What Is Guaranteed Life Insurance?
Guaranteed issue life insurance, also known as guaranteed acceptance life insurance, is a type of life insurance that guarantees acceptance without any medical questions. This type of life insurance solves specific problems for certain people, such as those who are unable to qualify for other types of policies. In this article, we will discuss the pros and cons of guaranteed issue life insurance to help you decide if it’s right for you.
Pros of Guaranteed Issue Life Insurance
| Pros |
|---|
| Easy to apply |
| No medical exam required |
| No health questions to answer |
The main advantage of guaranteed issue life insurance is that it’s easy to apply for and doesn’t require a medical exam or any health questions. This makes it a convenient option for those who are unable to qualify for other types of policies.
Cons of Guaranteed Issue Life Insurance
| Cons |
|---|
| Low coverage amounts only |
| The price is high for the amount of coverage you get |
| Beneficiaries won’t receive the full payout if you pass away within two or three years after buying the policy (except for accidental death) |
Guaranteed issue life insurance has several disadvantages. The coverage amounts available are usually very low, often between $10,000 and $25,000. Additionally, the price of guaranteed issue life insurance is high for the amount of coverage you get. The policies also have graded death benefits, which means that if you pass away within the first two or three years of the policy for any reason other than an accident, your beneficiary could receive only a refund of the premiums you paid, plus interest. Interest amounts paid vary by company but can be in the range of 10% to 30%.
Comparison with Whole Life Insurance
Unless severe health conditions make buying other types of policies impossible, you can likely save significant money by buying a more traditional policy. For example, a 70-year-old female buying a guaranteed issue life insurance policy with $20,000 in coverage could pay about $18,700 over 10 years. A $20,000 whole life insurance policy could cost her about $12,400 over 10 years.
| Applicant for $20,000 in coverage | Guaranteed issue life insurance | Whole life insurance |
|---|---|---|
| Female, age 70 | $156/month | $103/month |
| Female, age 80 | $349/month | $194/month |
Conclusion
Guaranteed issue life insurance can provide life insurance to certain people who need it but don’t have any other options. However, it has several disadvantages, such as low coverage amounts and high costs. If you’ve ruled out other options, make sure to compare policies from different insurers to find the best price. An independent insurance agent or advisor can help you shop among multiple companies.
