I sometimes receive mail from insurance companies inviting me to apply for their life insurance, even though I’m 70 years old. I see their ads on TV all the time now, too. They always say no medical exam is required and that it doesn’t matter how old I am. What’s the catch?
By Olev Edur
First, although the ads say a medical exam isn’t required, you’ll have to disclose any pre-existing medical conditions you may have when you apply. If the insurer later discovers that you were less than forthcoming about those medical conditions on your application, any insurance payout can be refused.
Then there’s price; the insurer will plug your health stats into a set of actuarial calculations and develop a premium structure that reflects your situation. So yes, you can get that life insurance policy, but you may well find that if you do have pre-existing conditions, you’ll end up paying as much in premiums over a few years as the policy will ultimately pay out.
In some cases, too, the policy may stipulate a graded benefit—a lesser payout is provided if death occurs within the first few years of the policy being issued. And while advertisers often claim their non-medical coverage can be as high as $500,000, in the vast majority of cases, the coverage offered will be far less—typically $25,000 at most.
Insurance companies are in the business of making a profit and that’s their prerogative, as it’s their right to make the product sound as attractive as legally possible, but lunches are never free. You’ll likely find, if you’re healthy, that you can get similar coverage for a lower price if you’re willing to undergo the slight indignity of a physical exam. As always, shop around before you buy.