The Only Time You Should Buy Guaranteed Insurance
Although obtaining life insurance coverage may be easy for some, that isn’t necessarily the case for everyone. Whether it’s due to a health issue or certain other factors, some applicants may need to consider alternative options.
One such option is guaranteed issue life insurance. This type of coverage is offered to an individual, regardless of his or her health – so for some, it could even be considered the “policy of last resort.”
With a guaranteed issue life insurance policy, there are usually no medical questions to answer on the application for coverage, nor is there a medical exam as a part of the policy approval process.
In fact, once a person applies and pays their premium, they are guaranteed to be issued a policy – and they will continue to be covered, provided that the premium continues to be paid.
How Much Coverage Can You Get?
Guaranteed insurance is generally a whole life policy that is designed for paying a person’s funeral and other final expenses – and because of that, these plans will typically offer smaller death benefits.
Most policies of this nature will provide face amounts in the range of $5,000 to $25,000 in coverage.
Applicants for guaranteed insurance are usually between the ages of 45 and 85 years old – although there are some carriers that make exception on either end of the age spectrum.
How Much Will Guaranteed Insurance Cost You?
Because those who apply for this type of life insurance are usually considered to be more risky to an insurer than the applicants who are approved for medically underwritten coverage, insurance carriers must compensate for the higher risk in some way.
Therefore, the premiums that are charged for guaranteed insurance are usually higher than that of comparable coverage – sometimes in the neighborhood of two to three times higher, or more.
As an example, a male and a female, both age 55, could expect to pay $113.90 and $88.23 monthly for $25,000 in guaranteed insurance coverage as versus for a medically underwritten whole life insurance policy (non-smoker).
And, because these plans are whole life insurance in nature, the premiums are a set, level amount and are guaranteed to never increase. This can be a benefit to someone who is living on a fixed budget.
Insurers will compensate for the higher amount of risk with guaranteed issue policies in other ways, too. For example, you may find that the policy provides graded death benefits.
This means that if the insured dies within the first two or three years of owning the policy, the beneficiary will not receive the stated death benefit, but rather only the amount of the paid-in premiums (and maybe a small amount of additional interest).
When Should Someone Consider This Type of Coverage?
While not everyone is a good candidate for guaranteed life insurance, there are some individuals who may want to consider this type of coverage – even with its higher premium charge. These include:
- Individuals who are not able to qualify for medically underwritten policies;
- Applicants whose health is such that they are likely to live past the two-year graded death benefit period.
It’s important to keep in mind that, due to the much higher premium cost of guaranteed insurance, if there is a chance that you’ll qualify for a medically underwritten policy, that should typically be your first option.
Working with an independent life insurance agent can help you with this process. An independent agent will have access to multiple insurers – and will know which carriers may be more apt to underwrite applicants who have certain types of health conditions.
Knowing your best course of action before applying for coverage can end up saving you a great deal of time throughout the application process. It can also help you to find the life insurance policy that will best serve your specific needs.