How does Guaranteed Issue Life Insurance Work?
Guaranteed issue life insurance means your acceptance is guaranteed, regardless of your health or medical history. If you are between 40 and 75 and can’t find affordable life insurance because of your health or age, you can apply for this type of policy.
With guaranteed issue, it doesn’t matter how your health is or if you have a medical condition; you don’t even have to answer any health questions. The insurance company cannot turn you down. You can get life insurance coverage from $5,000 to $25,000, your premiums will never increase, and your coverage will never decrease.
The fine details
The only requirement to getting and keeping a guaranteed issue life insurance policy is that you pay your premiums. Since you don’t have to qualify for coverage, the premiums tend to be substantially higher than what an applicant would pay for the same amount of coverage under a traditional policy that requires medical underwriting. However, sometimes you can find a slightly better rate if you shop around.
In addition to paying higher premiums, life insurance companies that issue guaranteed policies protect themselves against risk in two other ways: (1) by offering low payouts, and (2) by not paying a death benefit during the first two years of the policy. If you die during this time, the life insurance company will only issue a refund of your premiums. This protects the carrier from having to pay the death benefit for people who get policies when they are close to dying, just in time for their loved ones to receive a death benefit.
Understanding the cost of life insurance
The more information an insurance company has about you, the less your policy can cost; therefore, if you are in good health, we encourage you to apply for a product that asks health questions and completes a medical, like term life insurance.
Something to think about: It’s important to remember that life insurance gives you a benefit when the unexpected happens. Depending on when you die, you could pay more than the actual death benefit. For example, if you are 49-years old and buy $25,000 of guaranteed issue insurance for $105/month, by the time you’re 75-years old you’ll have paid more than your death benefit.
Benefits of guaranteed issue insurance:
- No medical exam or health questions required to qualify. There’ll be no health-related questions on your application either. One of the great things about this insurance is that your medical history doesn’t matter because the insurance company doesn’t need it.
- Your premiums and coverage amount will stay the same for the duration of the policy. Your coverage could be anywhere between $5,000 and $25,000.
- Your acceptance is guaranteed. You cannot be denied guaranteed issue insurance.
Is guaranteed issue right for you?
Guaranteed issue life insurance is ideal for individuals who need coverage but don’t qualify for a traditional policy, or have difficulty getting insured because of health problems or other reasons.
Guaranteed issue is a type of simplified life insurance product, which also includes no medical life insurance. Remember, however, while guaranteed issue applications don’t ask any health-related questions, it’s more expensive than the other no medical insurance options, and should only be considered if other types of policies aren’t an option due to health issues or age.
Alex Saltykov has a broad experience in advising insurance clients both in North America and Europe while he was working for one of the leading management consulting companies. His areas of expertise are insurance, innovation, IT, and operations.