What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance is a type of whole life insurance policy that does not require the insured to undergo a medical exam or answer any health questions. The insurance company also does not request your medical records or a list of your prescriptions.

While this may sound appealing, there is a catch. These policies typically have a waiting period of two to three years. The policy does not pay the death benefit if you die from anything other than an accident during that time. However, it typically pays your designated beneficiaries an amount equal to the premiums you’ve paid, plus interest.

An Option for High-Risk Individuals

A guaranteed whole life insurance policy may be the right option for individuals with medical conditions that make purchasing other types of life insurance policies impossible or unaffordable. While you may consider going without life insurance in these circumstances, it’s important to remember that proper coverage can offer financial protection for your loved ones.

As of 2022, 106 million adults currently do not have life insurance. At the same time, only 47% of uninsured households believe they would be financially secure if their primary wage earner suddenly passed away. This discrepancy highlights the need for life insurance, even if the policy requires a waiting period.

How Does Guaranteed Issue Life Insurance Work?

Part of the appeal of a guaranteed life policy is that you cannot be turned down due to your current health conditions or medical history. However, the insurance company may still have requirements regarding your age and/or state of residence.

Since there are no health questions, guaranteed life insurance policies have short, simple applications. The approval process may also be faster when compared to other types of life insurance since the company does not review your medical information.

Once you’ve been approved and your policy is in force, the waiting period begins. After the waiting period, the policy pays the full death benefit to your beneficiaries when you die.

Key Features

Several key features set guaranteed issue life insurance apart from other types of life insurance coverage.

Guaranteed acceptance in policy: You cannot be turned down for coverage based on your current health conditions or medical history.
Lifetime coverage, though at a lower amount: These policies cover you until you die. However, the maximum death benefit typically ranges between $2,000 and $25,000.
Guaranteed death benefit payout for beneficiaries: If you die after the waiting period or suffer an accidental death, your beneficiaries can receive the policy’s death benefit. During the waiting period, they do not receive a death benefit but a return of premium plus interest.
Fixed premiums throughout the policy: The premium is determined at purchase and does not change.
Cash value growth for some policies: Some guaranteed issue life insurance policies build cash value, which you can access during your lifetime through a policy loan.
Waiting period: These policies typically have a 2 to 3-year waiting period. During this time, the policy does not pay the death benefit except for accidental death.

Eligibility Criteria

While each insurance company has its guidelines, typically, you must be between the ages of 40 and 80 to purchase a guaranteed life insurance policy. Individuals outside this age range may still be able to find a company offering a guaranteed policy, but the options are typically limited. Some insurance carriers may also have state residency requirements.

Medical Underwriting Requirements

Guaranteed issue life insurance does not require any medical questions. There is also no physical exam or medical underwriting. With this policy, your health does not impact your approval for coverage or the cost of your insurance premiums.

Traditional life insurance policies typically require you to complete a medical questionnaire and undergo a physical examination. During the underwriting process, the insurer reviews this information and your medical history before determining whether you qualify for coverage. Your health and medical history also impact your rate classification, which influences the cost of your policy premiums.

Advantages and Drawbacks of Guaranteed Issue Life Insurance

When determining whether a guaranteed issue life insurance policy may be right for you, it’s helpful to compare the potential pros and cons. Before making a purchase, consider these important points.

Advantages

A guaranteed issue policy may be appealing to certain individuals thanks to potential advantages, such as:

The ability to obtain life insurance coverage even if you have a disqualifying medical condition.
A short, simple application.
No required medical questionnaire or physical exam.
A potentially faster approval process.
A guarantee that you can’t be turned down due to your current health or medical history.

Drawbacks

Despite the ease of approval, guaranteed life policies may have some significant potential drawbacks, such as:

The premiums are typically more expensive than for other types of life insurance.
A 2 to 3-year initial waiting period is typically required before the policy pays out a death benefit (except for accidental death).
The policies typically have low maximum death benefits (typically $2k to $25k).
You could be denied coverage if you do not meet the insurer’s age and residency requirements.

How Much Does Guaranteed Issue Life Insurance Cost?

