverage
Owing to limited information from applicants about their health, insurers hesitate to sell simplified issue policies that provide large coverage amounts.
When should you Apply for a Simplified Issue Life Insurance?
Keeping in mind the drawbacks, choosing a Simplified Issue Life Insurance still makes sense in the following cases:
- When you want to avoid a medical test but need life insurance.
- When you need life insurance but are not certain about qualifying for traditional policies.
- When you need a life insurance policy after your term insurance has matured, you need time to figure out what to do next.
In India, Term insurance plans without medical tests can be described as a variation of the Simplified Issue Life Insurance policy. Term Insurance policies are insurance schemes that ensure sufficient financial aid to sustain your family in the event of your death. These policies are purchased for a specified period. They are relatively cheaper but do not provide maturity benefits.
If a policyholder wants maturity benefits, they can choose Term Return of Premium (TROP) plans. These plans differ slightly from conventional term plans. They give maturity benefits to a policyholder by paying back the total premium amount paid by them.
This happens only when the term life insurance continues until the policy term's end and the policyholder is alive. According to the policyholder's needs, they can choose a term life insurance plan for 10, 20, 30 years.
However, it is advised that before you opt for a life insurance plan, you should take your time to research and compare various insurance schemes provided by different insurance companies. Accurate knowledge through proper research can safeguard you and your family from financial perils.