Guaranteed issue life insurance is a type of no exam policy, which means you can get coverage without the need to undergo a medical exam. Unlike other no exam policies that require you to answer a few health questions, guaranteed issue requires no such information. When you apply, no health questions are asked. All you need to do is provide your personal details, and acceptance is guaranteed.
Guaranteed issue is also a type of whole life insurance, which means that there is no expiration date on the policy. Once you buy it, the policy is valid for your entire lifetime.
Guaranteed Issue Life Insurance: Definition and How it Works
Guaranteed issue is a fairly unique type of policy in that anyone who applies can get approved. The only disqualifying factor is age, and most insurers have a minimum age of 40 to 50 and an age limit of 80 or 85. This makes guaranteed issue an ideal policy for older people who have serious health issues.
Here’s how it works: you can apply for guaranteed issue life insurance entirely online and get instant approval.
Once the policy is in place, you’ll need to pay monthly premiums, as you would with any other type of life insurance. However, since most people who apply for guaranteed issue have serious health issues, guaranteed issue policies include a waiting period.
The waiting period means that if the policyholder dies within this timeframe of natural causes (usually two to three years), only the premiums will be refunded, often plus a few percentage points. However, the beneficiaries will not receive the full death benefit. If the insured dies of an accident, the full death benefit will be paid out.
Why Does Guaranteed Issue Come with a Waiting Period?
The waiting period is one way insurers protect themselves against risk. Remember, the way traditional life insurance works is that you undergo a medical exam and underwriters assess your health situation. Namely, they determine the statistical probability that you will die early. From that, they calculate your monthly premiums. People who are young and in good health will almost always get lower monthly premiums than people who are older and have health issues.
With guaranteed life insurance, the insurers don’t ask any health questions. Acceptance is issued on the spot. This is a wonderful option for people who have serious health issues and can’t get approved for any other type of life insurance. But from the insurer’s side, they need to protect themselves against risk. What if an applicant gets approved for life insurance and then dies the next day? To avoid having to pay out the full death benefit after one monthly premium has been paid, a waiting period is included as part of the policy.
How Much Does Guaranteed Issue Life Insurance Cost?
Guaranteed issue policies cost significantly more than other types of life insurance, and coverage is usually capped at $25K. The high cost and limited coverage are due to the guaranteed acceptance and the risk the insurer takes on by offering this convenience.
Due to the high cost and the waiting period, life insurance experts often recommend guaranteed issue as a last resort, a policy to be purchased only if there are no other options.
Why Purchase Guaranteed Issue?
Given the high cost and limited coverage of guaranteed issue life insurance, why would you purchase it to begin with? This type of policy is meant for one audience, and one only: Elderly people who are sick and can’t qualify for another type of policy. The option to get coverage, even for the small amount of $25K, can offer great peace of mind. That lump sum of money can be passed on to loved ones or used to pay off final expenses like funeral and burial costs.
Bear in mind that if you’re considering guaranteed issue as a way to cover final expenses, you should first consider simplified issue insurance. According to Forbes, simplified issue insurance can offer higher coverage than guaranteed issue and doesn’t come with a waiting period. This makes it a better option than guaranteed issue.
However, simplified issue insurance doesn’t offer guaranteed coverage. You’ll need to answer several health questions and may not qualify. If you can’t qualify for a simplified issue policy, a guaranteed issue policy can save the day and ensure that the burden of your final expenses doesn’t fall to your loved ones.
Pros and Cons of Guaranteed Issue Life Insurance
As with any life insurance policy, there are pros and cons of guaranteed issue. The main pro is that acceptance is guaranteed as long as you’re within the age limit. No health questions are asked, no medical exam required, and the entire application can be done online. It’s a great convenience.
On the other hand, the cons include the high price, limited coverage (up to $25K), and the waiting period.
If you’re someone who can’t qualify for any other type of life insurance due to medical conditions, guaranteed issue may be a great option.
What Medical Issues Will Disqualify You From Other Life Insurance?
Guaranteed issue life insurance is ideal for people who can’t qualify for other types of life insurance due to health conditions. Health conditions that will disqualify you from other life insurance but won’t matter with guaranteed issue include:
- Terminal illness
- Recently had/need an organ or tissue transplant
- You living in a nursing home or hospice
- Certain types of cancer
If you have any of these health conditions, you can apply for guaranteed issue life insurance and still get coverage.
