What is Guaranteed Issue Life Insurance?

Who is guaranteed issue life good for?

Not everyone who wants coverage gets it. Guaranteed life insurance can be a good option for people who want to put a life insurance policy in place but aren’t eligible for traditional life plans. Perhaps they want to pay for final expenses, like funeral costs and medical bills. Or perhaps they want to leave a small financial gift to their family.  

As with all other types, it is recommended to speak with an advisor before getting a guaranteed life insurance policy.

A guaranteed issue policy could make sense for someone who:

• Doesn’t qualify for traditional life plans on account of their age or health
• Wants an insurance policy with a small payout
• Is on a limited budget

Benefits and Drawbacks of Guaranteed Life Insurance

Benefits ✔️

Guaranteed issue life insurance offers three main benefits:

• No medical underwriting

You don’t have to take a medical test or answer questions about your health to get approval.

• Guaranteed approval

Since there’s no medical underwriting, almost everybody who applies get approval. This makes it a good option for people who don’t qualify for any other life insurance policy. Even though the accidental death benefit is small, some life policy is better than none.

• Fast approval

The average life insurance policy takes up to six weeks to receive approval. By contrast, with a guaranteed issue plan, you can get the policy within 2-3 days at most.

Drawbacks ❌

Here are the main drawbacks.

• Higher premiums

When you sign-up for a traditional life policy, the insurance company relies on your medical history — obtained through a medical exam and health questionnaire — to set premiums. But, as said earlier, guaranteed life insurance plans involve no medical underwriting. Carriers compensate for their lack of knowledge about you by charging higher premium rates.

• Small coverage amounts

Guaranteed issue death benefit amounts available are typically very low, often not more than $25,000. For this reason, people tend to buy such a plan if they only want final expenses insurance.

• Graded death benefits

All guaranteed acceptance life insurance plans have a waiting period of at least 24 months. If you pass away during this period, the carrier won’t issue a death benefit. Instead, it will refund the premium amount you have already paid, plus the interest, to your beneficiary.

Alternatives to Guaranteed Issue Life Insurance

Simplified Issue Life Insurance

Simplified issue life insurance is another type of permanent life insurance policy that does not require a medical examination. However, unlike guaranteed issue policies, you will be asked a few straightforward questions about your health and lifestyle. Additionally, the coverage is not guaranteed, as the life insurance company has the discretion to decline coverage if it deems you too risky to insure.

If you do not qualify for a traditional life insurance policy, it may be worth considering simplified issue life insurance as an alternative. It tends to be more affordable than guaranteed acceptance life insurance and may not always include a waiting period. By exploring this option, you can potentially secure coverage without the need for a medical exam while enjoying a quicker and more accessible application process.

Term and Whole Life Insurance

Term life insurance is generally simpler and more affordable than permanent life insurance. Its premise is simple and straightforward — premiums paid every month and the insurer covers you for a set number of years.

If you die within the policy term, the carrier issues the payout to your beneficiaries. If you live beyond the selected term period, no benefit is payable. However, you can renew the term policy if you want to, usually without any medical exams.

Term life insurance plans don’t include a waiting period. While the insurer can investigate an accidental death if it occurs within the first couple of years, they can’t deny the payout if there’s no misrepresentation on the application.  

Whole life covers you for your entire life. It also includes a savings component — called cash value — that grows on a tax-deferred basis. Your beneficiaries receive the death benefit when you die, while the cash value is for you to use while you’re still alive. You can withdraw from or borrow against the cash value at any time and for any purpose.

Traditional whole life policies are costlier than term life insurance. Expect to pay five to ten times more than what you would pay for a comparable term life insurance plan.

When Guaranteed Issue Life Insurance Falls Short

A guaranteed issue plan might not work to your advantage in the following scenarios:

• You live long enough for premiums paid to exceed the death benefit amount.

• You could have qualified for a traditional life policy plan or a simplified issue policy.

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FAQ

What are the key features of guaranteed issue life insurance?

Guaranteed acceptance life insurance offers several attractive features that make it a preferred choice for many individuals. Firstly, as the name implies, this type of insurance is guaranteed to be issued to anyone who applies, irrespective of their health or other factors. This makes it an excellent option for individuals who may not qualify for traditional life insurance policies due to pre-existing conditions or other health concerns.

Another significant feature of guaranteed acceptance life insurance is the absence of a medical exam requirement. Unlike traditional permanent life insurance policies that typically involve medical underwriting and assessments, guaranteed issue life insurance streamlines the application process by eliminating the need for a medical exam. This simplifies and expedites the insurance approval process, allowing individuals to secure coverage quickly and conveniently.

Who is eligible for guaranteed issue life insurance?

Guaranteed issue life insurance is one of the most common and popular types of policies available. Generally, it is offered to individuals aged between 50 and 85. However, there are also life insurance companies that extend this coverage to individuals outside of this age range.

One of the key advantages of guaranteed issue life insurance is that it eliminates the need for a medical exam, making it accessible to those with pre-existing health conditions or concerns about undergoing medical tests. This ensures a hassle-free and straightforward application process.

How much does guaranteed issue life insurance cost?

The premiums paid for guaranteed issue life insurance are influenced by several factors. These include the specific underwriting guidelines of the insurance company, the age and health condition of the applicant, and the desired amount of accidental death benefit. Typically, guaranteed acceptance life insurance policies tend to be more expensive compared to traditional life policies. This is because the insurer takes on a higher level of risk by issuing a policy without medical underwriting or health assessments. However, despite the higher cost, guaranteed issue life insurance provides peace of mind and financial protection for individuals who may otherwise be unable to secure coverage.

Conclusion

Guaranteed acceptance life insurance is a specialized policy designed for individuals who may not qualify for traditional permanent life insurance. This includes not only older Canadians but also middle-aged adults dealing with poor health conditions.

Given the varying nature of guaranteed issue plans, it is crucial to consult a life insurance expert who can guide you in exploring your options. At Dundas Life, we specialize in assisting individuals in finding the optimal amount of life insurance coverage that suits their needs while ensuring affordability. Our team is committed to providing you with personalized solutions tailored to your circumstances.