Guaranteed Issue Life Insurance: Pros and Cons

Older people and those with severe health issues often have difficulty finding life insurance. Guaranteed life insurance is one possible avenue to get coverage.

These policies allow you to buy life insurance, but guaranteed policies typically have high costs, low coverage amounts and have “graded death benefits,” so they might not make sense for you.

What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance is a life insurance policy for which you won’t be turned down. It’s also called guaranteed acceptance life insurance.

These policies don’t require life insurance medical exams or health questions to buy coverage, so it’s easier to buy than other types of life insurance. The downside is that it generally has high costs and only low amounts of coverage available.

Guaranteed Issue Life Insurance Pros and Cons

Guaranteed issue life insurance has its pros (convenient, no medical exam) and cons (small benefit amounts, graded death benefits) to appeal to a specific market. For seniors with limited income and serious health conditions, the thought of providing money for their own funeral costs for about $10 a month can be appealing.

Cost of Guaranteed Issue Life Insurance

The average $20,000 guaranteed life insurance policy costs $154 a month for a 70-year-old woman and $329 per month for an 80-year-old woman, according to Forbes Advisor’s research.

Guaranteed issue life insurance is more expensive than other types of coverage. Life insurance policies that don’t require a medical exam or ask health-related questions mean that the insurers take on more risk, so they charge more for coverage.

Who Is Guaranteed Acceptance Life Insurance Good For?

Guaranteed issue life insurance can provide life insurance to certain people who need life insurance and who don’t have any other options. Perhaps they want to provide money for their family to pay for a funeral or final expenses. Or perhaps they want to provide a small legacy for children or grandchildren. This type of life insurance can help people who:

• Have medical conditions that would make it impossible or unaffordable to buy other types of life insurance such as whole life insurance.
• Have limited budgets for life insurance.
• Are OK with having only a small amount of life insurance coverage, such as $10,000.

If that’s not you, there are better options. Policies such as universal life insurance can provide higher coverage amounts (much higher, into the millions). These other options may require a life insurance medical exam but can ultimately provide the best pricing and coverage. And there are ever-expanding options for no-exam life insurance, although they are often targeted toward younger and healthier buyers.

EXPERT TIPS

How Does Guaranteed Life Insurance Work?

Ashlee Valentine

Insurance Editor

Jason Metz

Insurance Lead Editor

Les Masterson

Insurance Editor

Michelle Megna

Insurance Lead Editor

Best Ages for Buying

Guaranteed issue insurance companies generally restrict guaranteed issue insurance eligibility. I typically see a minimum age of between 40 and 50 to apply, and companies don’t sell new coverage to people after age 80.

Coverage Caps

I usually see low coverage amounts for guaranteed issue life insurance. They’re often between $10,000 and $25,000. Because of the low amounts of coverage, guaranteed issue life insurance is often purchased to cover only final expenses, such as a funeral, medical bills and small debts.

High Costs

Guaranteed acceptance life insurance is one of the most expensive ways to buy life insurance. Unless you have serious health conditions that would get you declined for other policies, I suggest looking into other policy types first.

Graded Death Benefits

Graded death benefits are often part of guaranteed policies. If you pass away within the first two or three years of the policy for any reason other than an accident, your beneficiary will receive only a refund of the premiums you paid, plus some interest. I suggest you keep graded death benefits in mind if you’re thinking about buying guaranteed life insurance.

Cost of Guaranteed Issue Life Insurance vs. Whole Life Insurance

Unless severe health conditions make buying other types of policies impossible, you can likely save a significant amount of money by buying a more traditional life insurance policy, such as whole life insurance.

For example, if a 70-year-old female buys a guaranteed issue life insurance policy with $20,000 in coverage, she could pay, on average, nearly $18,435 over 10 years. In contrast, a $20,000 whole life insurance policy could cost her about $12,900 over 10 years on average.

Average Cost of Guaranteed Issue Life Insurance vs. Whole Life Insurance

Who Sells Guaranteed Issue Life Insurance?

Many life insurers offer guaranteed issue life insurance, including the following companies. Note that products might not be available in all states.

• AAA Life Insurance. AAA Life Insurance sells guaranteed issue life insurance to folks ages 45 to 85 for coverage amounts up to $25,000. At age 100 and after, there are no further premiums due.
• AARP. The AARP Life Insurance Program offers a policy through New York Life for AARP members ages 50 to 85 in most states and between 50 and 80 in Minnesota, Missouri, Montana and Oregon. Coverage amounts go up to $25,000 with one catch: It’s not available to applicants who are currently terminally ill.
• AIG Direct offers policies for $5,000 to $25,000 in insurance for individuals ages 50 to 80.
• Alfa Insurance’s guaranteed acceptance life insurance is for buyers ages 40 to 80 who are looking for up to $25,000 in coverage.
• Colonial Penn sells guaranteed issue life policies for up to $50,000 in coverage to those ages 50 to 85 in most states. Colonial Penn uses “unit pricing,” offering units of coverage to everyone that starts at $9.95 a month. But the coverage amount within a unit will vary based on your age and gender.
• Fidelity Life’s RAPIDecision Guaranteed Issue policy provides up to $25,000 in coverage for people ages 50 to 85. There’s a graded death benefit for the first three years, and you can build cash value.
• Gerber Life Insurance offers guaranteed issue policies to people ages 50 to 80 with coverage of $5,000 to $25,000. The Gerber Life policies can build cash value.
• Mutual of Omaha offers guaranteed whole life insurance. Mutual of Omaha offers coverage choices up to $25,000 for people ages 45 to 85.
• Vantis Life’s Guaranteed Golden Final Expense insurance for folks ages 50 to 80 provides coverage levels from $5,000 to $20,000.

Alternatives to Guaranteed Issue Life Insurance

Other options if you don’t want to go through a medical exam to get life insurance include accelerated underwriting and simplified issue life insurance.

Accelerated Underwriting

Accelerated underwriting uses information primarily from third-party companies to approve a person and set life insurance rates. Depending on your age and health, an accelerated underwritten policy may provide you with life insurance without a medical exam.

In this process, life insurance companies use data modeling rather than traditional underwriting to assess risk. You may have to answer health-related questions.

A benefit of this type of policy is that you can generally get coverage quickly since there’s not a lengthy underwriting process, and it may not require a medical exam.

These types of life insurance policies usually are limited to up to $1 million.

Simplified Issue Life Insurance

Simplified issue life insurance doesn’t require a medical exam, but you generally have to answer health-related questions.

These policies don’t have a lengthy underwritten process, so you can get approved quickly. Life insurance companies gather information about applicants from health questions and third-party sources.

These policies will generally cost more than fully underwritten life insurance and have lower coverage amounts.

Guaranteed Issue Life Insurance Frequently Asked Questions (FAQs)