Last updated: May 12th, 2023
Reviewed by
Lisa A Koosis
Medical Claims Specialist
Table of Contents
When considering life insurance, guaranteed issue policies offer the convenience of no health underwriting and streamlined application processes. However, these policies present a higher level of risk for insurers, leading to increased premiums compared to traditional life insurance products.
In contrast to underwritten policies, where applicants must disclose medical histories and undergo medical exams, guaranteed issue policies provide coverage without requiring health information. Insurers accept the greater risk of insuring unknown health conditions, which increases the cost.
| Features | Description |
|---|---|
| Approval | Guaranteed approval regardless of health condition, age or gender. |
| No medical exam | No medical exams or health questionnaires are required. |
| Cost | Premiums are generally higher compared to traditionally underwritten policies due to higher risk. |
| Death benefit | A guaranteed death benefit is provided to beneficiaries after the policyholder’s death. |
| Cash value | A cash value component is included that grows tax-deferred over time. |
| Coverage limits | Death benefits from $2,500 – $25,000. |
| Waiting period | Most policies have a waiting period before the death benefit can be paid out, usually two years. |
Guaranteed issue whole life insurance policies have a waiting period because they are designed to offer coverage without requiring medical underwriting. The waiting period is a way for insurance companies to mitigate the risk of insuring individuals with pre-existing health conditions or high mortality risk. The waiting period allows the policy to become effective without incurring an immediate payout of the full coverage amount. Depending on the policy, this life insurance waiting period is typically two to three years.
Guaranteed issue whole life insurance policies do pay out for accidental death during the waiting period.
A modified benefit period is a duration of time during which the life insurance policy doesn’t pay the full coverage amount. If the insured were to pass during this time, the beneficiary would receive all paid premiums plus interest (typically 10%).
Under a graded whole life insurance policy, beneficiaries may receive 30% of the death benefit if the policyholder passes away during the first year of the waiting period and 70% if the policyholder passes away during the second year. Once the two-year waiting period ends, the beneficiaries will receive the full death benefit amount.
As the name suggests, a guaranteed issue life insurance policy provides life insurance coverage, regardless of your health or financial history. This policy may also be called a guaranteed acceptance whole life insurance policy. This type of life insurance is generally available to individuals between the ages of 50 and 85, though some companies may provide coverage for people as young as 45 while others won’t approve coverage for someone older than 80.
Guaranteed issue whole life insurance doesn’t qualify you based on your health. The price for a 50-year-old in supreme health is the same as for a 50-year-old with a long history of health conditions. Consequently, if you’re in good health, you could save a lot of money going with a traditional final expense life insurance policy instead.
No life insurance type is perfect for everyone. Here are some of the pros and cons of guaranteed issue life insurance:
A guaranteed issue life insurance policy is more expensive than other products. This is primarily because there are no medical exams or health questions involved. As a result, it’s most popular for individuals with less than-average health.
The sample rates for guaranteed acceptance life insurance for men:
Guaranteed acceptance life insurance plans are more expensive than other alternatives. Therefore, it’s most common for seniors or people who are considered high-risk.
When Are You Considered High-Risk?
The most common reason to be considered high-risk is primarily because of health or health history. If you’re diagnosed with a serious health condition, such as some types of cancer, you’ll be considered high-risk for many years to come. Other reasons to be flagged as high-risk are dangerous professions or hobbies. Skydiving or deep-sea diving are just two examples.
If you’re a high-risk individual, a guaranteed issue policy can be a good option. However, most guaranteed acceptance products do have a graded benefit duration of 2 years. For that reason, your beneficiaries won’t receive your full coverage amount during this period. Instead, they’ll receive your paid premiums, plus a certain amount of interest. A guaranteed issue policy can provide up to $40,000 of coverage (and sometimes more). This is enough to pay off debt, pay for funeral costs, or leave a small inheritance.
The best alternatives to guaranteed issue life insurance are term life insurance, traditional final expense life insurance, and accidental death insurance. The alternative that’s best for you depends on your age and your health.
Final expense is the a common life insurance option for healthy seniors. It’s a whole life insurance policy. As long as you make the premium payment, you’ll stay insured.
Guaranteed acceptance life insurance is a type of life insurance policy that guarantees coverage for applicants regardless of their health status or medical history. This means that anyone who applies for this policy will be approved for coverage, without having to answer health questions or undergo a medical examination.
Guaranteed life insurance is typically designed for individuals who have pre-existing medical conditions or are of advanced age, making it difficult for them to obtain traditional life insurance policies.
Guaranteed issue and guaranteed acceptance are terms that are often used interchangeably in the context of life insurance policies. Both refer to a type of life insurance policy that guarantees coverage for applicants regardless of their health status or medical history.
In many cases, whole life insurance only requires you to pay premiums for a designated period of time, though other payment plan options may be considered. After you’ve paid for the policy, you have lifetime coverage. Your beneficiaries will receive death benefits when you pass away. Whole life policies also have a cash value, and they may pay dividends.
Guaranteed issue life insurance requires you to keep paying premiums, which stay the same. You have coverage as long as you pay the premiums. In some cases, a cash value policy may be an option, though not all guaranteed issue life insurance policies earn cash value.
Guaranteed acceptance life insurance is generally available to individuals within a specific age range, with the minimum age for guaranteed acceptance whole life insurance typically starting at age 45. The maximum age for eligibility can vary between providers, but it is often set between ages 80 and 85.
The major problem with guaranteed life insurance is the two to three-year waiting period, also known as a modified or graded benefit period. During this time, if the policyholder passes away due to natural causes, beneficiaries will only receive the paid-in premiums plus a small percentage, typically around 10%, rather than the full death benefit. This waiting period is a drawback for those seeking immediate full coverage for their loved ones.
We make shopping for life insurance as simple as possible. You can shop online, or we can assist you in finding the best policy from the best company, based on your situation.
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
Lisa worked as a medical claims specialist for five years, adjudicating claims, developing appeals training programs and liaising with insurance auditors. As a full-time freelancer, she now completes work that includes writing and fact-checking life and health insurance content for a variety of online publications.
