A guaranteed life insurance policy is a great way to get life insurance if you don't qualify for a traditional term life or permanent life insurance policy.
As someone reading this article seeking life insurance to protect your family or to pay for end of life expenses, a guaranteed life insurance policy is a good solution for your life insurance needs.
This article will discuss more about the guaranteed life insurance policy, how much it might cost, and circumstances that will dictate that you get one.
Guaranteed Life Insurance Policy Explain
Guaranteed issue life insurance is a small whole life insurance policy ($25,000 or less in death benefits) with no health qualifications.
Guaranteed issue life insurance does not pay death benefits during the first two or three years the policy is in force, but it does return the policy's premiums plus 10% interest if the insured dies during this period.
Given there are no health qualifications necessary to get a guaranteed issue life insurance policy, a life insurance company will issue this type of life insurance policy to all that apply.
And given there is no medical exam or health qualification necessary, you can guess that people who are older and/or who have health issues are more likely to apply for guaranteed issue life insurance.
Traditionally, for insurance policies with death benefits of $500,000 and up, a medical exam is required so that the insurance company can get a better idea of your true health. The medical examiner draws blood, takes your blood pressure, and gets a urine sample.
If you are a high risk candidate, the life insurance company will know and price its health premium accordingly. A guaranteed life insurance policy is generally for those who are older and/or with medical conditions.
How Does Guaranteed Life Insurance Work?
A guaranteed issue life insurance policy is a type of permanent life insurance policy. In other words, the policy contains the following features:
- Fixed monthly payments
- Fixed death benefit
- Life-long policy
- Cash value accrual
A guaranteed issue insurance policy comes with a graded period. This means that if you pass away during the first two years from when you take out the policy, your beneficiaries will not get the full benefits, but rather the premiums paid to date and accrued interest).
The purpose of the graded period is to protect life insurance companies from having to pay out benefits soon after taking out a policy. Therefore, a wise person who feels he or she has a limited time on Earth needs to have the foresight to apply for a guaranteed issue life insurance policy two or more years in advance.
The interest percentage and period will vary from one company to another. This is why it's good to shop around for life insurance. The easiest way is through PolicyGenius, where you apply once and highly qualified life insurance companies compete for your business.
PolicyGenius then helps guide you to the best one. You may also find policy exceptions that grant the full benefit if the insured’s death is due to an accident.
Requirements For Guaranteed Issue Life Insurance
Given pretty much anybody who applies for guaranteed issue life insurance gets one, there aren't many requirements.
Not all companies offer Guaranteed Issue Life Insurance in all states. Therefore, search online and check to see if the largest life insurance companies provide this type of life insurance. Most usually do.
You can basically get guaranteed issue life insurance at any age. However, it be wiser to get a term life insurance policy before the age of 50 instead if you are in decent health. It's cheaper.
Most guaranteed issue life insurance policyholders apply between the ages of 50 and 80. Just know that median life expectancy for men is about 78 and 80 for women. Therefore, you premium will be higher the older you apply.
Just like every other legally-binding contract, you need to be of sound mind to sign it. In other words, you need to know what you are doing.
As long as you satisfy these criteria, you can get a Guaranteed Issue Life Insurance policy.
How Much Does Guaranteed Issue Life Insurance Cost?
There are many factors that go into determining the cost of life insurance (premiums). Age and health are the two main criteria. Given there is no health criteria to get guaranteed issue life insurance, the main criteria are age and competitiveness of the insurance company.
Are some examples of some guaranteed issue life insurance quotes from PolicyGenius.
Mutual of Omaha
- Rating: A+
- Age: From 45 to 85
- Coverage availability: From $2,000 to $25,000
- Excluded States: CT, MT, NY, OR
- Waiting Period: 2 years
- Interest accrued: 10%
Sample monthly rates for male customers:
Sample monthly rates for female customers
As you can see from the above example, the monthly premium isn't a huge absolute dollar amount of money. However, the monthly premium compared to the death benefit is.
For example, let's say you are a 70 year old male who takes out a $10,000 guaranteed issue life insurance policy. At $89 a month, you must pay $890 a year. The policy requires you to be alive for two years before it gets paid out. Therefore, you must pay $1,780 in premiums before your beneficiaries can receive $10,000.
If the 70 year old male has a strong feeling he will live longer than the two-year waiting period, but die before 9.3 years, then getting a guaranteed issue life insurance policy makes a lot of sense. After 9.3 years, the life insurance company starts earning more in premiums than the death benefit. Further, during the 9.3 year period, the life insurance company would hopefully have used the premiums to make a return.
Your beneficiaries will still get something; it will just be less than you’d like. Insurance companies put this waiting period in place because if they didn’t, everyone could apply for insurance on their deathbed and pay a few hundred dollars to secure a $10,000 benefit for their family.
Please take some time to familiarize yourself with all the different life insurance options so you can better prepare for your family. A guaranteed issue life insurance is really a life insurance policy of last resort.
Guaranteed Issue Life Insurance Can Be A Good Option
To summarize guaranteed issue life insurance, here are the key points:
- Guaranteed issue life insurance is a small whole life insurance policy with no health qualifications.
- It pays a cash death benefit of $2,000 to $25,000 to the insured’s beneficiaries.
- Guaranteed issue life insurance does not pay death benefits during the first two or three years the policy is in force, but it does return the policy’s premiums plus 10% interest if the insured dies during this period.
- Guaranteed issue policies are designed for people with more serious health conditions or people of advanced age who have been shut out of typical term or permanent life insurance policies.
- Compared with other types of life insurance, guaranteed policies generally have high premiums relative to their death benefits because their policyholders are in poor health.
You never really want to have your life insurance policy pay out. If it does, that means you died. However, if you are in poor health and still want life insurance, getting a guaranteed issue life insurance is a good solution.
Life insurance is an act of kindness to your dependents and loved ones. Run through some various life and financial assumptions. If you feel you have greater than a 50% chance of living beyond the waiting period, but dying before the crossover period where you end up paying more in premiums than the death benefit, consider getting guaranteed issue life insurance.
The most efficient way to get competitive life insurance quotes is to check online with PolicyGenius, the #1 life insurance marketplace where qualified lenders compete for your business.