Money Matters: No medical, no problem

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(KRT / MCT)

Life insurance is frequently the forgotten pillar in many people's financial plans.

About 30 to 40 per cent of Canadians don't have coverage, depending on the study. And it's likely at some point many of them only look at purchasing coverage after a scare due to a serious illness.

While it may appear too late for coverage, the reality is there's always an insurer willing to provide coverage with no medical exam. Many are even willing to do so no questions asked.

It's tough to gauge an accurate uptick in business for providers of these products, but no-medical-exam life policies are becoming an increasingly popular option for consumers -- if ad campaigns from providers such as Canada Protection Plan, BMO, RBC and others are any indication, the fishing is good.

"I think the companies are promoting the products more now than in the past, and certainly more companies are coming forward with these products," says Connie Sadler, vice-president of operations for Audis Canada/Financial Horizons Group, a managing general agency, or MGA.

As a liaison between brokers and insurance companies across Canada for products, the Winnipeg company has a fairly good sense of insurance market trends, Sadler adds.

"And we're seeing see more and more of these products every day," she says.

Considering the Canadian population is getting older, the growth in no-medical exam life insurance is understandable, she says.

"People are living longer with ailments so these products at least offer them minimum coverage."

Yet no-medical-exam life insurance isn't for everyone. It's a costly form of protection, says Ron Sanderson of the Canadian Life and Health Insurance Association.

Consumers can often pay double or more the premium they would for a policy with a medical exam, and the benefits are often only a fraction of the typical life coverage needed by most Canadian families, says Sanderson, the director of policyholder taxation and pensions for the organization.

"If you can qualify for lower-cost insurance by providing some medical evidence then, why wouldn't you do it?"

Still, many Canadians are choosing this coverage, despite the costs, says Tamara Humphries, certified financial planner and insurance broker with LSM Insurance.

"About a third of my business is for these types of products," she says.

Most people get non-medical life coverage because they are battling illness, she adds. They may have cancer, uncontrolled diabetes or an unstable heart condition.

"If you're looking at someone with uncontrolled diabetes, combined with heart problems, that can even be a decline, so they wouldn't be able to get regular insurance," says the Toronto adviser.

Even people who have medical problems who may get coverage through the normal route should consider getting no-medical coverage before pursuing normal coverage, because getting denied for normal coverage can affect their ability to get no-medical-exam life insurance coverage.

"There's a question on every non-medical plan that states 'have you been declined or been postponed in the last two years?' If you answer 'yes,' then they'll put a two-year limited benefit provision on the non-medical policy," Humphries says. "That only covers just accidental death for the first two years, and if they die in any other way than by accident, the beneficiary receives a refund of premiums and interest, tax-free."

It isn't just people who have health conditions applying for this kind of insurance.

"Some people are healthy, but they may travel a lot or not have time to do the medical," she says. "A lot of people will get non-medical simply because it's easy."

No-medical-exam life insurance isn't new. It used to be more commonly referred to as burial insurance because its benefit was small -- often enough to cover a funeral cost, Sanderson says.

While it's been around for more than a decade, it typically hasn't been marketed much until recently.

The leading marketer is the Canada Protection Plan, another MGA and brokerage that sells no-medical exam, with questionnaire, policies underwritten by Foresters Life.

Mark Tateishi, vice-president of business development, says Canada Protection Plan has offered the product since 2003.

"Since then business has really taken off," he says.

Although Canada Protection Plan is a leading broker of no-medical policies in Canada, it only offers products that involve a "yes/no questionnaire."

In the last few years, more insurers are actively marketing a "guaranteed coverage" product that involves no questionnaire.

Tateishi says Canada Protection Plan doesn't offer the guaranteed product because the market is very competitive. But many major insurers -- including the big banks -- offer this type of product.

Among them is the Quebec-based firm Industrial Alliance Insurance and Financial Services.

Both Alliance's no-medical with questionnaire and guaranteed products combine for about $5 million in revenue a year, a drop in the bucket for an insurer with billions in revenue annually.

Alliance doesn't market no-medical insurance, including its guaranteed life insurance, called Alternative, says Louis-Charles Leclerc, manager of marketing for the company.

"These are not our bestsellers because most of the population is insurable after a medical test, but we sell a few of them."

Leclerc says the segment should grow as the nation's population ages.

In fact, when Industrial Alliance introduced a 20-year term no-medical life insurance with up to $100,000 in coverage about five years ago, sales were strong from the get-go, he says, adding most no-medical coverage is permanent, not term, life insurance.

Coverage offered by most no-medical products is substantially less than Alliance's term product. Guaranteed insurance is even less so -- understandably -- than those that at least ask potential customers a few questions about their health. And guaranteed coverage only pays out for accidental death during the first two years of coverage with a return of premiums with interest for other causes of death.

"The typical benefit for a guaranteed product is $25,000," says Humphries, adding some may be as high as $50,000.

In contrast, no-medical-exam life policies with questionnaires can provide coverage as high as $250,000.

"But you have to answer a lot of questions," she says. "So if you can answer 'no' to all of them, you likely could get a regular policy approved."

While no-medical life insurance products are beneficial for some consumers, Sanderson says most people are best to apply for traditional coverage even if they think they're not eligible.

Sanderson is himself a cancer survivor, and he says he is proof consumers who have battled major illnesses can get regular life insurance coverage.

"Certainly, right after my diagnosis, I wouldn't have been insurable, but today I am," he says.

"For someone in that situation, no-medical life coverage may be a bridging arrangement and they might two, three or five years down the road be able to qualify at a lower rate by providing evidence of their improved health."

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Quick facts:

Paying a premium:

Life insurance coverage with no medical exam isn't cheap. Here's a look at the difference in premiums for a 50-year-old man, who's a non-smoker, for $50,000 worth of coverage in a permanent plan:

Insurance with a medical exam: $924 a year

Insurance with questionnaire, but no medical exam: $1,328 a year

Insurance with no medical exam or questionnaire: $2,223 a year

-- Industrial Alliance

They may not ask questions, but you should:

If you're looking at these products, it's best to work with a broker or adviser who has experience dealing with no-medical-exam life insurance, says financial planner Tamara Humphries. Each provider offers a slightly different product with differing criteria for coverage, including questionnaires. "It's not standard across the board so you really need a broker's help to figure your way out," she says. "Choosing the right policy really depends on the ailment the person has and which companies are going to ask the questions that are easiest for the person to get coverage."

By the numbers... key statistics about life insurance (all policies):

Total life insurance owned in Canada: $3.77 trillion ($2.12 trillion individual and $1.63 trillion group)

Total life insurance owners in Manitoba: $130 billion

Number of Canadians who have life insurance: 21 million

Number of Manitobans who have life insurance: 680,000

Average amount of coverage per individual: $179,400

Annual premiums collected: $15.6 billion

Annual benefits paid: $7.1 billion

-- 2011 statistics from Canadian Life and Health Insurance Association

Republished from the Winnipeg Free Press print edition February 23, 2013 B12