Guaranteed life insurance, also known as guaranteed acceptance or guaranteed issue life insurance, is available to almost anyone regardless health, or medical history.
Seniors, people with serious health issues, and those with very risky lifestyles all have justified concerns about their ability to get life insurance. However, guaranteed life insurance is one type of no-exam coverage that you may qualify for even when you are high risk.
Guaranteed issue life is specifically designed for applicants who are otherwise ineligible for life insurance and don’t want to complete the detailed medical questionnaire and physical exam that are normally part of the underwriting process.
If you’ve been turned down for traditional term coverage and are willing to pay higher premiums for protection, you may be interested in a guaranteed acceptance life insurance policy.
How Does Guaranteed Life Insurance Work?
Normally when you shop for life insurance, you must answer questions about your current health and medical history, as well as undergo a medical examination, including blood and urine tests.
This is because life insurance rates are based on your age, health, family history, lifestyle, tobacco use, alcohol consumption, occupation, etc. The higher the risk for the insurance company, the higher the price of your policy, which is why financial advisors and insurance experts always recommend buying cheap term life insurance when you are young and healthy.
On the other hand, guaranteed issue life insurance carriers provide coverage without a medical exam or questionnaire. In exchange for the added risk, the company charges you a much higher premium and you get to keep your policy for as long as you make the payments.
The other benefit is that getting your guaranteed issue policy is quick and easy. Because there are no comprehensive underwriting guidelines, the entire process takes just a few days instead of the typical 6 to 8 weeks.
Is There Anyone Who Cannot Get Guaranteed Life Insurance?
Yes. There are four questions that insurance companies ask applicants:
- Are you a smoker?
- Are you living in a hospital or other long-term care facility?
- Are you terminally ill?
- Are you living with HIV/AIDS?
If you are a smoker, you can still buy guaranteed life insurance, although non-smokers will always get lower rates. Unfortunately, people who answer “yes” to any one of the other 3 questions will be denied.
Therefore, if you are dying (terminally ill), already under long-term care, or diagnosed with HIV or AIDS, you will probably not be eligible for any type of life insurance, except one.
Who Needs Guaranteed Life Insurance?
There are a few groups of people who are most likely to need guaranteed coverage.
- Severely disabled people such as those with spinal cord injuries who cannot get traditional life insurance coverage. The key factor is whether the disability impacts lifespan.
- People who have a life-threatening or potentially terminal illness such as cancer.
- Elderly seniors, in particular those who have never had life insurance.
- Individuals who can’t qualify for traditional term life insurance and need to pay for funeral or burial expenses. This type of policy is also known as final expense life insurance.
- Anyone who is unable to buy life insurance because he/she is high risk. This can be occupational or lifestyle related, including pilots, firefighters, skydivers, scuba divers, extreme sports enthusiasts, etc.
Key Features of Guaranteed Acceptance Life Insurance
It is important to distinguish between guaranteed life insurance and other types. These are the features and characteristics that set guaranteed issue apart from standard term and permanent policies.
- No medical exams, tests, or questionnaires are required.
- Approval by most carriers is guaranteed. Some companies do have specific restrictions which vary.
- Guaranteed life insurance is almost always term insurance. Guaranteed permanent life insurance does exist, but is rare and very expensive.
- Death benefits from are significantly lower than the benefits from traditional term policies. Typical guaranteed life benefits are between $5,000 and $100,000.
- Guaranteed life is far more expensive to buy than other forms of life insurance – up to five times more expensive.
- Benefits are limited for the first two years. Similar to no exam life insurance, if you die within the first 2 years, your beneficiaries are only eligible for a refund of the premiums paid or a portion of the death benefit. For most policies, full death benefits vest only after the two year time period has passed.
- Some age restrictions exist, although they are not nearly as stringent as in traditional policies. You may apply for guaranteed acceptance life insurance if you are between the ages of 45 and 85.
Drawbacks To Guaranteed Issue Life Insurance
While guaranteed life insurance is fast and easy to qualify for, there are many reasons to think of it as a plan of last resort. Here is why it may not be suitable for everyone.
Higher Costs. Guaranteed acceptance life insurance may not be as affordable as normal term life. Free life insurance quotes comparing the policies will demonstrate that you are paying more to compensate the company for the extra risk of insuring you.
Lower Policy Limits. Unfortunately, guaranteed issue life insurance companies cannot take on huge policies. In fact, the largest policy you can buy is $100,000, and most are much smaller. The average carrier offers a death benefit in the range of $10,000 to $50,000. This means that you are paying higher rates for less coverage.
Time Limitations. Unlike a traditional term policy, guaranteed life insurance has a 2 year waiting period. Beneficiaries who attempt to submit a claim before the 2 year mark can only receive a limited payout – the total premiums paid up until the time of death or a fraction of the policy’s value. After the waiting period, your death benefit is fully vested.
Are There Alternatives To Guaranteed Life Insurance?
Yes. All carriers assess risk in different ways, making it very important to compare life insurance companies, policies, and quotes to find the best and cheapest coverage.
For example, simplified issue life insurance may be a better fit for your needs. A simplified issue policy asks a few more questions than guaranteed life, but is much more affordable and still doesn’t require a medical exam. In certain cases, giving a company additional information about your health might actually make them more comfortable with your risk levels, especially if you can demonstrate that you’ve taken steps to improve your health and control your illness.
Overall, guaranteed life insurance isn’t a perfect option, but for some people, it’s the only option. Being informed about the types of life insurance policies available and the pros and cons of each can help you make the right choice for you and your family.