Simplified issue life insurance

Where it sits

Between full underwriting and no questions at all.

Full underwriting collects a lot: a long questionnaire, usually an exam, sometimes your doctor’s records. Simplified issue collects a short list of pointed questions and nothing else. Guaranteed issue collects nothing about your health.

Because it collects something, simplified issue can price more accurately than guaranteed issue, which is why it generally offers larger amounts at lower rates. And because it can act on the answers, it can decline.

How the questions work

They are not a general health survey. They are designed so that a yes to any one of them means this product is not available to you. Insurers sometimes call them knock-out questions.

The subject matter varies by insurer, and the recurring themes are:

• A diagnosis or treatment for certain serious conditions within a defined recent period
• Currently awaiting test results, a diagnosis, or a referral to a specialist
• Hospitalization or surgery within a recent window
• Requiring help with daily activities, or living in a nursing or long-term care facility
• Current use of oxygen, kidney dialysis, or certain other ongoing treatments
• A terminal diagnosis or a limited life expectancy

Timing matters as much as the condition. Many questions are framed as “in the last two years” or “in the last five years”, which means the same person can be declined this year and eligible in three years with no change in their health.

Answer them accurately

The absence of an exam does not mean the answers are not checked.

Every life insurance policy in Canada carries a contestability period, normally the first two years, during which the insurer can compare the application against your medical records if a claim is made. On a simplified issue policy this matters more than usual, because the application is the only information the insurer has.

An answer that turns out to be inaccurate can lead to the claim being reduced or refused, and the family finds out at the worst possible time. If a question is ambiguous, ask what it means before answering rather than guessing. See leaving something off the application.

Speed

This is the practical advantage. Many simplified issue products can be decided in days, and some issue within minutes of the application being submitted.

That makes it genuinely useful where there is a deadline: a property closing, a business agreement being signed, a separation agreement requiring coverage by a date. Full underwriting cannot be compressed to fit those timelines.

What it costs you

More, for the same death benefit. The insurer is accepting risk it has only partially measured, and it prices for that.

Coverage limits are also lower than fully underwritten policies, though usually higher than guaranteed issue. Most simplified issue products in Canada issue somewhere between $50,000 and $500,000, with a few going higher for younger applicants. Exactly where a given product sits depends on the insurer, the product and your age, and the figures move often enough that it is worth asking rather than relying on anything published.

Full benefit from day one

An important difference from guaranteed issue: many simplified issue products pay the full death benefit from the start, with no graded period.

That is not universal. Some products do include a waiting period, particularly at older ages or where the answers were borderline. It is a specific question to ask before applying, because it changes what the policy is worth in the first two years. See waiting periods and graded benefits.

Who it suits

Someone whose health would complicate full underwriting but who can honestly answer no to the knock-out questions. That is a large group, and it includes many people who assume they are uninsurable.

Someone who needs coverage quickly.

Someone who has been rated on a fully underwritten application and finds the rated premium higher than a simplified issue alternative. That comparison is worth running rather than assuming full underwriting always wins.

Who should try full underwriting first

Anyone in reasonable health. The difference in price and available coverage is large, and applying costs nothing.

Anyone with a condition that sounds worse than it underwrites. Controlled high blood pressure, a thyroid condition, treated anxiety or a cancer history well in the past frequently produce ordinary offers on full underwriting. The health conditions section goes through what actually drives each assessment.

If the fully underwritten answer comes back unfavourable, simplified issue is still there. Applying in that order costs you time and nothing else.