No matter how insistent a life insurance company agent may be, he cannot always help you get a policy. A life insurance policy is not a pay-take-and-go product. You need to qualify to buy yourself one. Else your application gets declined and this literally happens to many. But when all doors close behind you, a guaranteed issue life insurance policy is the only way open for you to leave some financial help to your family members.
What Is a Guaranteed Issue Life Insurance Policy?
A guaranteed issue life insurance policy is a whole life insurance product that pays out a death benefit to meet out the last rites expenses of a policyholder. It is simply another name for final expense insurance. However, there is a simple difference that makes a guaranteed issue insurance plan stand off. When you buy traditional final expense insurance, you are either to undergo medical exams or answer health questions for the company to decide your life insurance cost. Medical exams are often necessary when you seek bigger amounts. But when you buy a guaranteed issue life insurance, you are invariably pre-qualified. There are no health questions asked and the policy is issued within the shortest time, within a couple of days.
This policy is also known as guaranteed acceptance or instant issue life insurance.
Who Is Guaranteed Issue Life Insurance Policy for?
Qualifying for life insurance takes you through a step-by-step process. You need to apply to the company for approval of your insurance. The company takes you through several medical tests the results of which must come in your favor. You also need to be legally viable for the policy. You are approved only when everything is in your favor.
The medical tests are done to ensure you are going to survive the years you are buying the insurance policy for. The trick is easy to understand— the company does not have to pay you a check for sure. This is especially true when you are buying a term insurance policy which most people buy for protection of their heirs.
Obviously, your life insurance application is going to get a denial when possibilities of paying death benefits loom large. Any lethal or incurable health issue will thus be a destroyer for your expectations for life insurance application approval.
Legally speaking, history of recurrent accidents or criminal background can be a dampener in the way of your getting insured. In fact, there are quite a number of reasons that will deprive you of protection for your family through life insurance.
As we said earlier, a guaranteed issue life insurance is the boat for you to get aboard for protection then.
Benefits of Guaranteed Issue Life Insurance
A guaranteed issue life insurance is a no-denial insurance policy for you. This is especially beneficial for you several ways:
First, your application for life insurance is denied for no reason whatsoever. The process is automatic and acceptance is pre-qualified.
Secondly, many people hate going through medical tests for their life insurance. Each has their own reasons for the hatred for medical tests. To some, it is time consuming. For others, it is time-consuming. Some others simply hate going through fasting or needles. A guaranteed issue life insurance policy rids you of the trouble. Also, if you have fears your test results will lead you to denial, an instant acceptance insurance policy is the very thing for you.
Thirdly, you have lifelong protection when you purchase a guaranteed issue life insurance policy. It serves as a whole life insurance plan and continues to protect your financial interest so long as you keep your premiums.
Fourthly, the cost of premiums of the policy does not rise over time. Your premiums are fixed and do not go up for any reasons. Costs remain unchanged no matter your health deteriorates.
Fifthly, the death benefit of a guaranteed acceptance life insurance policy is fixed and the company cannot lower it for any reasons. Once you have passed the waiting period (which is typically 2 years from the date of purchase), the full death benefit comes to your heirs upon you death.
Sixthly, in the event of critical illness you may be eligible to get 50% of your death benefit. That means if you have a terminal illness that might lead you to death within 12 to 24 months, you can receive half of your death benefit in advance. So, if you are insured for $100,000, you will receive $50,000 as an advanced payment.
Seventh, if you happen to undergo some chronic illness leading you to suspend your daily normal activities, the company returns all your premiums to you.
Eighth, a guaranteed issue life insurance policy has bears cash value component by default. The insurer sends part of your premiums to money market as investment. The profit grows over time and you can borrow it when you need it. You may also choose to pay your premiums from it.
Ninth, a guaranteed acceptance life insurance policy is meant to meet your final expenses when you pass on.
The tenth and the last in our list, this policy offers a 30 day free look time for you to see if you want to continue the policy or cancel it. If you are not satisfied with the product, you can cancel and get fully refunded.
Eleventh, you may choose to use your death benefit in whatever way you want. The life insurance beneficiaries can pay for the funeral costs that your death will entail. They may pay for the medical bills or personal loans that you may have left behind unpaid. Similarly, you may want to leave the unused money for whatever way you would want. You may leave it for your grandchildren or gift it to some charity.
Demerits of Guaranteed Issue Life Insurance
You know not every cloud has a silver lining. A guaranteed acceptance life insurance cannot be an exception. While the merits discussed above might sound alluring, the demerits of a guaranteed issue life insurance are not ignorable at all. Here are some substantial weaknesses you had better look at before you decide to get this policy.
First, a guaranteed issue life insurance can be pretty costly compared to a regular final insurance policy. As the policy comes to you without medical underwriting, the insurance company presupposes you to be physically vulnerable. They suppose they are taking more risks of paying off death benefit earlier than they otherwise would want to. Consequently, the costs of your life insurance policy can reasonably be higher.
Second, death benefits should always be higher and you would probably be trying to find companies that provide big death benefits. Unfortunately, a guaranteed issue life insurance policy is not going to pay you much. Most companies sell benefits that average between $10,000 through $25,000.
Thirdly, the death benefit does not convert unless you have passed the waiting period which often covers up to 2 years. You only have your premiums refunded if you happen to die within the period. That can be real spoiler for your protection.
