Life insurance can be an uncomfortable topic, but an important one. Restrictions around pre-existing conditions can make traditional life insurance difficult for some people to obtain. Guaranteed life insurance is a last-resort option for those who can’t pass a medical exam due to a disqualifying medical condition such as a terminal illness. While more expensive than traditional life insurance, guaranteed issue life insurance policies can be a great way to get the coverage you need when it seems like you’ve run out of options.
What Is Guaranteed Issue Life Insurance?
Guaranteed issue life insurance, also called guaranteed acceptance life insurance, is a type of life insurance policy in which qualified applicants are guaranteed coverage regardless of their health or financial status. These policies are most attractive to those who can’t get a traditional life insurance policy due to disqualifying health factors.
How Guaranteed Issue Life Insurance Works
The benefits from a guaranteed issue life policy work in a similar way to traditional life insurance, but with a few restrictions. These generally concern the amount of coverage you can purchase and when your beneficiaries will become eligible to receive payment.
When to Buy Guaranteed Issue Insurance
Guaranteed life insurance policies are best suited for individuals at an advanced age who cannot meet the health requirements needed to qualify for traditional life insurance. Most life insurers will issue guaranteed acceptance policies to applicants between the ages of 50 and 80.
A defining characteristic of guaranteed acceptance life insurance is that coverage amounts are significantly lower than traditional policies. Most companies won’t write a guaranteed life policy for more than $25,000.
Prepare to Pay Higher Rates
Since insurers take on higher risk when issuing a life insurance policy without knowing someone’s health status, premiums are significantly higher than policies that require a medical exam. Lincoln Financial estimates that premiums for guaranteed issue policies are two to three times their traditional counterparts.
Graded Death Benefits
The benefits from a guaranteed life policy can’t be collected by your beneficiaries if you pass away immediately after purchasing coverage. Insurers place a graded period of two or three years on guaranteed policies to help avert risk. This is to avoid terminally ill patients from purchasing a policy immediately before they pass away. The good news is that if you do die before the waiting period has elapsed, any premiums paid plus interest will be returned to your estate.
Build Cash Value
As a type of whole life insurance, guaranteed issue policies build cash value as long as you continue paying premiums. The longer premiums are paid, the more value the policy has. You can choose to withdraw or borrow against this cash value while living, although you may have to pay taxes on whatever you take.
Is Guaranteed Issue Life Insurance Right for You?
As a rule, guaranteed issue life insurance is only the right option if you can’t get a standard life insurance policy. Since guaranteed policies are subject to higher premiums and more restrictions than their traditional equivalents, there isn’t any advantage to choosing a guaranteed acceptance policy if both are an option.
However, if you have been diagnosed with a terminal illness or recently undergone certain medical procedures such as an organ transplant or dialysis, you may not be able to find an insurance company willing to write you a standard life insurance policy. In this scenario, a guaranteed issue policy could be your only option.
- Guaranteed acceptance: True to its name, you won’t be denied coverage due to health conditions with a guaranteed life insurance policy.
- No financial questions: Some life insurers ask questions about your finances, but you won’t have to provide this information when applying for a guaranteed acceptance policy.
- Premiums returned in the event of premature death: If you pass away before the end of the policy’s waiting period, your premiums will be returned plus interest.
- Low benefit caps: Most insurers only issue guaranteed life policies up to $25,000.
- Age restrictions: You’ll typically need to be between the ages of 50 and 80 to get guaranteed issue life insurance.
- High premiums: Guaranteed issue life insurance costs an average of two to three times what a traditional policy would.
- Waiting period: There’s typically a graded period of two or three years that must elapse before coverage goes into effect.
How To Get Guaranteed Life Insurance
To get a guaranteed life insurance policy, all you need to do is fill out an application with a company that offers the type of policy you’re looking for. As long as you’re within the qualifying age range (typically 50 to 80), you should be able to purchase coverage fairly quickly.
The following insurance companies offer guaranteed life policies:
- AIG: Offers guaranteed whole life policies in amounts starting at $5,000 and going up to $25,000. Coverage includes living benefits for chronic and terminal illnesses. You must be between the ages of 50 and 80 to qualify.
- Fidelity: Fidelity’s RAPIDecision® is a permanent life insurance policy that provides coverage up to $25,000 for anyone from age 50 to 85. The policy is marketed as final expense insurance and allows funeral homes to be named as the beneficiary.
- Mutual of Omaha: If you fall just above or below the typical age range for guaranteed life insurance, take note of Mutual of Omaha, which accepts individuals as young as 45 and as old as 85. Benefit amounts are available from $2,000 to $25,000.
- Gerber Life: Gerber’s guaranteed life policy is good for 50- to 80-year-olds who need between $5,000 and $25,000 in coverage. The company offers a discount of up to 8% on premiums if you sign up for automatic payments.
- AAA: Another provider with more generous age limits, AAA issues guaranteed policies to anyone between 45 and 85. Benefits max out at $25,000, although if you die in a travel accident, the death benefit doubles automatically.
- Colonial Penn: Guaranteed acceptance life policies are available for 50- to 85-year-olds. Benefit amounts are purchased in units, the dollar value of which depend on your age and location. Older applicants may find very limited benefit options.
- Americo: With policy benefits available from $2,000 to $30,000, Americo’s plan is great for anyone looking for higher amounts of coverage. However, you’ll have to factor in a full three-year graded death benefit.
- Columbian Financial: This is one of very few providers to offer guaranteed issue insurance to adults of almost any age. Columbian Financial writes small policies between $5,000 and $10,000 to applicants between 25 and 44; 45- to 80-year-olds have more options with benefits from $2,500 to $25,000.
Guaranteed life insurance premiums are determined by your age and the type and amount of coverage you choose. On average, you can expect to pay two to three times what you would for a traditional life insurance policy with the same terms.
If you can pass a medical exam to get traditional life insurance, a guaranteed life policy probably won’t be worth it. However, if you’re unable to get standard coverage, guaranteed insurance may be your only option.
Guaranteed whole life insurance is simply a whole life policy that has been taken out with guaranteed acceptance. These policies accumulate cash value over time and last for your entire life.
It’s entirely possible to have multiple guaranteed issue life insurance policies. For example, you may decide to combine different types of life insurance policies and purchase each with guaranteed acceptance terms.