WOW - The one word that comes to mind whenever "No Medical Questions" comes up in conversation with someone about insurance.
Because, unfortunately, the media and advertising has completely distorted the term "No Medical Questions". Media and advertising do this to simplify and "dumb down" the conversation. Saying to you things that you want to hear, and of course it's profitable. Why do they do it? Because;
Sorry to say, but all these wonderful features come with a price.
These advertisements prey on middle America with an assumption that middle America is too naive or too lazy to understand or care about the details.
Remember the movie National Lampoon Vacation when Clark Griswald paid top dollar for ... The Antartic Blue Super Sports Wagon with the C.B. and optional rally fun pack ... BUT ... ended up with the ... Metallic Pea Wagon Queen Family Truckster
"Now, I owe it to myself to tell you that if you're taking the whole tribe cross-country, the Wagon Queen Family Truckster... You think you hate it now, wait 'til you drive it."
Medical Questions means = GUARANTEED ISSUE = A company will insure you without knowing anything about you.
Think long and hard about that for a minute.
Let's pretend for a minute go to a casino to play blackjack BUT you you are not allowed to look at the hole card (face down card). You have to "hit" or "stay" only based upon the face up card(s).
Would you EVER do that? EVER?
You probably said NO, right? Well, the correct answer is ... YES ... you would do that but only if the odds were in your favor!
If you are playing straight up even money, the answer is HECK NO YOU WOULD NEVER DO THAT.
If, however, you were given a 10x payout, the answer is HECK YES YOU WOULD DO THAT!
This analogy is nearly identical to what the insurance companies are doing when they claim NO MEDICAL QUESTIONS! They are taking a blind bet on you, but guess what ... THEY ARE MAKING YOU PAY A PREMIUM FOR THAT BLIND BET. The insurance company is "the house" and we all know the house never ever loses! They might lose a deal here or there but in the long run the house will always win.
Actually, YES, in some cases (many cases) it makes a whole heck of a lot of sense. It makes sense if someone is otherwise uninsurable or has some VERY serious health conditions. OH, by the way - Guaranteed Issue usually comes with a 2 Year Waiting Period (if you die within 2 years, your beneficiary will get nothing - nada - zilch).
The problem I have here is that when media and advertising lead with this offer YET do not mention the risk, cost or downside. You, consumers, are not being told the whole story.
I would like to share a story about a neighbor. He is 70 years old, in pretty decent health and is a smoker. I am very fortunate because he let's me practice my phone scripts and in person presentations with him as acting as an "average 70 year old consumer", which indeed he is.
Time and time again, he always mentions to me;
"I get these postcards and see ads for life insurance that say - NO MEDICAL QUESTIONS"
Time and time again, I mention to him;
"You do realize with those policies you are paying more money for less coverage?"
From there it always turns into a full-blown conversation, most of the time we always end up back on the topic of "Colonial Penn $9.95 per month" or "United of Omaha" (both guaranteed issue policies).
It finally dawned upon me after 2-3 of these conversations that no matter what I say, the media and advertising had such a profound impact on him that there is little I can say or do to counteract the message he consumed from that advertising.
The convenience and peace of mind of having to answer No Medical Questions must be very important to him. And guess what? He is not alone, many people feel this way.
This sometimes PAINS me dearly, especially for people in good or moderate health that have so many better options.
So, media and advertising hooks you with;
Then, the additional list of benefits and features hit the screen, paper or a web page.
What was an extremely interesting offer now becomes a completely irresistible offer. EXCEPT, the three features above are STANDARD features for nearly every Final Expense or Burial Insurance policy out there.
Now the entertaining part! Don't know about you but one of my favorite movies of all time is National Lampoons Vacation. So let's compare Guaranteed Issue policies to the purchase of The Family Truckster!
Rusty Griswold: Dad, this is not the car you ordered!
Clark Griswald : Settle down Russ. Let me handle this. Ed, uh... this is not the car I ordered. I distinctly ordered the Antartic Blue Super Sports Wagon with the C.B. and optional rally fun pack.
Ed, the car salesman : You didn't order the Metallic Pea?
Clark Griswald : Metallic Pea?
It's kind of like running into a savvy used car salesman;
Check out this AWESOME 2014 FAMILY TRUCKSTER - PACKED WITH FEATURES SUCH AS;
In the fine print is that you will have to make payments for 5 years (60 months) for a total of $18,000 for an $8,000 vehicle.
Would you ever pay $18.000 for an $8,000 vehicle? OF COURSE NOT -
Guess what - If you are healthy or even moderately healthy and you have a "NO MEDICAL QUESTIONS" or Guaranteed Issue life insurance policy, you just paid $18,000 for an $8,000 vehicle!
"No medical exams means you pay lower rates for more coverage" (Simplified Issue). This is absolutely 100% true vs. "No Medical Questions" (Guaranteed Issue).
The nitpicker's in the world might argue; But Mike people can get a fully underwritten policy for even lower rates and more coverage. My response to that (silly) argument is that there few (if any at all) fully underwritten Final Expense or Burial Insurance policies out there, it makes NO SENSE AT ALL for customers or the insurance companies to have a medical exam for a small face value whole life policy.
Back on point, NO MEDICAL EXAMS means SIMPLIFIED ISSUES which means you will have MEDICAL QUESTIONS but will not have to go take an exam or have a doctor visit your house for an exam.
If we rewind the clock 15 years, 20 years or more, Final Expense or Burial Insurance may have been around but it was not popular of prevalent.
There ARE reasons why these policies are so popular and prevalent now vs. 20 years ago, including;
Most carriers have a standard set of questions that are asked up front, either during an informal session (sales appointment or call) or at the beginning of the formal application. These up front questions are sometimes called disqualifying questions. Disqualifying questions simply means that you will not be qualified for the lowest rate but may qualify for GRADED or MODIFIED policies and if not either of those then finally a GUARANTEED ISSUE policy.
Examples of disqualifying questions, if you answer YES to any of the following you are disqualified from simplified issue;
You are generally disqualified from purchasing a simplified-issue final expense policy if you answer YES to one or more of these questions (excluding tobacco use). Ultimately, it depends on the criteria of the insurer though, every carrier has their own underwriting standards. Click here for insurance company underwriting standards and the Final Expense Health Cheat Sheet.
With simplified-issue final expense insurance, the insurance company must pay your beneficiary the full death benefit as soon as the policy is in force. Additionally, the death benefit stays level throughout the entire time the policy remains active.
If you purchase a simplified-issue final expense policy with a $10,000 death benefit and unfortunately passed away the next day, your beneficiary would receive the full $10,000 as long as you were honest with your answers to the application’s health questions.
All companies that offer Final Expense and Burial Insurance policies will typically have some variation of simplified issue. The variations may use health classes like;
The companies might suck you in with an advertisement for Guaranteed Issue (No Medical Questions), but they also have Simplified Issue as well.
IF YOU ARE IN GOOD HEALTH - PLEASE, PLEASE, PLEASE - Look beyond the "No Medical Questions" and guaranteed issue policies. In the long run you will save a LOT of money on monthly premiums.