What Is Guaranteed Issue Life Insurance and How Does It Work

Having life insurance may help protect your loved ones from any financial hardships they may face after your death. Qualifying for life insurance may not come easy for those with a complicated health history.

Life insurance customers wishing to purchase a standard policy must often undergo a medical background check and possibly a medical exam. However, an alternative type of life insurance for high-risk individuals is guaranteed issue life insurance, which does not require a medical background check.

What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance, also known as guaranteed acceptance life insurance, is a whole life policy that provides permanent coverage for the rest of your life.

What differentiates guaranteed issue life insurance from other types of life insurance policies is that it does not require a health screening. Therefore, individuals may be guaranteed a policy after applying.

This policy may be beneficial for seniors with a high health history record or for other individuals who may not be able to get life insurance elsewhere.

How Does Guaranteed Issue Life Insurance Work?

Life insurance companies may be able to get you a quote for your guaranteed issue life insurance online. After receiving your quote, you may have the chance to purchase your policy right away.

With guaranteed issue life insurance, there is a two-year waiting period for the insurance company to pay out your life insurance. If you die before the first two years of your policy, your beneficiaries may not receive the full death benefit.

Since guaranteed issue life insurance is a whole life policy, as long as you continue paying your monthly premiums, your policy will remain active until you pass away. One feature of this policy is that it builds cash value over time, which you may borrow against at any time while you’re still living.

Cost of Guaranteed Issue Life Insurance

Guaranteed issue life insurance may be more expensive because it provides coverage to high-risk individuals. Factors that may affect the premiums of a guaranteed issue life policy are age, gender, the state where you live, and your desired coverage amount. If you do not have serious health conditions, applying for a guaranteed issue life policy may be your last option due to its high premiums.

Advantages of Guaranteed Issue Life Insurance

One of the biggest advantages of a guaranteed issue life policy is that there’s no medical background check, guaranteeing everyone qualifies for the policy. Moreover, if you’ve been declined from other traditional life insurance policies, you may find that after applying, you could instantly be approved for guaranteed issue life insurance.

At the time of your death, the policy could be enough to cover your final expenses, which could be one less financial stress that your loved ones must worry about.

Disadvantages of Guaranteed Issue Life Insurance

Disadvantages of guaranteed issue life insurance include the premium rates. If you’re on a tight budget, you may have to consider how much you want to pay for a guaranteed issue life insurance.

There is a cap on how much coverage you may apply for, as coverage may range from $10,000 to $25,000, just enough to cover final expenses. If you’re looking to pass money on to your beneficiaries, a guaranteed issue life policy may not have enough coverage to do so. Moreover, if you pass before the waiting period ends, your beneficiaries may not get the entire death benefit.

Guaranteed Issue Life Insurance Compared To Other Policies

	Guaranteed Issue	Term Life	Permanent Life	Simplified Issue
Length	Permanent coverage	5, 10, 20, or 30 years	Permanent Coverage	Permanent Coverage
Coverage Amount	$2,000 to $25,000	Up to $1 Million	Up to $1 Million	$5,000 to $250,000
Medical Requirements	None	Depending on the desired coverage: Blood and urine samples. Applicants must also fill out a health questionnaire.	Depending on the applicant: Blood and urine samples, height, and weight are required. Applicants must also fill out a health questionnaire.	Applicants must fill out a health questionnaire.
Cash Value Aspect?	Yes	No	Yes	Yes

Term Life

Term life insurance is temporary life insurance that runs for 5 to 30 years. Term life is typically the most affordable type of life insurance due to how long it may run for. Remember that premiums may start low but could jump higher after the term runs out. This is due to the difference in age if you choose to renew your term policy.

Key differences between term life and guaranteed issue life insurance policy are:

• Guaranteed issue life insurance is permanent, unlike term life.
• Guaranteed issue life builds cash value, and term life does not.
• Guaranteed issue life has a guaranteed death benefit. With term life, your beneficiaries will be paid out if you die only within your term year.

Permanent Life

Permanent life insurance, also known as whole life insurance, is permanent just like the guaranteed issue life policy. This means that the policy will remain active until you die or you do not pay your premiums on time.

Aside from the medical requirements, the biggest difference between permanent life insurance and a guaranteed issue life policy is that there’s no waiting period for permanent life insurance.

For example, if you were to die after a month of having your permanent policy, your beneficiaries may be paid out the entire death benefit amount. Moreover, a permanent life policy is less expensive because it does not provide coverage for high-risk individuals.

Simplified Issue

Simplified issue life insurance may be beneficial for those with serious health conditions, much like guaranteed issue life insurance. This type of life insurance may be chosen as a term or permanent option.

The key differences between a simplified issue life and a guaranteed issue life are:

• Individuals must fill out a health questionnaire when applying for simplified issue life insurance. Guaranteed issue life insurance does not require a health questionnaire or medical exam.
• There is no waiting period on a simplified issue life policy, but there is a 2-year waiting period for a guaranteed issue life policy.
• There are greater coverage amounts for a simplified issue policy compared to a guaranteed issue policy.

When To Buy A Guaranteed Issue Life Insurance Policy

The best time to purchase a guaranteed issue life insurance policy is as soon as you know you are disqualified from other forms of traditional life insurance. Since life insurance rates are based on your age, gender, and the state you live in, it could be beneficial to apply when you’re still young.

Due to it being harder for high-risk individuals to get traditional life insurance, the best candidates for a guaranteed issue life policy are:

• Individuals who have been denied traditional life insurance
• Individuals with serious health issues
• Individuals who want life insurance for final expenses

Alternatives to Guaranteed Issue Life Insurance

Guaranteed issue life insurance may not be the only option for high-risk individuals. Other life insurance alternatives may include guaranteed universal life insurance and term life insurance.

With guaranteed universal life insurance, premiums and death benefit of this policy will not change over time. The individual has a higher death benefit amount to choose from and, at the time of applying, may choose at which age the policy may end, such as age 95, 100, 101, etc.

If your desired coverage amount is less than $25,000 for term life insurance, you may be eligible for term life insurance without a medical exam. Term life insurance has set terms that range from 5-to-30 years that you may choose for your policy to run for.