You may have heard of a guaranteed issue life insurance policy before. They are advertised in senior magazines, on television, and spot lighted through different senior programs around the nation.
Buying guaranteed issued life insurance affords you the opportunity to get life insurance where you otherwise might not qualify.
The idea behind a guaranteed life insurance policy is the ability to get life insurance coverage where you may have been declined for medical reasons, or simply a way to get insurance without having to go through lengthy applications and medical exams.
Most guaranteed life insurance quotes require only your resident state, age, gender and whether or not you use tobacco. And there’s not much more when applying either.
Guaranteed acceptance life insurance plans are called guaranteed because you won’t be declined for your health history, or for failing a medical exam. This is because they aren’t even required. With few companies requiring you answer five or six questions, most don’t require any questions be answered other than basic contact and personal information.
You can also apply without having to go through extensive medical exams, such as urinalysis, blood work, or other annoying and invasive screenings.
It may seem extremely convenient, and it is, but unfortunately, there are some drawbacks to escaping most of the life insurance underwriting hassles. Costs will likely be much higher, and you will be limited on coverage amount.
The typical guaranteed issue life insurance plans have limited coverage amounts, such as $25,000, depending on your age. Each company varies, and may only be able to cover up to $10,000 if you’re in an older age bracket.
They typically allow for issue ages up to 85 years old, although this can fluctuate up and down depending on which company you’re applying with, and how much coverage you’re looking to get.
Each plan is structured to be a permanent insurance product, similar or equal to a whole life insurance policy. This means you’ll get a level death benefit for as long as you hold the policy, and your premium will be level also, so you don’t have to worry about rate hikes when you need the coverage most.
Unlike whole life, though, there might be some stipulations on payout depending on how long you’ve held the policy when you die. If you have only had the insurance policy for one or two years, you could be denied payment, depending on the small print of the policy you purchase. This is how the insurance company can leverage it’s risk when someone knows they are terminal, for example, and try to buy life insurance anyway.
As mentioned, quotes are fairly easy to obtain, only generally requiring the state you currently live in, the coverage amount you want to apply for, your date of birth, gender and whether or not you use tobacco products.
Because the life insurance guaranteed issue, your age and gender will automatically place you in a rating class of all other people your same age and gender. There aren’t multiple risk classes like in a regularly underwritten type of insurance product, so there isn’t a need to do any additional research or classification.
Other than smoker or non-smoker, your age, gender and coverage amount all directly correlate to what premium you’ll pay, without variation to health class ratings.
For some, guaranteed issue life insurance is the only option, and because that means poor health is almost a sure bet, the insurance company has a much higher risk in issuing the policy. Therefore, rates are much higher.
If you are simply buying life insurance guaranteed issue for its conveniences, you’re probably paying way too much. If you can still qualify using your health, your premiums could be drastically reduced by going through the full process.
While rates are pretty high for these types of policies, their main advantage is still as good as other life insurance policies: they leverage your dollars for a death benefit. What this means is, rather than paying $10,000 out of pocket when you die, you’ll pay something like $5,000 from now until you pass. So if this were true, you’re getting $2 back for every $1 you put in.
A guaranteed life insurance policy may or may not work for your situation, but if you have poor health, have already been declined, or don’t think you’ll be able to qualify on a standard issue policy, it may be an option.
Just remember, buy a policy which is affordable. There is no sense in paying a high premium for years, then having to drop the policy later because you can no longer afford those premiums. As with any permanent life insurance policy, also research the company from which you’re buying from, as they do make a difference.