In exchange for skipping the exam, be prepared for high premiums and a low death benefit, or payout.
A guaranteed issue life policy, also known as no-medical exam life insurance or no medical underwriting, is a permanent insurance policy that provides life insurance with no medical underwriting. To qualify for coverage, you don’t need to answer any questions about your health.
What’s the catch? What’s the catch? “Final expense” (or “guaranteed accept”) life insurance comes with higher premiums, and lower coverage. You will have to wait for certain reasons before benefits are paid.
These policies have merit, but that doesn’t mean they aren’t worth your time. Your medical history is not a factor in your application being accepted. A life insurance policy that covers you can provide coverage if you are over 65 and have an uninsurable condition.
The key features of a policy with guaranteed issue
There are many types of guaranteed issue life insurance policies, including those that offer death benefits and age restrictions. There are some features that can be applied to nearly all guaranteed issue products.
- The policy’s term will determine how much your premiums remain the same. You may lose your policy, have your rate increased or be canceled if you fail to pay your premiums.
- The death benefit will not decrease over time. Your death benefit may be reduced if you fail to pay your premium or any loan against the cash value.
- The policy begins with a waiting period. This usually lasts for two years. If you die from natural causes, access to the full benefit is restricted.
- To be eligible for coverage, there are no medical examinations or questionnaires about your health.
- All policies are valid throughout your life.
Most guaranteed issue policies are a form of whole life insurance that provides permanent coverage. These policies are very rare. They last for a certain number of years and then expire. Policies that do not require information about your health to calculate rates and confirm eligibility are “guaranteed issue” in general.
This type of coverage is sometimes called “no-medical exam life insurance”, but the exam is only one component of the medical underwriting process. If a whole-life insurance policy does not require you to take the exam, but instead asks for a quick questionnaire about your health, it isn’t a guaranteed issue policy.
Who is eligible to receive guaranteed-issue life insurance?
Your medical history and age are not used to determine your eligibility. Guaranteed issue products are generally only available to applicants aged between 40 and 85. There are many age restrictions that vary between insurers. Some accept applicants as young as 50 years old, while others only allow applicants who are between 80 and 85 years.
Your age may also have an impact on the price of your premiums. Rates are affected by risk, just like all life insurance policies. Higher premiums are associated with older age.
Good news! The good news? Not all insurers offer guaranteed products and availability can vary between states.
What coverage are you eligible for?
Average death benefits for guaranteed-issue life insurance policies are between $1,000 and $25,000. These policies cover funeral costs and final expenses. In fact, Americans buy life insurance to cover funeral expenses.
According to the National Funeral Directors Association, the median cost for a burial is more than $7,000 Costs will vary for each person so it is important to set priorities and budget in order to calculate the coverage.
TIP: Consider your age, your health, and the policy’s cost when estimating future expenses. You may pay more for a guarantee issue policy if you stay on the policy for 20 years.
What is the cost of guaranteed issue life insurance?
Guaranteed issue policies are not very comprehensive for the amount you pay. A $250,000, 20 year term life insurance policy for a woman aged 60 costs on average $908 per annum. A $25,000 guaranteed issue policy costs $919 annually. Although the coverage is tenth as extensive, the guaranteed issue policy has a price that is comparable to the other policies.
Who is eligible for a guaranteed-issue policy?
High premiums and lower benefits can be a result of severe health conditions. A life insurance policy without medical underwriting may be an option if you are in this situation. You don’t have to be ill in order to get a competitively priced whole or term life insurance policy that includes medical underwriting.
Applying for life insurance with a pre-existing condition might not be as fruitless as you think. Before purchasing guaranteed-issue life insurance, shop around and compare quotes to see the coverage you are eligible for.
If you just want to avoid the exam but don’t mind answering a few questions about your health, a simplified issue policy might be the better option. You may be able to qualify for a policy that offers greater death benefits and is cheaper than a guaranteed-issue policy by providing any information about your health, no matter how minor.
Why would you want guaranteed-issue life insurance?
Even though it is small, the death benefit can still be used for any purpose. It is a flexible option for those who wish to leave a lump sum to their beneficiaries. These are some scenarios where a guaranteed-issue life insurance policy might be required.
- You want your beneficiaries to be able to pay for final expenses such as burial costs.
- You no longer have term life insurance and are in need of coverage. However, your current health status or medical history prohibits you from buying a standard policy.
- You want to purchase a policy quickly, without waiting for medical exams or questionnaires to be verified, and are willing to pay more for it.
What are non-insurable conditions?
These health conditions are considered to be high-risk for standard life insurance policies that include medical underwriting. They may limit your coverage options. Guaranteed issue life insurance, on the other hand, will accept you regardless of your uninsurable condition.
- Autoimmune conditions such as Lupus and rheumatoid are known to be autoimmune.
- Sickle cell anemia is one example of blood disorders.
- Cancers, such as breast cancer.
- Transplants are possible for heart conditions.
- Kidney and liver diseases.
- Mental health conditions such as schizophrenia and PTSD.
- Multiple sclerosis and epilepsy are both neurological conditions.
- Respiratory conditions such as asthma or emphysema can be caused by these conditions.
What is the guarantee issue waiting period?
Guaranteed-issue life insurance usually comes with a “graded Death Benefit,” also known as a waiting period. This is typically the benefit that covers the first few years of the policy.
The benefit will not be paid if you die from natural causes during this period. Your beneficiaries will receive a portion, or 110%, of the premiums you have already paid.
This is the loophole: The benefit will be paid in full if you die from an accidental cause, such as a car crash, during the waiting period.
The benefit is paid regardless of the cause of death after the waiting period expires.
You’re not covered for certain causes, but you may be covered for the waiting period. Depending on your policy, you might also be covered for the costs associated chronic or terminal diseases. These are often called “living benefits”.
Insurers don’t have to collect information about your health so they can determine if you will need to file a claim. This is to balance the risk. The waiting period can vary from one to three year depending on which policy you have. Companies have different waiting periods, payouts and definitions for accidental death.
NOTE: While the cause of death has been determined, claims can take longer to process during the waiting period.
Recap: The pros and cons of guaranteed-issue life insurance
Insurance companies don’t calculate all risks. You’re the one buying the policy, after all. When deciding on the type of life insurance you want, it is important to consider your budget, long-term priorities, and anticipated costs.
Although policies that guarantee coverage sound appealing, the costs could be more costly than the benefits. These are some pros and cons that will help you to balance your priorities and understand the risks.
Alternatives to life insurance policies that do not require a medical exam
A simplified issue is a permanent type of life insurance that allows you to skip the exam by answering some questions about your health. Like guaranteed issue, policies that do not require medical exams are less likely to pay out death benefits than products with full medical underwriting.
Accelerated Underwriting uses “big data” in order to determine risk and eligibility. Your age, gender, and smoking habits may be required information. These data are then compared with life expectancy patterns in similar groups to determine rates. Many applicants are able to skip the exam and still be eligible for coverage.
Employer-sponsored group life insurance policies don’t usually include an exam. Some conditions may not be covered and medical questionnaires may be necessary. They typically offer higher benefits than standard guaranteed issue products. Eligible applicants can also convert group policies to individual plans with no need for reexamination.
Policies covering accidental death and dismemberment don’t usually require a physical exam or a health questionnaire. These policies only cover eligible accidents that are subject to certain restrictions, not natural deaths.