We live in a time where people want what they purchase right away. Simplified insurance can help many obtain insurance without going through all the work to get it. That said – simplified insurance doesn’t give the client the same peace of mind as a fully underwritten policy.
Personally, I am not a fan of simplified coverage and only go that route after I have exhausted all the other options for my client. I always explain the advantages of a fully underwritten policy. One of the main advantages is that there is potential for accidental non-disclosure on certain simplified applications. This could lead to a rescinded policy or worse, a declined claim. The other advantage of a fully underwritten policy is that it typically has less limitations built into the contract.
Certain simplified products only have a handful of “yes/no” questions and the client is automatically disqualified for the coverage if they answer “yes” to certain questions. This means that if they accidently answered “no” (because they didn’t understand the question), they may find themselves not getting paid out at time of claim.
An insurance company can decline a claim or rescind a policy if they can illustrate that the incorrect information at time of application would have had an impact to the way the policy was issued – irrelevant if it has anything to do with the actual claim or not. Given the nature of certain simplified products, incorrectly answering a certain question could have made one ineligible for coverage and therefore possibly lead to a claim being declined.
Let’s look at an example where the simplified disability application asks the question “In the past 5 years, have you received any treatment, medical advice, been diagnosed with, required any follow-up for, or had any known indication of: any disease or disorder of the brain or nervous systems?”
Client may be quick to answer “no” without realizing there are over 600 different neurologic diseases, some not all that serious. Maybe the client has had a couple migraines in the past couple years. That would be considered a disorder of the brain or nervous system so they should have technically answered yes on the application. If they answered yes, they would have been disqualified for the coverage and a policy would not have been issued. Unfortunately, some simplified applications do not give the client the opportunity to provide further details as they are simply knock out questions. By incorrectly answering a question, the insurer may have the right to rescind the policy or deny a claim. This is very unsettling in my expert opinion.
Imagine if this client decided to purchase a fully underwritten policy instead of the simplified coverage. The application itself would ask about migraines giving the client the opportunity to disclose their medical history. If the underwriter needed additional information, they would have asked the clients doctor for further details to help ensure full disclosure. Depending on the severity of the migraines, there is a good chance that the history of migraines itself would not have had an impact to a fully underwritten policy and would have been issued standard. Can you see the difference?
I should mention that not all simplified products are the same. Some have qualification questions, and if you answer yes, it triggers a phone interview to obtain further information like a fully underwritten policy. Other simplified plans do not require any medical underwriting and are offered on a guaranteed to issue basis. This is typically for those who can not qualify for traditional plans.
Money doesn’t buy insurance, health does. If you have had any type of health issue in the past, I would be very cautious when applying for simplified coverage.
HOW I HELP
There is not a one size fits all solution when it comes to insurance and ultimately it should be you who decides which coverage is best for you, your family and your business. It’s my job to help you clearly understand what your options are so you can make an easy and informed decision when it comes to buying insurance.
Being an insurance broker with strong relationships at most of the major insurance carriers, I am confident that you are in great hands when I am on your side. I can help you navigate the market to ensure that you obtain the best possible coverage and price for your situation.
I am always happy to provide a free, no-obligation insurance consultation or second opinion. Feel free to reach out!
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By Jeff Romansky
CHS, CPCA Principal, SecurePlan Insurance Solutions
Jeff started his insurance career in 2006 by helping hundreds of insurance advisors grow their business by providing them with comprehensive advice, consultation and training. After nine successful years, he decided to take his knowledge and start his own practice to ensure his clients are getting the best advice. His office is based in Grimsby, ON and he serves clients throughout Southwestern Ontario and the GTA.