Guaranteed issue life insurance solves specific problems for certain people. if you’re not one of those people, it’s probably a bad buy.
You may also see it called guaranteed acceptance life insurance.
The main selling point of guaranteed issue life insurance is that no one can turn it down. It’s also incredibly convenient compared to most other types of life insurance: there’s a simple app that doesn’t ask medical questions.
so what’s not to like? high costs, low coverage amounts, and what are called “graduated death benefits.”
for whom is the problem of life guaranteed?
Guaranteed issue life insurance can provide life insurance to certain people who need life insurance but have no other options. they may want to provide heirs with money to pay for a funeral or final expenses. Or maybe they want to leave a small legacy for children or grandchildren. This type of life insurance can help people who:
- have medical conditions that would make it impossible or unaffordable to purchase other types of life insurance, such as whole life insurance
- have limited budgets for life insurance
- agree to have only a small amount of life insurance coverage, such as $25,000
If it’s not you, there are better options. policies like universal life insurance can provide higher coverage amounts (much higher, in the millions). These other options may require a life insurance medical exam, but may ultimately provide the best price. And there are ever-expanding options for no-exam life insurance, especially for term life buyers.
what you need to know about guaranteed issue life insurance
If you’ve decided guaranteed issue life insurance is for you, after ruling out other options, here’s what you need to know.
best age to buy guaranteed issue insurance
Many guaranteed issue insurance companies have a minimum age of 40-50 to apply, and will not sell new coverage to people over 80.
Amounts of available guaranteed issue life coverage are typically very low, often between $10,000 and $25,000. Due to low coverage amounts, guaranteed issue life insurance is often purchased to cover only final expenses, such as a funeral, medical bills, and small debts.
Guaranteed acceptance life insurance is one of the most expensive ways to buy life insurance. Unless you have serious health conditions that would make you decline other policies, shop around for other types of policies first. An independent insurance agent or advisor can help you shop between multiple companies. plus, an experienced advisor will know which insurers are most likely to offer you the best price based on your medical conditions.
Rates are based on the age at which you purchased the policy and your gender.
gradual death benefits
Guaranteed life insurance companies often use tiered death benefits to protect themselves from purchases by seriously ill people.
If you die within the first two or three years of the policy for any reason other than an accident, your beneficiary may receive only a refund of the premiums you paid, plus interest. interest amounts paid vary by company, but can range from 10% to 30%. If death is due to an accident, such as a car accident, the policy will pay the full amount of coverage to your beneficiaries, even if you recently purchased it.
Some guaranteed issue policies build cash value, which you can access through a policy loan. If you don’t repay the loan before you die, the payment to your beneficiaries will be reduced by what you owe. In addition, the payment to your beneficiaries is the amount of coverage in the policy, not the amount of coverage plus cash value.
pros and cons of guaranteed issue life insurance
cost of guaranteed issue life insurance vs. whole life insurance
Unless serious health conditions make it impossible to purchase other types of policies, you can likely save a significant amount of money by purchasing a more traditional policy. For example, if a 70-year-old woman purchases a guaranteed issue life insurance policy with $20,000 coverage, she could pay about $18,700 over 10 years. A $20,000 whole life insurance policy could cost you about $12,400 over 10 years.
who sells it?
here is a sample of guaranteed issue life insurance sellers. Please note that products may not be available in all states. Be sure to check the policy’s rules on graduated death benefits before you buy.
aaa life insurance sells guaranteed issue life insurance to people ages 45 to 85 for coverage amounts up to $25,000. at age 100 and there are no more premiums due thereafter.
aarp: the association offers a policy through new york life for aarp members ages 50 to 80. coverage amounts to $25,000 with one drawback: it is not available to applicants who are currently terminally ill.
aig direct offers policies from $5,000 to $25,000 in insurance for people ages 50 to 85.
alpha insurance: alpha guaranteed acceptance life insurance is for buyers ages 40-80 looking for coverage up to $25,000.
america offers guaranteed issue life policies with coverage up to $10,000 for people ages 50-75.
colonial penn sells guaranteed issue life policies for up to $50,000 in coverage for people ages 50-85 in most states. Colonial Penn uses “unit pricing,” offering coverage units to everyone starting at $9.95 a month. but the amount of coverage within a unit will vary depending on your age and gender.
Fidelity Life‘s Quick Decision Guaranteed Issue Policy provides up to $25,000 in coverage for individuals ages 50-85. there is a gradual death benefit for the first three years and you can build cash value.
gerber life insurance offers guaranteed issue policies for people ages 50 to 80 with coverage from $5,000 to $25,000. policies can build cash value.
mutual of omaha offers guaranteed whole life insurance with coverage options up to $25,000 for people ages 45-85.
Vantis Life Gold Guaranteed Final Expense Insurance for ages 50-80 offers coverage levels from $5,000 to $20,000.
get professional advice
Guaranteed issue life insurance has its pros (convenient, no medical exam) and cons (small benefit amounts, graduated death benefits) to appeal to a specific market. For seniors on limited incomes with serious health conditions and family needs, the idea of paying funeral costs of around $10 a month may be appealing.
For people with health issues, it’s especially important to work with a life insurance agent who will shop the marketplace for you. Experienced agents will know which life insurance companies are most likely to accept you, based on your health history. Check out your other options before diving into a guaranteed issue policy.