A standard, fully underwritten disability insurance policy provides coverage for a portion of your income, based on disability for any reason. Applications for these policies require investigation into three areas; your income, your health, and your occupation.
RBC (Royal Bank) offers a no medical exam life insurance policy that requires only a definition of your occupation and basic overview of your income, and no health exam at all. Qualification requires only answering a couple of very basic questions.
In order to determine whether this policy is appropriate for you we need to look at the differences in premium and benefits between these policies and a fully underwritten policy.
The good news is, that these policies are typically far less expensive than a fully underwritten policy. Yes, simply by answering a few questions you can have a long term disability insurance policy that has lower premiums than many fully underwritten policies.
The tradeoff is in the benefits – but while these policies do have some restrictions as the result of no medical exam, they actually have some additional features as a result as well.
RBC’s no medical exam disability insurance covers disability for accident only. The base plan does not cover disability due to illness. Simply put, if you are disabled as the result of a car accident you’ll receive benefits. If you’re disabled due to sickness or medical reasons like cancer or heart attack, no benefits would be payable.
However, because they pay benefits for accidents only, these policies can be purchased with no waiting period – benefits are payable from the first day of being disabled. A typical fully underwritten disability insurance policy might not start paying benefits until 90 days have passed.
In addition, these no medical exam policies will provide benefits for disability up until age 70. Most fully underwritten policies provide benefits that cease after 2 years, 5 years, or age 65.
No medical exam life insurance would normally only be a good option when a fully underwritten policy isn’t viable. No medical exam life insurance is of course a great option for those who would be unlikely to qualify for a fully underwritten policy. However it can also be a great option for those even in great health who are seeking a lower cost alternative and are willing to have a policy that covers disability due to accident only.
Summary: No medical exam disability insurance can actually have lower premiums AND better benefits. The tradeoff for skipping the medical exam is that disability due to illness isn’t covered.