Money & Finance

Guaranteed Issue Life Insurance & Final Expense Insurance

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Elderly man with walker (Caption: Guaranteed Issue Life Insurance)Are you worried that you won’t qualify for life insurance because of your age and less-than-stellar health status? You still have options, thanks to a product called guaranteed issue life insurance. You can even qualify for this type of life insurance without a medical exam and minimal (if any) health questions.

The catch is, you guessed it, high premiums for low death benefit payouts. Due to the high cost and other cons we’ll discuss here, is guaranteed issue life insurance worth it? In some cases, yes — especially if you have no other options and want to provide enough for your family to pay for your final expenses upon your death.

Article Overview

What Is Guaranteed Issue Life Insurance?

Compare Life Insurance Rates Quote BoxGuaranteed issue policies, also called guaranteed acceptance life insurance, are typically small, whole life insurance policies tailored to older adults to cover funeral costs and other final expenses.

With most guaranteed issue policies, your approval is guaranteed (as its name indicates) without a required medical exam. Some policies have no health questions, while others may ask you about any terminal illnesses you have.

Like all types of whole life insurance, guaranteed issue policies last for as long as you pay for them — there are no term limits or expiration dates. However, many guaranteed issue policies require you to have had your policy for a year or two before your family can collect full benefits (an industry feature called graded benefits).

About Graded Benefits

Guaranteed issue policies typically use graded benefits, meaning that the policy pays a low amount if death occurs during the first year or two after you purchase the policy. Insurance companies use graded benefits to reduce the risk they take on by issuing policies to unhealthy individuals.

Your beneficiaries will only receive the full death benefit if your policy has been in effect for a few years. This length of time varies by insurance provider, so be sure to ask specific questions about how each policy works.

Who Is Guaranteed Life Insurance Best For?

Guaranteed issue policies are usually best for senior citizens and middle-aged adults whose current age and/or health status would disqualify them for other types of life insurance.

Guaranteed Issue vs Final Expense Life Insurance

Is there a difference between “guaranteed issue” and policies called “final expense” life insurance? Sometimes these two terms are used interchangeably for the same product, but it’s important to know that not all final expense insurance policies are guaranteed issue.

So when you’re shopping for life insurance to cover your end-of-life expenses, like burial and funeral costs, you may find that there are some other options besides guaranteed issue. However, these other final expense policies will typically be more difficult to qualify for than a guaranteed issue policy. Be sure to speak to your insurance provider to make sure you understand what’s required to qualify.

Another popular type of final expense insurance is simplified-issue life insurance. While this type may not require a medical exam, simplified-issue requires you to “pass” medical questions in order to qualify. And you’re not guaranteed approval as you are with guaranteed issue policies. However, simplified issue policies usually have lower premiums than guaranteed issue policies.

How Much Can You Get With A Guaranteed Issue Policy?

Guaranteed issue life insurance generally offers low death benefit options with much higher than average premiums. Many cap benefits at $10,000 or $25,000, but you sometimes can find an insurance provider that offers a policy up to $100,000. However, keep in mind; the higher the benefit you choose, the higher your monthly premium.

How Much Are Premiums?

Guaranteed issue premiums are among the highest in the industry. Your rates will be based on your sex, age and state of residence. Rates also vary by the insurance provider you select and the amount of death benefit you choose. We recommend you get several guaranteed issue whole life insurance quotes and make sure the insurance company you go with is financially sound.

Why are guaranteed issue whole life insurance rates so high? These policies aren’t fully underwritten (you don’t take an exam or answer health questions), so insurance companies are assuming a greater risk by issuing you a policy. This risk drives up rates.

Guaranteed Issue Pros

Guaranteed Issue Cons

  • Easy to apply
  • Guaranteed approval for most (a terminal illness could disqualify you)
  • No medical exam required
  • Very limited (or no) health questions
  • Expensive premiums
  • Low coverage amounts, with average caps at $25,000
  • Beneficiaries don’t get full death benefits until the policy’s been in effect for 1-2 years
  • Much more expensive for healthy individuals than getting a policy that requires a medical exam

Is Guaranteed Life Insurance Worth It?

If you’ve already been denied other types of life insurance, guaranteed life can be worth it — as long as you live long enough for your beneficiaries to receive full benefits.

It’s also crucial to figure out the math regarding your premiums and payout. You want to make sure you’re not paying too much in premiums over the course of several years. Otherwise, you could end up paying more in premiums than the full benefit your beneficiaries will receive upon your death.

Another important issue to consider — just because you think you’ll get denied for more conventional types of life insurance doesn’t mean that you will. We recommend first looking into fully underwritten whole or term life insurance because they pay out full benefits immediately and are less expensive. Learn more about these and other types of life insurance before plunging into a costly guaranteed issue policy.

Sally Jones

While attending the University of North Carolina at Chapel Hill’s graduate school for journalism and public relations, Sally began a long career researching and writing about hard-to-understand topics, such as insurance and finance. Her additional experience in marketing, fundraising, public relations and financial planning at various foundations and nonprofit organizations over the years has given her the practical tools to inform consumers about making the smartest business and personal financial decisions. Her work has appeared in many notable media outlets, including The Washington Post, Entrepreneur, People, Forbes, Huffington Post, and more. Speaking of smart living — growing up in the (at-the-time) per-capita murder capital of the U.S. (Richmond, VA) taught her a thing or two about the need for personal and home safety. Sally stays on top of all the latest gadgets and services to protect her and her teenage daughters from potential predators and thieves. And she brings this knowledge to every article she writes.

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