While other types of life insurance policies base their rates on factors such as the applicant’s medical conditions, health history, and hobbies, guaranteed issue life insurance does not consider these variables. Instead, the policies have fixed premiums based on the applicant’s gender, age at the time of the application, and the policy’s death benefit amount. The policy premiums are typically more expensive for men than for women. Higher death benefits also require higher premiums.

Generally, a guaranteed issue policy with a $5,000 death benefit may cost between $16 and $29 a month for a 50-year-old, while the premium for the same policy may be closer to $69 to $105 a month for an 80-year-old.

A policy with a $20,000 death benefit may cost a 70-year-old between $139 and $185 per month, while an 80-year-old may pay between $268 and $349 per month for the same death benefit.

Guaranteed Issue Life Insurance vs. Other Life Insurance Types

If you’re looking for life insurance coverage with higher death benefits and potentially lower premiums, you may consider other types of life insurance policies. For example, term insurance can be more affordable, while whole, universal, and variable life insurance policies typically include features such as cash value and permanent coverage.

	Guaranteed Issue	Term Life	Whole Life	Universal Life	Variable Life
Coverage Length	Permanent coverage	5, 10, 20, or 30 years	Permanent coverage	Permanent coverage	Permanent coverage
Coverage Amount	$2,000 to $25,000	Up to $1 Million	Up to $1 Million	Variable	Variable
Cash Value Growth	Yes	No	Yes	Yes	Yes
Interest Growth on Cash Value	Varies	N/A	N/A	Reflects market rates	Based on market performance
Premiums	Fixed	Fixed	Fixed	Flexible	Flexible
Death Benefit	Fixed	Fixed	Fixed	Flexible	Fixed
Waiting Period	Yes	No	No	No	No
Medical Underwriting Requirements	None	Medical examination typically required	Medical examination typically required	Medical examination typically required	Medical examination typically required

Guaranteed Issue Life Insurance vs. Term Life Insurance

Term life insurance provides coverage for a specified period, such as 10, 15, or 20 years. Once the term ends, the coverage lapses unless you renew the policy for another term or convert it to permanent coverage. Premiums for term insurance tend to be significantly less than those for permanent life insurance coverage.

Unlike guaranteed issue life insurance, term insurance typically requires a medical questionnaire, physical exam, and medical underwriting. Individuals with certain health conditions may be denied coverage. In addition, term insurance premiums can vary depending on various factors, including the applicant’s age, gender, life expectancy, hobbies, and health.

Term life insurance does not have a cash value or savings component built in. Term policies also do not have a waiting period, except for the policy’s suicide clause, which allows the insurer to deny a death benefit if the insured commits suicide within a specific timeframe.

Which Should You Pick: Guaranteed Issue or Term Life Insurance?

If you do not have a disqualifying medical condition and are looking for affordable life insurance coverage for a specified time, you may benefit from a term life insurance policy.

For example, a term policy could be beneficial if you want to ensure your family has a certain amount of protection while your children are minors or until your mortgage is paid off. Since term policies are relatively inexpensive and do not have a minimum age requirement, they also tend to be popular among younger individuals.

Guaranteed Issue Life Insurance vs. Whole Life Insurance

Both whole life and guaranteed issue life insurance policies offer coverage throughout your lifetime. Whole life also has a cash value component, which grows at a fixed rate. Unlike guaranteed issue policies, whole life insurance policies typically require a medical questionnaire, physical exam, and medical underwriting.

It’s possible to be denied whole life coverage based on your health and medical history. Your health classification can also impact the cost of your coverage. However, since the insurance company can hedge its risk by conducting medical underwriting, you may find that the premiums for a whole life insurance policy are less expensive than those for a guaranteed issue insurance policy. Whole life policies also do not have a waiting period other than a suicide clause, allowing you to purchase a significantly higher death benefit.

Which Should You Pick: Guaranteed Issue or Whole Life Insurance?

The features of whole life insurance are similar to those of a guaranteed issue insurance policy. Since whole life is typically less expensive and has no waiting period, this could be a good alternative if your health does not disqualify you from traditional coverage.

Individuals who want lifetime coverage and seek a death benefit that provides sufficient financial protection for their beneficiaries may find that whole life insurance is a viable option. For example, if you’ve determined you need $200,000 in life insurance coverage, the maximum death benefit on a guaranteed issue policy is insufficient.