Fourthly, you cannot buy guaranteed issue insurance if you do not fall in the preset age bracket. In most cases, you have to be between 50-85 years to buy a policy. As a result, you cannot hope to use this policy as a substitute for term insurance or regular whole insurance plan to protect your family.
Fifth, borrowing from your policy’s cash value part can be a knock-out for the policy. On one hand, borrowing will accrue interests on it. On the other hand, leaving it due will eat away your death benefit. Also, if you happen to expect your cash value to pay the premiums and the money already falls short, the policy will be at fault.
Sixthly, most guaranteed issue life insurance policy will pay you graded death benefit. It means you will not receive full death benefit till the waiting period is over. This period typically consists of the first two years. With some companies the duration is up to 3 years. The insurer pays you back only the premiums you have paid out. Some companies add an interest of 10% or 20% to your total money. However, if you die by an accident during the waiting period, your beneficiaries receive the full death benefit.
5 Best Companies for Guaranteed Issue Life Insurance
AIG (American International Group) is one of the best companies if you happen to seek a guaranteed issue life insurance policy for yourself. They have highly positive ratings from all the rating agencies:
America Best (A.M. Best) : A
Standard and Poor’s (S&P): A+
Their product is known as GIWL (Guaranteed Issue Whole Life). You are eligible to buy this policy if you are anywhere from 50 to 85 years old. The maximum death benefit you can buy through the policy is $25,000. It is $5,000 on the low end. They offer these two useful riders at no cost of your own.
Chronic Illness Rider benefits you with return of all your premiums if you happen to fail to any two of the 6 daily living activities. The list includes inability to bathe, move, eat, use toilet, dress on your own or control bladder or bowels functions.
Chronic illness rider enables you to get 50% of the full benefit when you are diagnosed with enlisted chronic illnesses that doctors predict you will die for within 24 months.
Gerber Life is one of the big shots you cannot ignore when you would want to buy guaranteed acceptance life insurance policy coverage up to $25,000. In South Dakota, however, the highest coverage is $15,000. They pay a 10% interest on your paid premiums if you pass on for some natural cause. However, your are paid full benefit if death occurs by accident or after the waiting period.
The company has one of the best ratings from world class 3rd party rating agencies:
A.M. Best: A (stands for excellent)
Better Business Bureau (BBB) : A+ (highest positive)
COMDEX: 80 out of 100
Mutual of Omaha
Mutual of Omaha is another good name for guaranteed acceptance life insurance. If you are from New York, you can buy an instant issue policy from them when you are aged between 50-75. Elsewhere, the issue age is 45-85. They also sell up to $25,000. They also pay a graded death benefit during a waiting period of the first two years.
The company has one of the best ratings:
America Best (A.M. Best): A+
Standard & Poor’s: AA-
American National Insurance Co.
American National Insurance Co. is yet another carrier for you to consider when you would be looking for a guaranteed issue life insurance policy. Their policy is known as Legacy Life. You can buy up to $25,000 coverage through this policy. Premiums do not change until you are 121 years and the waiting period goes over in 24 months.
They refund your paid money adding a 10% interest to it if death occurs for any other reason other than an accident.
The company’s 3rd party ratings are quite good:
American Best (A.M. Best) : A
Standard and Poor’s : A
Great Western Life Insurance Company
Great Western Life Insurance Company issues guaranteed acceptance life insurance for people who are 40-85 years old. You can buy up to $25,000 coverage from them for final expense insurance. Their waiting period consists of 24 months during which they pay a 10% extra to the premiums you pay. While natural death brings graded death benefit to you, accidental death brings full face amount that you purchase the policy for.
Sample Quotes of Guaranteed Issue Life Insurance Policy from 3 Companies
Guaranteed or instant issue life insurance policies can be highly expensive. The costs go steeping high when you are a smoker and upward in the eligibility curve. Females pay less than their male counterparts while smoking affects both sexes equally. The following screenshots of quotes are for a fifty year old male and female, both as smokers and non-smokers. They will help you understand the probable costs you might have to pay for a $25,000 coverage.
Quotes for No Smoker 50 Year Old Male
Sample Quotes for 50 Year Old Smoker Male
Sample Quotes of No Smoker 50 Year Old Female
Sample Quotes for a 50 Year Old Smoker Female
Should You Buy Guaranteed Issue Life Insurance?
Opinions will vary when you would be seeking to know if you should buy guaranteed issue life insurance. Our answer to this is initially no. Here are the reasons we do not recommend this policy to people who are able to take protection otherwise.
The policy is highly expensive. Compared to term insurance, an instant issue life insurance is overwhelmingly expensive. But compared to its costs, the policy benefit is too low. You could buy a return of premium term or guaranteed universal life insurance policy with coverage of several hundred thousand dollars in exchange of the same premiums. While a level term insurance policy won’t protect you at the end of the term, these two policies will keep giving your financial security till death. This is why avoiding a guaranteed acceptance insurance policy is what we suggest.
A guaranteed issue life insurance policy might end up paying you much less than you pay for yourself. For example, if you happen to start paying $150 each month for 30 years, you end up paying $54,000 in all. But in the end you are not going to get even your premiums back. All you will receive in the end is the face amount that you purchased from the company. That means you will lose $29,000 when you die.
Even though some suggest buying this policy for people with critical illnesses or ‘going to die’ people, there seems little reason to do so. If there are possibilities of death within the waiting period, there seems no reason you should buy this policy for. You will be refunded only the premiums with a so-called interest that weighs nothing for your need.
Thus, alternatives to guaranteed issue life insurance policy should be in your consideration.