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When you’re used to the instant gratification that comes with ordering everything online, buying life insurance can seem painfully old-school.
Until recently, if you wanted to purchase a lot of life insurance at a low price, you typically had to fill out paperwork, undergo a medical exam, give a urine sample or get blood drawn, and then wait 30 to 90 days to get a policy.
But that’s changing. Some companies — from traditional insurers to technology-driven startups known as “insurtechs” — are making the process of getting life insurance easier. Applying online for instant life insurance takes only a few minutes, and coverage can range into the millions of dollars, without the need for a medical exam.
What is instant life insurance?
Instant life insurance refers to coverage that’s quick to apply for and doesn’t require a medical exam. But these policies aren’t like guaranteed issue life insurance, the small and pricey products marketed to seniors. Instead, instant life insurance typically uses a process called “accelerated underwriting” to estimate rates. An insurer funnels data about you into algorithms to calculate your risk of dying early. This process often provides enough information for the company to make a quick decision and offer competitively priced coverage on the spot.
It’s also contactless, which is one of the reasons behind the popularity of no-exam life insurance during the COVID-19 pandemic.
Instant policies are typically term life insurance policies lasting from 10 to 30 years.
How instant life insurance works
Since the entire process is online, applying for and buying a policy is fairly seamless.
These are the steps:
You apply online by filling out a life insurance application with your personal and contact details and answering some basic questions about your health and lifestyle.
With your permission, the company retrieves information about you from a variety of databases. For example, it can find out what medications you’ve taken by searching prescription databases. It can look at your motor vehicle record to see if you’ve had any driving violations. And it can check data from the MIB Group to determine if any health conditions came up when you applied for individual health or life insurance with other companies. Owned by its member insurance companies, MIB maintains a database of information from insurance applications.
You will typically get a decision within minutes of submitting the application.
There are three possible outcomes:
Approved. This means there was nothing in your application that made the insurer hesitant to cover you. Once you sign off on your policy and pay your first premium, your coverage will go into effect — and all of that can happen on the same day. You won’t have to take a life insurance medical exam.
Denied. While you’re free to apply for an instant life insurance policy, coverage isn’t guaranteed. You may not qualify for a policy based on factors like your health, lifestyle or age. If you’re denied, you can still apply for a traditional life insurance policy, which may take a few weeks. Otherwise, you can apply for a guaranteed issue policy and skip the health questionnaire and medical exam.
Referred to underwriter. Sometimes, insurers need a bit more information about you before they can make a decision. Rather than relying on algorithms, the insurer will send your case to an underwriter, a professional who’s tasked with evaluating your risk. The underwriter might reach out to ask more questions.
Types of life insurance underwriting
When shopping for an instant life insurance policy, you may see terms like “automated underwriting,” “accelerated underwriting” and “simplified issue,” which often mean similar things.
Automated underwriting refers to the lack of human involvement in the approval process.
Accelerated underwriting implies a fast application process through the use of algorithms and increased data points.
Simplified issue underwriting traditionally uses fewer data points than accelerated underwriting to determine whether to issue you a policy and how much you’ll pay.
In general, policies that use more data are able to provide more competitively priced policies with higher coverage amounts. If the insurer uses only a few data points to assess risk, the cheapest rates may not be available.
Instant life insurance with an exam
Some companies use accelerated underwriting to fast-track consumers through the application process but reserve the right to request a medical exam if needed. This means you might be approved instantly or asked to complete additional steps before getting an answer. Applicants who are accelerated through the process without an exam receive the same price and product as if they had taken an exam.
Tips for buying an instant life insurance policy
If you need life insurance ASAP or want to forgo the medical exam, you might be in the market for an instant life policy.
To make sure you’re buying the right coverage, keep these tips in mind:
Decide on the length and amount of coverage. Before you apply, calculate how much life insurance you need and how long you want it to last. This may narrow down your options as some insurers offer only limited term lengths or small instant policies.
Be realistic about your chances of approval. Generally, instant life insurance is open to healthy applicants who lead safe lifestyles. If you’re trying to buy life insurance with a pre-existing health condition, a hazardous job or a poor driving record, you might be better off applying for a traditional life insurance policy.
Look at policy features. Are you hoping to customize your coverage with life insurance riders, or do you want the option to convert to a permanent policy later on? If so, factor these features into your decision.
Shop around. Premiums are likely to vary widely, because some use more data than others to determine your eligibility and price. As always, it’s useful to compare life insurance quotes before buying coverage.