In simple words, guaranteed issue life insurance is a type of whole life insurance policy where the client’s health examination is not considered. It is also known as guaranteed acceptance life insurance.
What is Guaranteed Issue Life Insurance?
The guaranteed issue life insurance is primarily used as funeral and burial insurance. The prime target market of such policy is generally seniors with prior medical conditions that had to prevent them from qualifying for other insurance policies that are less expensive.
Insurance companies market guaranteed issue life insurance to seniors through television advertisements based on emotional tactics. It is not unethical to advertise your policy. But few seniors buy the guaranteed issue life insurance who might qualify for a cheaper insurance policy than a guaranteed issue.
Hence, guaranteed issue life insurance should be the last option for purchase as; it is more expensive. A person has to wait for a lengthy period during which if the policyholder dies from a natural cause, the insurance company will not pay a death benefit.
How Does it Work?
The majority of the life insurance companies that offer to seniors typically have two or three forms of insurance policies available:
Level Benefit Life Insurance
This type of level benefit insurance policy offers coverage to all death benefits starting from the first day when you buy a policy. Despite the cause of death. But a policyholder must answer a list of comprehensive questions to qualify for the insurance. Level benefit insurance is the cheapest insurance policy.
Graded Benefit Life Insurance
Graded benefit policy is the next level policy designed for people that didn’t qualify for the level benefit policy. The death benefit you might receive is on a reduced basis in the initial years. In the first year, you will receive 25% of the death benefit, 50% in the second year, 75% in the third year, and after that, you will receive 100% death benefit. However, the death benefit payout is 100% from the first day if the cause is due to an accident. Remember, every insurance company pays different payouts so, make sure you know the payout before purchasing any graded insurance policy. It is expensive than level benefit life insurance but cheaper than guaranteed issue life insurance.
Guaranteed Issue Life Insurance
It is also known as guaranteed acceptance or modified benefit. Moreover, it is for people with severe health issues, which prevents them from getting a level benefit or graded benefit final expense policy. The guaranteed insurance policy charges more as they don’t consider the policy holder’s health in the underwriting process. Thus, by accepting uncertain health issues, insurance companies will charge more and require a waiting period.
Here, the agency pays modified death benefit for the initial two years. Which is the sum of all premium amounts plus 10% if the reason for death is a natural cause. But remember to be sure of different death benefits before you purchase any insurance policy.
How Does Guaranteed Insurance Differ From Other Insurance Policies in Price?
Every insurance company that offers different final expense whole life insurance claims level benefit insurance is the cheapest in all insurance policies. A graded benefit is a little more expensive than a level benefit. In contrast, the guaranteed issue is the most costly form of insurance policy. The cost of each insurance policy increases with the increase in the medical risks of applicants.
What Other Options Do I Have Besides Guaranteed Issue Life Insurance?
The insurance rates of your insurance policy depend on three factors; age, health, and the amount of insurance you opt to purchase. If you want a high coverage on the minimum amount, probably term life insurance is the best option. Although the term insurance policy is for applicants with health issues, seniors should look for other insurance policies to see if they qualify for any policy. Sometimes insurance companies offer a policyholder to convert to permanent insurance before it gets expired.