- The history of non-medical life insurance
- June 5, 2015
When selling life insurance policies, insurance companies use a series of factors to determine the insurability of the potential applicant.
One of the biggest factors is the age and current health status of the applicant.
A medical examination is used to get a full health history of the potential applicant. The examination will give the insurance company important information regarding the health history of the applicant, which will be used to predict their life expectancy.
However, the medical examination is not popular among some applicants for a variety of reasons.
The good news is that you can still apply for life insurance without having a medical exam done. This is generally the case when the applicant has an immediate need for insurance coverage, does not favor doctor examinations or has a health condition that may keep him or her from applying for a more traditional policy.
While this may not be a recent innovation, non-medical life insurance has given individuals the peace-of-mind that their beneficiaries will be financially protected when the policyholder passes away.
In fact, the first life insurance policy was sold without a medical examination.
In the early days of the life insurance industry in England, each applicant appeared before the directors of the company, who made their decision largely based on appearance.
Personal inspection by the company directors was later supplemented by recommendations of the applicant’s friends and associates, which was eventually replaced by the medical examination, as it gave an unbiased point-of-view.
Then, in the late 1880s, companies in Great Britain began to experiment with non-medical life insurance underwriting. To protect the companies from financial loss, the policies offered to applicants were limited in amount, contained liens during the early years of the contract or were issued at advantaged premium rates.
Non-medical underwriting as how it is practiced today began in 1921 in Canada. However, the motivation behind the change in underwriting practices developed due to the shortage of medical examiners, particularly in rural areas.
The concept of non-medical underwriting spread to the United States around the 1920s after the success in the Canadian market.
It gained approval during the 1930s as American experiences enjoyed its greatest growth when a shortage of medical examiners developed during World War II.
The practice of non-medical underwriting or no-exam life insurance is extremely successfully today in both Canada and the United States.
While buying life insurance without a having a medical examination is more convenient and quicker, it is also more expensive than the traditional policy. This is because the insurance company has little to no information regarding your health condition and could be taking a greater risk by offering you insurance.
To help offset this financial risk, insurance companies will charge these individuals higher premiums and will also offer them less coverage.
This type of life insurance is ideal for an individual who needs coverage as soon as possible, does not favor the medical examination element or has a health condition that may normally decline them coverage.
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