What is Life Insurance Guaranteed Insurability?

A question clients often ask  is

“Can I get more life insurance in the future if I need it?”

My answer is

“Yes, but you’ll have to answer medical questions unless you can use the guaranteed insurability option”

The response is invariably

“What the hell is the guaranteed insurability option???

Don’t worry; it’s less confusing than it seems.

Let’s break it down in plain English.

What is Guaranteed Insurability Option (GIO)?

Guaranteed insurability (also known as the life events options) lets you increase your cover at specific times without answering health questions

The GIO is available on life insurance, mortgage protection and income protection policies.

But you can only use the option in certain circumstances, like

Getting a new mortgage or re-mortgaging
Birth or adoption of a child
Marriage
Change in job or promotion

Do all insurers offer this life events option?

Yes, but how it works differs from insurer to insurer.

Most allow you to increase your cover by up to €100k, but you can’t amend your term.

Aviva limits it to €40k, but you can amend your term.

We recommend adding the conversion option to a mortgage protection plan, so in the future, you can extend the term AND use the GIO to increase your cover making you

How much does it cost to add guaranteed insurability?

Unlike a conversion option, you don’t have to pay an extra premium to add Guaranteed Insurability.

In other words, it’s FREE.

Can you increase your mortgage protection without a medical?

Last week Sarah rang me looking for advice.

She had a baby last year, so her current apartment was no longer suitable for her needs.

As all new parents know, your baby is born with a magical ability to shrink your house in a matter of days.

Sarah required a mortgage of €65,000 to buy her new home (after selling her old one).

She had mortgage approval, but her bank wouldn’t let her increase mortgage protection without doing a full medical.

Unfortunately, Sarah had been recently diagnosed with Multiple Sclerosis.

I ran her case by my underwriters at the other insurance companies but didn’t have any joy.

Nobody was willing to offer her insurance as the MS diagnosis was so recent.

Believing I had exhausted all options, I was about to give up but then thought

Maybe she has a Guaranteed Insurability Option?

Feeling confident I had found a solution, I called Sarah and asked her to check with her bank whether she could exercise her GIO to increase her cover.

“Computer says no”, was their fairly predictable response.

Never being one to trust banks, I asked Sarah to find her policy documents and email them to me.

In large letters on her policy cert were the words:

“you have the option to increase your benefits without medical evidence.”

Armed with this, Sarah went back to her bank who approved the extra €65,000 so she can now buy her new home for her new baby to wreck!

Lessons to be learned:

1) Don’t trust your bank – always question them.

2) If you’re getting nowhere with your bank, get some independent advice from a financial broker. A fresh pair of eyes may help.

My Guaranteed Insurability Option has been Declined – Why?

Does this look familiar?

I’m sorry about that.

Strange as this may seem, the GIO isn’t guaranteed for everybody, the insurers can refuse to offer it based on your health.

Generally, if the insurer has loaded your premium, they will remove the Guaranteed Insurability Option from your policy.

Zurich will offer the GIO with a loading up to 50%, above that and they will decline it.

Let me know if you’d like me to run your case by Zurich.

Anything else I need to know?

The Guaranteed insurability Option varies between lenders:

Limitations of cover – some insurers allow you to increase by €100,000 (others by just €40,000)
Age restrictions
Types of products with the GIO
Utilising the option within certain time-frames, e.g. six months of the event
Special terms may apply to increases.

Maybe you’ll experience ill-health in the future, and because of that, you’ll presume you can’t get more cover.

But this won’t be the case if guaranteed insurability is baked into your cover.

Over to you…

If you’d like my help choosing the right type of coverage and insurer to protect you and your family, please complete this questionnaire, and I’ll send you a recommendation.

Thanks for reading

Nick