Guaranteed Issue Life Insurance vs. Universal Life Insurance

Universal life insurance is a type of permanent insurance coverage that offers policy owners additional flexibility. These policies typically cover you up to a certain age, such as 95 or 120.

A significant difference between universal and guaranteed issue life insurance is that universal life insurance policies allow you to adjust your premiums.

These policies have a cash value that fluctuates based on market interest rates. If you pay more than your premium amount, the excess funds can increase your cash value. You can also pay less than your premium, drawing from your cash value to cover the difference.

It’s common for universal life insurance to require full medical underwriting. This typically includes health questions, a physical exam, and a medical history review. Universal life policies are also available with higher death benefits and do not have a waiting period, except for the suicide clause.

Which Should You Pick: Guaranteed Issue or Universal Life Insurance?

Individuals who do not have disqualifying medical conditions and want to take advantage of the ability to adjust their premiums may benefit from purchasing a universal life insurance policy rather than a guaranteed issue policy.

By purchasing universal life insurance, you can receive immediate coverage with no waiting period and choose a death benefit that meets your needs. Since your financial situation may change throughout your lifetime, the ability to adjust your premiums can give you additional flexibility.

Guaranteed Issue Life Insurance vs. Variable Life Insurance

Variable life is another type of permanent life insurance coverage. These policies allow you to choose the investment options for your cash value, giving you more upside earning potential than whole, universal, and guaranteed issue life insurance policies. When the underlying investments perform well, your cash value can increase. You can then access these funds by taking withdrawals or policy loans.

Variable life policies typically require full medical underwriting, including a physical exam. They do not have a waiting period other than the suicide clause and offer larger death benefits when compared to guaranteed issue policies.

Which Should You Pick: Guaranteed Issue or Variable Life Insurance?

As long as your health conditions do not disqualify you from coverage, a variable life insurance policy may be an attractive option for those who want to combine life insurance coverage with the ability to invest and potentially grow their cash value.

Since the cash value grows tax-deferred and can be accessed during your lifetime, using this type of life insurance to supplement your retirement savings is common. The funds can also be used for unexpected expenses like medical bills. Variable life policies offer larger death benefits and immediate coverage with no waiting period.

Should You Consider Guaranteed Issue Life Insurance?

Depending on your circumstances, you may benefit from purchasing a guaranteed issue life insurance policy, or another type of policy may be appropriate for your needs. When weighing your options, consider your current medical conditions, health history, financial situation, and intentions for the death benefit.

Consider Guaranteed Issue Life Insurance If…

A guaranteed issue life insurance policy may be appropriate for you if the following conditions apply:

You have a severe health issue that makes it difficult, impossible, or cost-prohibitive to get approved for other types of life insurance coverage (e.g., a terminal illness, HIV or AIDS, dementia, or Alzheimer’s disease).
You need insurance to cover funeral costs and cannot get approved for other types of life insurance.
You are willing to accept an insurance policy with a waiting period.
A death benefit of $25,000 or less meets your needs.

Consider a Different Type of Life Insurance If…

The potential drawbacks of a guaranteed issue policy may lead you to look into other types of life insurance coverage, particularly if the following circumstances apply to you:

You do not have a disqualifying medical condition.
You are willing to shop for a company that accepts your health issues.
You need a death benefit that is higher than $25,000.
You want immediate life insurance coverage with no waiting period.
You do not meet the age requirements for a guaranteed issue policy.

Putting It All Together

A guaranteed issue life insurance policy allows individuals to purchase life insurance coverage without medical underwriting. This can be beneficial if you have a medical condition that makes obtaining other types of life insurance coverage difficult or impossible. However, there are some potential drawbacks to consider.

These policies can be more expensive than other types of coverage and typically require a waiting period before paying out a death benefit for anything other than an accidental death. For this reason, you may consider exploring other options, such as term, whole, universal, or variable life insurance.

Working with a qualified insurance professional can help determine whether you can find a company willing to approve you for a medically underwritten life insurance policy despite your medical conditions. Your insurance advisor can also help you compare policy types, so you can choose an option likely to meet your needs.

What Is Guaranteed Issue Life Insurance and How Does It Work?