A Guaranteed issue policy is a life insurance policy offered to customers without a medical examination.
In other words, as long as you can afford the premiums for a guaranteed issue life insurance policy, you qualify to get one regardless of your medical history.
What is a Guaranteed Issue Life Insurance Policy
A guaranteed issue policy is similar to other life insurance policies as the benefits are paid out to the beneficiary of your choice after death. The payments are usually made in cash.
The three significant factors that determine if you qualify for a guaranteed issue policy are age, sex, and location.
This type of life insurance is usually marketed to the elderly and people with severe medical conditions. People who are unable to get a life insurance policy through their employer also find this type of policy attractive.
Most guaranteed life insurance policies are not offered to people over the age of 100. It is easy to confuse guaranteed issue policy with simplified or no exam life insurance policies.
These life insurance policies unlike the guaranteed issue policy, ask medical questions. As mentioned above guaranteed issue policy does ask medical questions and does not require a medical exam.
Pros
Anyone can apply
Anyone can qualify to get a guaranteed life insurance policy. You only need to meet the age requirements, be of sound mind to enter into a legal agreement and be able to afford the premiums.
No medical exam
Most people opt for this type of policy because it does not require specifics of your health. You can be very ill or have little or no complications and still qualify for a guaranteed issue policy.
It is also an excellent option for those who fail to qualify for other life insurance policies. Unlike term life insurance, guaranteed issue policy goes into force sooner.
Unfortunately, the list of pros for a guaranteed issue life policy is not long. This policy is a great solution if you need a way to provide for all your funeral expenses and if you do not have enough savings.
Cons
Guaranteed issue life insurance policy is considered by many to be a bad decision for any customer. You might think that it is your only option, but it is very important to consider the downsides.
Small dollar amounts
A guaranteed issue policy is a great risk for life insurance companies. To avoid paying out a large amount of money to clients, they offer small payouts usually amounting to $20,000 or less.
These insurance companies do not have anything but your age, sex, and residence to go by, so they protect themselves from losing money in this way.
Another way life insurance companies protect themselves is by offering the policy to a specific customer. For example, some companies can set an age limit, say from age 45-80.
It is also important to understand that most guaranteed issue policies are set for a specific purpose that is to provide for funeral arrangements after death.
The bottom line here is that the less the information, the higher the risk for the insurer, and the lower the payout.
Expensive
Guaranteed issue policy is the most expensive form of life insurance on the market right now. This is mainly because they do not set the premiums using your medical information.
Premiums are usually paid annually, but some insurance companies can offer you a quarterly or semi-annual payment plan. If you happen to choose the latter, then you are likely to pay more in the end.
The high premiums do not change the fact that the payouts are still small. Guaranteed issue life insurance is not a good deal, especially for people who are not very ill.
Depending on the state, it is unlikely that the insurer will be required by law to disclose this information to the buyer.
It is also important to note that unlike term life insurance the unit per coverage for guaranteed issue policy is fixed. It remains the same regardless of whether your age or health condition changes.
Graded benefits
This option was mainly introduced to curb insurance fraud.
Graded benefits, in the case of guaranteed life insurance, mean that your beneficiary will not receive the full payout if you die within a specific time frame provided by the insurance company. The period is usually within the first two years of the policy.
With guaranteed issue life insurance if you die within this time, then your beneficiary will only receive a refund of your premiums until that time.
This is also a method of an insurance company to protect itself from suffering loss. As an individual, you can buy as much insurance as possible but graded benefits limits how much you get.
Guaranteed issue life insurance is not a good policy for those who have been diagnosed to be terminally ill.
It is also not a good choice for those who would like to leave enough money behind for their family to pay the mortgage and other financial obligations.
Is Guaranteed Issue worth It?
Getting an insurance policy usually depends on your current needs and what you want to benefit from the policy. With life insurance, it’s all about taking care of the future of your loved ones.
Guaranteed issue life insurance is not worth it if you want to leave a substantial amount of money for your family to take care of important financial expenses or leave them an inheritance.
In the case where you do not qualify for other life insurance policies or are looking for funeral coverage, guaranteed issue life insurance is an option worth considering. It is also a good option for those who would only like to have their funeral expenses taken care of.
If you are not yet above 65 years of age, it is advisable that you explore every life insurance coverage option before settling on a guaranteed issue life insurance policy.
The same rule applies if guaranteed issue policy is your preferred choice. Get the best insurance deal either way.
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