Guaranteed Issue Life Insurance| Peace of Mind
Guaranteed Issue Life Insurance| Peace of Mind
Are you considering purchasing a guaranteed issue life insurance policy?
Maybe it was recommended by a friend, maybe you are attracted to the idea of not having to answer health questions, or maybe you think it’s your only option.
Regardless of why you are researching this type of life insurance, there is much to know before you sign on the dotted line.
What Is Guaranteed Issue Life Insurance and How Does it Work?
Guaranteed issue or “GI” policies tend to be the last resort for those who are looking to buy life insurance. If you are permanently disabled, have serious health issues, or have a mental disorder that you are currently collecting Social Security or SSDI for, guaranteed issue life insurance may be your only option to secure coverage. Guaranteed issue life insurance is also the only option for high-risk candidates who have been recently diagnosed with cancer, COPD, congestive heart failure, and for those who have an implanted heart defibrillator or are on kidney dialysis.
If you previously applied for term life insurance and were turned down or “declined” for coverage, chances are that Guaranteed Acceptance Life Insurance (commonly referred to as a “Guaranteed Issue” or “Guaranteed Approval” policy) is the best life insurance option available to you. “Guaranteed Approval” is just what it sounds like your pretty much-guaranteed coverage as long as you meet a few very minimal requirements.
There are 3 main characteristics to a guaranteed issue life insurance policy:
1) Waiting Period of 2 or 3 years before coverage kicks in (depending on the carrier)
2) ZERO health questions & no medical exam
3) Guaranteed level premiums
The main feature folks need to understand is there’s a waiting period before coverage starts known as the “graded death benefit” period.
This has a different meaning for every life insurance company – for some companies, this waiting period is for 2 years (Good) and others the waiting period is for 3 years (bad).
During that waiting period, the life insurance company will refund your premiums + interest if you pass away. If you pass in an accident, the carrier will pay the full benefit amount.
The important thing to understand is that no matter what, your beneficiaries will receive some payment in the first 2 years.
You should only consider guaranteed issue life insurance if you can’t qualify for any other type of coverage. Always try to secure a policy that has health questions even if you have a serious health condition. There are some carriers out there who will take some specific high risks without a waiting period (what us agents call “first day coverage”). Always try for first-day coverage and if you get declined by the life insurance company, you can always secure a guaranteed acceptance life insurance policy.
Who Should Consider a Guarantee Issue Life Insurance Policy?
There are several cases where a person may be a good candidate for a guarantee issue life insurance policy. First, those who have certain health conditions such as cancer or-or someone needing life insurance after a heart attack – and who may not otherwise qualify for traditional coverage – may want to consider going the route of a guarantee issue policy.
Also, because there is no requirement to provide the insurance company with a blood and urine sample, those who have an intense fear of needles could also be a good candidate for guarantee issue life insurance.
Let’s see Guaranteed Issue Life Insurance in detail
Guaranteed issue policies have small dollar amounts
Insurance companies sell guaranteed issue policies without medical underwriting, but there are limitations to those plans.
“Most of these policies have small face values, usually less than $20,000. This is because guaranteed issue policies are designed for a specific purpose, which is to pay for funeral expenses. Additionally, some insurers may offer guaranteed issue policies only to a small universe of consumers, such as those between ages 50 and 85,” he says.
Offering policies with smaller payouts protect the health insurance company from paying out huge amounts to a policy without medical exams. With guaranteed issue life insurance policies, because there is no medical exam or underwriting, insurance companies have no information other than the applicant’s age and gender on which to base the premiums.
This also means that people who take out guaranteed issue policies should understand the payouts will pale in comparison to term life or even permanent life insurance. Guaranteed issue life insurance might not be right for you if you want to leave behind money to provide for mortgage payments and the care of a loved one after you die.
Guaranteed life policies may cost more
The cost of the plans is usually high because guaranteed issue life insurance policies do not rely on medical information to set premiums. So, insurers charge you more because they feel they’re taking on more risk. If you find you need a payment plan, such as quarterly or semi-annual bills, you’ll likely pay more.
The high premiums, combined with a low face amount for the death benefit, make guaranteed issue life insurance a less desirable option for relatively healthy individuals. For some of these policies, you could end up paying more in premiums than your beneficiaries will receive upon your death.
Make sure you do the math to figure out how much you’ll have paid out into your guaranteed issue policy in five, 10 or 15 years. Don’t assume that your agent will tell you that you may pay more in premiums than your beneficiaries will get back in death benefit; very few states have laws that require this disclosure.
Graded death benefits limit early payouts
Introduced to reduce insurance fraud, a graded death benefit policy pays out only a portion of the death benefit if you die within the first several years of the policy. Check the policy details for a schedule of how the benefit amount is graded.
Some policies will pay out the full-face amount during the graded benefits period in the case of an accidental death (such as a car crash), but not all guaranteed issue policies offer this feature and the definition of “accidental causes” is usually quite limited.
Overall, even if you have some health problems, you will likely pay less for an underwritten policy than a guaranteed issue policy.
Guaranteed issue life insurance quick facts:
- Policies are typically meant to pay for final expenses (funeral and burial costs)
- Policies are generally considered an only option or “last resort” life insurance
- Policies offer smaller death benefit amounts compared to most life insurance policies
- Most people who apply for guaranteed issue life insurance are generally not in good health and may have been denied coverage at one time
- Because the life insurance company can’t determine through a medical exam or questions the extent of your health (how healthy or how ill you are) you should expect to receive higher than normal rate quotes
Shop around for guaranteed life insurance
Guaranteed issue individual life insurance can be a last resort if you’ve been turned away from every other policy because of your age or your health. These types of plans are not for everyone, but they’re an option if you’ve been turned down for other policies and want to leave something behind to pay for your final expenses.
Some life insurance companies that offer guaranteed issue life insurance are:
- Affordable Life USA
- American Family Mutual Insurance
- Banker’s Life
- Gerber Life Insurance
- Globe Life Insurance
- Navy Mutual
- New York Life Direct
Is Guaranteed Acceptance Life Insurance A Good Purchase?
Life insurance coverage is guaranteed regardless of health conditions with no medical exam required.
Low coverage amounts could lead to you paying more in premiums for life insurance coverage than the total death benefit will pay out.
WHO IT IS BEST FOR
Best suited for those over 50 who are looking for a guaranteed acceptance life insurance policy to help cover final expenses.
If you’re a senior without life insurance, you may be putting your loved ones at risk for a financial burden. Funeral costs, hospice care, unpaid debts and medical bills are just some of the expenses your family may be left with if you do not have a life insurance policy in place when you die.
It’s easy to get a free quote from Life Exchange Insurance Services. Call (904)203 1763 to speak to a licensed agent today.