Guaranteed Issue vs Simplified vs Fully Underwritten Life Insurance Policies

Whether it’s your first time buying life insurance, or you’ve been browsing for a while, you’ve probably come across a few different options for applying for either term or permanent life insurance. Here’s what you need to know about the difference between the different types of life insurance: fully underwritten, simplified issue, and guaranteed issue life insurance.

What Are My Life Insurance Options?

While looking for life insurance, you’ll commonly come across three types of life insurance: fully underwritten, simplified issue, and guaranteed issue. Each has their pros and cons, and are designed for different situations and needs. Fully underwritten and simplified are for term life insurance and permanent life insurance, whereas the guaranteed issue is typically only for permanent life insurance, aimed to cover your whole life.

What is Fully Underwritten Life Insurance?

Fully underwritten life insurance, also known as medically underwritten insurance or traditional insurance, is for people in good health with no serious medical or lifestyle concerns.

Applying for a fully underwritten policy typically (although not always) requires a medical exam done by a nurse visiting your home. This medical exam can consist of:

• Getting your height and weight measured
• Providing blood and urine samples
• Getting your blood pressure checked
• Potentially taking other tests, such an electrocardiogram

The results for these tests and samples typically take a few days to sometimes a few weeks, which is why this process takes the longest to get approved for. However, if you have exceptionally good health, you might qualify for an even better premium rate than the one you were quoted.

In 2017, Manulife Insurance, Canada’s largest life insurance provider, introduced accelerated underwriting for life insurance policies. This new process reduced medical underwriting (no fluids or biometric testing) and has resulted in quicker underwriting decisions.

Since that time, many life insurance carriers in Canada have followed which has resulted in several options for approval with no medical tests. The COVID-19 pandemic in 2021 significantly impacted the life insurance underwriting process as companies expanded their no medical limits. Although deemed temporary measures, many expect these accelerated underwriting guidelines to remain permanent.

As of 2021, the following limits are available with no fluids:

For Life Insurance

For Critical Illness Insurance

For Disability Insurance

What is Simplified Issue Insurance?

Simplified issue insurance policies don’t require a medical exam but do require you to answer certain health-related questions as part of your application. In return for no medical exam, premiums tend to be higher than traditional insurance. The number of questions asked vary for each insurer, and also vary depending on if the policy is deferred or not. Simplified issue insurance is an option for those who want faster approval or don’t want to take a medical exam, and are generally used for term life insurance products.

Below is a highlighted chart of simplified issue insurance options available, and the number of questions their applications ask.

What is Deferred Life Insurance?

Some insurers offer deferred life insurance policies, like Industrial Alliance and Canada Protection Plan. Deferred life insurance refers to a type of policy where the insured is not covered for a period of time (typically 24 months) and will only receive their premiums back plus some interest if death occurs in that period of time. Deferred policies ask less medical questions during the application, but result in higher premiums.

Some insurers offer a version called Deferred Plus that asks more medical questions, but comes at a lower premium than the regular deferred coverage. It also has no coverage in the first 24 months.

Immediate coverage is the standard policy most insurers work with, and covers the applicant on day one of getting approved.

Deferred insurance plans are similar to simplified life insurance, and are another option for those who may have been declined life insurance in the past, or have trouble obtaining life insurance.

What is Guaranteed Life Insurance?

These plans ask no questions at all, and require no medical exams. Guaranteed issue insurance is designed for those who have more serious health issues, or are older in age and do not qualify for traditional or simplified insurance. Many insurers will also have a deferral period of 24 months for guaranteed life acceptance insurance. Guaranteed issue insurance coverage generally has a maximum of $50,000, with some insurers covering less, and comes at the highest premium out of the three because it’s also a type of permanent life insurance.

What is the Difference in Cost?

Quotes will vary with each insurer, but the costs follow the same pattern: fully underwritten has the lowest premiums, and guaranteed issue has the highest premiums. Simplified is a mix of the two types, and is in the middle in terms of price. To better illustrate this, below are quotes from Canada Protection Plan’s fully underwritten and simplified issue options, based on a 45 year old male non-smoker for $500,000, for a 10 year term.

Note that CPP’s maximum coverage for their deferred term insurance maximum coverage is $350,000, and their guaranteed issue is $50,000. This is usually the case for other insurance companies as well: guaranteed issue coverage tends to be less than other products.

Frequently Asked Questions (FAQs)

Do you have any other Life Insurance Questions?

At Protect Your Wealth, we have been providing life insurance and expert advice since 2007. If you’re not sure which of the types of life insurance applications will best fit your needs and situation, we’ll be more than happy to help.

Get in Touch With Us Today

We’re proudly based in Hamilton, and service clients anywhere in Ontario, including areas such as Burlington, Guelph, Kingston, and Oshawa, so please contact us or call 1-877-654-6119.