Guaranteed issue life insurance is expensive, has limited coverage, and comes with a waiting period — it’s also the only type of life insurance policy that offers guaranteed acceptance, even to people with terminal illnesses. If you can’t qualify for other types of life insurance but want to leave something to your loved ones, guaranteed issue can give you the coverage you need.
Still have questions? We have answers! Check out our FAQs about guaranteed issue life insurance.
How much does guaranteed issue life insurance cost?
Other life insurance policies take your health and lifestyle into account when determining the amount of your monthly premiums. With guaranteed issue, those factors aren’t relevant. Factors that do play a role in determining the cost of your monthly premiums include:
- State of residence
- Amount of coverage
Due to these considerations, the exact cost of monthly premiums for guaranteed issue can only be determined on an individual basis.
What’s the difference between guaranteed issue and guaranteed universal life insurance?
Guaranteed issue, as described above, is life insurance that grants instant approval to anyone who is within the age limit. Guaranteed universal life insurance is a different type of policy altogether. It’s often thought of as a hybrid between term and whole life insurance. Like whole life insurance, it lasts your entire lifetime, but the cash value growth is extremely minimal and it should not be viewed as an investment vehicle. The upside is that, unlike traditional whole policies, the cost is much more affordable. Northwestern Mutual has a great description of guaranteed universal life insurance.
Are there other types of no exam policies besides guaranteed issue?
Yes, there are several types of no exam policies, but only guaranteed issue offers guaranteed acceptance. Simplified issue is a popular type of no exam life insurance, but it does require you to answer various health-related questions. If underwriters determine that your health condition poses too much of a risk to the company, your application can be denied.
If you’re young and in good health, you can often get good rates with the added benefit of skipping the medical exam via accelerated underwriting.
Another type of no exam life insurance is graded death benefit, which is very similar to guaranteed issue. The main differences are that coverage for graded death benefit can go up to $50K and if the policyholder dies within the waiting period, a portion of the death benefit will be paid out to the beneficiary. (As opposed to guaranteed issue, in which only the premiums are refunded if the policyholder dies within the waiting period.)
You can read more about no exam life insurance in our blog post, Everything You Need to Know About No Exam Life Insurance.
How does the waiting period differ with guaranteed life insurance and graded death benefit insurance?
All guaranteed life insurance policies come with a waiting period, usually two to three years that, if the policyholder dies within that period, the beneficiaries don’t receive the death benefit. Traditional guaranteed life insurance policies only offer a refund of monthly premiums if the policyholder dies within the waiting period. But graded death benefit policies offer to pay out a portion of the death benefit. These policies also offer up to $50K in coverage, as opposed to traditional guaranteed issue policies that offer up to $25K.
Who should buy guaranteed issue life insurance?
Guaranteed issue is best suited for people who have serious health conditions and cannot qualify for any other type of coverage. Health conditions that disqualify you from traditional coverage include:
- Terminal illness
- Had/need an organ or tissue transplant
- You living in a nursing home or hospice
- Certain types of cancer
If you have other health issues and think you can’t qualify for other types of life insurance, think again. It’s always best to speak with an insurance advisor who can tell you if your specific health condition is disqualifying or not.
Is guaranteed issue life insurance worth it?
This is a question that only you can answer. If you can’t qualify for other types of life insurance policies but want to leave a small nest egg to your loved ones or cover your final expenses, guaranteed issue life insurance is your best bet. Is it worth the high monthly premiums and waiting period? It’s up to you to decide.
However, bear in mind that if you have a terminal illness and may die within two years, purchasing a guaranteed issue policy may not be worthwhile due to the waiting period. It’s best to consult with your doctors and insurance experts to get the best advice.
What should I do if I can’t qualify for other policies but need more than $25K in coverage?
Unfortunately, if you can only qualify for guaranteed issue and not other life insurance policies, your coverage will be limited to $25K from any one insurance carrier. But you can speak with Sproutt insurance advisors to see if you can find some creative solutions.
What’s the difference between guaranteed issue and final expense life insurance?