Is Guaranteed Issue Life Insurance a Good Option?

Video Transcript

Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions.

Quotacy is an online life insurance broker, where you can get life insurance on your terms.

I’m Jeanna and I’m Natasha

Today’s question is: what is guaranteed issue life insurance?

It’s likely you’ve seen an ad for guaranteed issue life insurance. It’s often a TV commercial or a mailed postcard that’s advertising affordable no-exam life insurance for seniors.

Guaranteed issue life insurance can also be referred to as final expense life insurance or guaranteed acceptance life insurance.

Something that really draws people to guaranteed issue life insurance is that there is no medical exam or health questionnaire to fill out when applying.

Compared to other types of life insurance, guaranteed-issue life insurance has very few eligibility requirements.

While not all guaranteed issue policies are the exact same, typically their eligibility requirements include: you must be between the ages of 50 and 85; you must be a U.S. citizen; you must be able to sign and be the owner of the policy; and you cannot have any current memory deficiency such as memory loss, Alzheimer’s, or dementia.

Guaranteed issue life insurance is a form of permanent life insurance so it lasts your entire life as long as you keep up with the premium payments.

There are a few things to be aware of when it comes to guaranteed issue policies.

The coverage amount options are very limited compared to your traditional life insurance policies. Guaranteed issue life insurance plans usually only offer face amounts of $5,000 to $25,000.

The face amounts explain why it’s often referred to as final expense life insurance because the death benefit usually provides just enough money to pay for a funeral and some end-of-life expenses.

Because these policies are often seen as a last resort for people who don’t qualify for traditional life insurance, insurance carriers take on a lot of risk with = these policies which they balance out by requiring higher premiums.

Another thing about guaranteed issue products is that they come with either a graded death benefit period or waiting period.

A graded death benefit period means that for a predetermined amount of time, usually 2-4 years depending on the company, only a certain amount of the policy will be paid out for natural causes.

Here’s a common example. You buy a guaranteed issue policy with a graded death benefit period of two years. If you die during the first two years after policy activation as a result of an accident, your beneficiaries receive the full death benefit. But if you die of natural causes, they’re only paid a refund of the premiums you paid. Starting in year 3, you’re fully covered and your beneficiaries will be paid the full death benefit no matter how you die.

A guaranteed issue policy with a waiting period is even stricter. A waiting period is a 2-4 year period, depending on the company, in which your beneficiaries wouldn’t receive anything if you died during that time. The coverage officially begins after the waiting period is over.

The companies Quotacy works with to offer guaranteed issue policies have graded death benefit periods, not waiting periods. But we want you to be aware of the two different types.

To get a better grasp on guaranteed issue life insurance, let’s look at an example. These are some quotes for a guaranteed issue policy with a graded death benefit period for a 60-year-old man. The good news is that these premiums won’t increase once you buy the policy.

So, let’s say a 60-year-old man has congestive heart failure and can’t get approved for traditional life insurance. He decides to buy a $15,000 guaranteed issue policy, so he can leave his spouse some money to take care of his funeral.

He’ll pay $148.32 every month, with no premium increases. If he dies of natural causes within two years of the policy being put inforce, his spouse will receive the total amount of premiums he paid thus far. If he dies as a result of an accident, like a car crash, during those first two years, his spouse receives the $15,000 death benefit.

After the two year graded death benefit period is over, his spouse receives $15,000 when he dies whether it’s a result of an accident or natural causes.

We do recommend that before applying for a guaranteed issue policy, always try for a traditionally underwritten policy first. If you’re able to qualify for a traditional policy, you can likely get much higher coverage amounts for the same price or cheaper than what you’d pay for a guaranteed issue policy with no graded death benefit or waiting period.

If you’ve tried applying for traditional life insurance policies, like term, whole life, or universal life insurance and keep getting turned down, this is when guaranteed issue life insurance can be beneficial.

Life insurance helps relieve your loved ones the burden of costly final expenses. If you need life insurance, Quotacy can help.

As a broker, we have access to many different life insurance companies and their various products.

If you’ve been turned down for life insurance by a life insurance company before, there is a chance that Quotacy may still be able to get you coverage, simply due to the fact we have many more options to shop from.

We can help you apply for a traditional policy, and if we’re unable to find coverage for you, your dedicated agent will let you know if guaranteed issue life insurance is an option.