When you’re used to ordering everything with a tap on a screen and getting it fast, from Uber rides to Etsy art, buying life insurance can seem painfully old-school.
Until recently, if you wanted a lot of life insurance at a low price, you had to fill out paperwork, undergo a life insurance medical exam, give a urine sample or get blood drawn, then wait 30 to 90 days to get a policy.
But that’s changing. A handful of companies now offer instant-approval term life insurance online for younger healthy people without requiring a medical exam.
“You can get the coverage you need as fast as you can type,” says Jamie Hale, CEO of Ladder, one of the providers of instant-approval term life insurance.
Who offers instant-approval term life
- Haven Life, owned by insurer MassMutual. It launched sales in May 2015 and offers coverage in every state except California and Montana. (See NerdWallet’s Haven Life Insurance review.)
- Ladder, which launched in January and sells policies in California. Policies are issued by Fidelity Security Life Insurance.
- SoFi, which began selling instant-approval term life in November 2016. SoFi offers policies nationwide, except in New York. Policies are issued by Protective Life.
How it works
- You can see quotes online and then apply online by answering some health questions.
- 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 checking prescription databases. It can check 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.
- Immediately after filling out the application, you find out whether you’re approved. The younger and healthier you are, the less likely it is that you’ll have to answer more questions or take a medical exam.
If you have a health issue or two, you probably will have to take a life insurance medical exam. With Haven Life and Ladder, you still get covered right away if you’re approved. The companies set the final price after the exam results come back.
With SoFi, you’ll need to wait until the exam results for the coverage to go into effect.
Companies offering instant-approval term life
A new way to decide life insurance rates
These instant life insurance policies are made possible by “accelerated underwriting.” This process gives insurers the ability to make quick decisions and require fewer medical exams than with traditionally underwritten policies. Traditional policies take longer to process and require applicants to get life insurance medical exams if they want larger amounts of coverage.
Thanks to the plentiful data and sophisticated algorithms that accelerated underwriting uses, insurance companies can get enough information to predict your life expectancy and set a price. This also lets them keep rates low and offer a lot of coverage.
“The key is to learn as much as you can about the applicant without making them go through invasive testing,” says Samantha Chow, a senior life insurance and annuities analyst with Aite Group, a research and advisory firm.
Haven Life co-founder and CEO Yaron Ben-Zvi says many people forgo coverage they need because the buying process is inconvenient, and they overestimate the price. He says his company wants to make shopping for life insurance simpler.
The “no-exam life insurance” concept isn’t new. “Simplified-issue” and “guaranteed-issue” life insurance have been around a long time. With simplified-issue policies, you qualify for coverage based on answers to several health questions on the application. With guaranteed-issue, you qualify without answering any health questions.
But typically no-exam policies have had two big drawbacks: The coverage was expensive, and you couldn’t get very much of it.
Accelerated underwriting removes those drawbacks and expedites the life insurance shopping process.
Four ways insurance companies set term life rates
|Instant approval policies using accelerated underwriting||Simplified issue life insurance||Guaranteed issue life insurance||Traditional medically underwritten life insurance|
|Get coverage quickly|
|$1 million or more of coverage available|
|Low price for healthy people|
|Considers medical information|
|Medical exam required for larger amounts|
Instant approval helps insurance companies, too
One reason life insurers want to streamline the buying process is to cut their costs, Chow says. Medical exams are expensive for life insurers, who bear the cost. And for younger people, they often don’t reveal much because bad health habits haven’t had a chance to make a measurable impact on things like cholesterol and blood pressure.
“For someone under 40, the chance of finding an undiagnosed medical condition [with a life insurance medical exam] is low,” says Andrea Blankmeyer, SoFi’s vice president of finance and corporate development.
Another reason is to encourage more people to buy coverage.
“Consumers need a process that’s friendly to them,” Chow says.
Ladder’s CEO Hale also has personal reasons to believe in making life insurance easier to buy. “My dad died when I was 11,” he says. “He had a simple policy. It kept my mom and my brother and I in our house, and I was able to stay around my friends.”