Until recently, if you wanted to buy a large amount of life insurance at a low cost, you had to fill out paperwork, go through a medical exam, provide a urine sample or have blood drawn, and then wait 30 to 90 days for a policy.

However, this is changing. Some businesses, ranging from traditional insurers to technology-driven startups known as "insurtechs," are making it easier to obtain life insurance. It only takes a few minutes to apply online for instant life insurance, and coverage can range into the millions of dollars without the need for a medical exam.

What is instant life insurance?

Instant life insurance is coverage that is easy to obtain and does not require a medical exam. However, these policies are not the same as guaranteed issue life insurance, which is a small and expensive product marketed to seniors. Instead, instant life insurance typically estimates rates through a process known as "accelerated underwriting." An insurer uses data about you to feed into algorithms that calculate your risk of dying prematurely. This process frequently provides the company with enough information to make a quick decision and offer competitively priced coverage on the spot.

It's also contactless, which is one of the reasons why no-exam life insurance was so popular during the COVID-19 pandemic.

Instant policies are typically term life insurance policies with terms ranging from 10 to 30 years.

How instant life insurance works

Because the entire process is done online, applying for and purchasing a policy is fairly simple.

The steps are as follows:

1. You apply online by completing a life insurance application with your personal and contact information and answering some basic health and lifestyle questions.
2. The company obtains information about you from a variety of databases with your permission. It can, for example, search prescription databases to determine what medications you've taken. It can check your driving record to see if you've had any traffic violations. It can also check MIB Group data to see if any health conditions arose when you applied for individual health or life insurance with other companies. MIB, which is owned by its member insurance companies, keeps a database of information from insurance applications.
3. Typically, you will receive a decision within minutes of submitting your application.

There are three possibilities:

• Approved. This means that nothing in your application caused the insurer to be hesitant to cover you. Your coverage will take effect once you sign off on your policy and pay your first premium — and all of this can happen on the same day. You will not be required to take a life insurance medical exam.
• Denied. While you can apply for instant life insurance, coverage is not guaranteed. Because of factors such as your health, lifestyle, or age, you may not be eligible for a policy. If you are turned down, you can still apply for traditional life insurance, which may take a few weeks. You can also apply for a guaranteed issue policy and avoid the health questionnaire and medical exam.
• Referred to underwriter. Insurers may require additional information about you before making a decision. Instead of relying on algorithms, the insurer will refer your case to an underwriter, a professional tasked with assessing your risk. The underwriter may contact you to ask additional questions.

Types of life insurance underwriting

When looking for an instant life insurance policy, you may come across terms like "automated underwriting," "accelerated underwriting," and "simplified issue," all of which mean the same thing.

Automated underwriting refers to the lack of human involvement in the approval process.

Accelerated underwriting entails a quick application process made possible by the use of algorithms and more data points.

Simplified issue underwriting uses fewer data points than accelerated underwriting to determine whether to issue you a policy and how much you'll pay.

Policies that use more data, on average, can provide more competitively priced policies with higher coverage amounts. If the insurer only considers a few data points to assess risk, the best rates may be unavailable.

Instant life insurance with an exam

Some companies use accelerated underwriting to expedite the application process, but they reserve the right to request a medical exam if necessary. This means you may be approved immediately or asked to complete additional steps before receiving a response. Applicants who are accelerated through the process without taking an exam pay the same price and receive the same product as if they had taken an exam.

Tips for buying an instant life insurance policy

If you need life insurance right away and don't want to take a medical exam, you might be interested in an instant life policy.

Keep the following tips in mind to ensure you're getting the right coverage:

• Determine the length and extent of coverage. Calculate how much life insurance you require and how long you want it to last before applying. This may limit your options because some insurers only offer limited term lengths or small instant policies.
• Be realistic about your chances of being accepted. In general, instant life insurance is available to healthy applicants who live a secure lifestyle. If you have a pre-existing health condition, a dangerous job, or a poor driving record and are looking for life insurance, you may be better off applying for a traditional policy.
• Examine the policy provisions. Do you want to customize your coverage with life insurance riders, or do you want to be able to convert to a permanent policy later? If this is the case, consider these aspects when making your decision.
• Shop around. Because some use more data than others to determine your eligibility and price, premiums are likely to vary greatly. Before purchasing life insurance, it is always a good idea to compare quotes.