Guaranteed Issue Life Insurance
When Your Medical History Doesn't Look So Good
Guaranteed issue life insurance is a policy that's guaranteed to anyone... without regard to health conditions. You might think this sounds awfully risky for the insurance companies. They get around it in two ways.
First of all, guaranteed issue life insurance policies have "graded benefits". This means that if the insured person dies within a specified amount of time, the beneficiaries only receive a portion (or none, in the case of contestable periods) of the death benefits. Most guaranteed issue life insurance policies only pay full benefits after the first two years of the policy. So if John Doe purchases a guaranteed life insurance policy in 2006, and dies of cancer in 2007, the beneficiaries will only get a portion (or none) of the benefit.
Another way companies make money off guaranteed issue life insurance is by charging more for the premiums. They also set age limits on the policies (typically, they won't insure someone over seventy years old.)
What Kind of Insurance is Guaranteed Issue Life Insurance
It's a whole life insurance policy, but the premiums are higher because no-one can be turned down. This means that guaranteed life insurance policies accrue a cash value over time (usually after the first couple of years). A portion of the premiums pay the cost of insurance, while the rest builds the cash value.
And since it's a permanent life insurance, the premiums do not change, nor does the death benefit. As long as the premiums are paid, guaranteed issue life insurance is good for as long as you live.
Are There Exceptions to the Graded Benefits with Guaranteed Issue Life Insurance
Most policies will still pay the full amount of death benefits if the insured dies in an accident. But this is generally the only reason. In other words, if you find out you've only got three months to live, guaranteed issue life insurance won't help you.
What Else Should I Know About Guaranteed Issue Life Insurance
Since the policies are open to anyone, guaranteed issue life insurance doesn't require a medical exam or even a medical history. The questions asked are very general, like name, age, address, etc.
Most guaranteed issue life insurance policies have a limited death benefit amount (you'll have a hard time finding a policy for more than $50,000). Guaranteed issue life insurance policies are most often sought to cover burial expenses, debts left in the estate, and medical bills.
You can use the cash value in a guaranteed issue life insurance policy to cover emergency expenses while you're still alive. You can withdraw the money, and end the policy or accept a lower death benefit. Or you can borrow against the cash value and keep your benefits the same once you've paid the loan.
Guaranteed issue life insurance isn't for everyone. But if you have trouble obtaining other insurance policies because of a health condition, and expect to live for at least two years, guaranteed issue life insurance might be your only option.
Talk to your Insurance Agent to ensure Guaranteed Issue Life Insurance is right for you!