The Pros and Cons of Guaranteed Issue No Exam Life Insurance
When you apply for a traditional life insurance policy, there’s always the possibility that your application will be denied. Not so with a guaranteed issue no exam life insurance policy. With these types of policies, almost everyone is approved. The only reason one wouldn’t be approved is if they’re over the age limit (85) or have a terminal illness. Otherwise, no medical exam is required, no health questions asked, and approval is guaranteed.
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Graded Death Benefit
Since approval is guaranteed to virtually all applicants, insurers need to compensate for the large risk they’re taking on. One way they do this is to offer a graded death benefit, which means that if the policyholder dies within two or three years of purchase (the exact number of years depends on the insurer), only a portion of the death benefit is paid out. In some cases, it will be 100% of the premiums plus a portion of the death benefit. This means that the beneficiaries will get a refund for all the premiums paid plus 10%-20% of the death total death benefit.
Pros and Cons of Guaranteed Issue Life Insurance
As with any type of life insurance policy, there are pros and cons of a guaranteed issue policy. There are several benefits to buying this type of policy. The main one is that approval is guaranteed. Additional benefits revolve around convenience — no medical exam is required, the entire application process can be done online, and approval is instant.
Of course, all these benefits come at a cost. One of the main cons of guaranteed issue life insurance is that it’s the most expensive type of policy. You can get an idea of how much this type of policy would cost you here. Additionally, for the high monthly premiums, the most you can get is $25,000 in coverage, possibly $50,000 if you find the right carrier. And finally, the graded death benefit means that you are taking a risk, because if you die before the two-three year waiting period is up, your beneficiaries get almost no coverage.
Do the Pros Outweigh the Cons?
Since there is nothing perfect in life, the question you always need to ask yourself is whether the pros outweigh the cons. In the case of guaranteed life insurance, it’s a very personal question. Only you know if you’ve been rejected for other types of life insurance coverage. Only you know if you have loved ones who are relying on even a small death benefit. Only you know if you can afford the high monthly premiums. Therefore, deciding if the pros outweigh the cons is something that only you can answer.
However, the general trend is that people who have been turned down for traditional life insurance policies but still want coverage choose guaranteed issue. If you are young, healthy, and don’t have a fear of needles, there are plenty of less expensive, more worthwhile options for you.
Who Usually Buys Guaranteed Issue Policies?
As mentioned above, people who are young or in good health are not optimal candidates for guaranteed issue life insurance. However, people who have serious medical conditions, like cancer or heart disease, are good candidates.
How is Guaranteed Issue Whole Life Insurance Difference from Traditional Whole Life Insurance?
Whole life insurance policies are policies that don’t come with an expiration date. Once you purchase one, it’s yours for life. Term life insurance policies, on the other hand, are sold for a span of 5, 10, 15, 20 years, etc. People usually buy term life insurance because it’s more affordable than whole.
Whole life insurance is more expensive because it:
- Has no expiration date
- Acts as an investment vehicle
While guaranteed issue whole life insurance is similar to its traditional counterpart in that it has no expiration date, it does not act as an investment or accrue cash value.
Additionally, the application process for guaranteed issue is very different from its traditional counterpart. Traditional whole life insurance policies require a medical exam and ask several questions about your health, finances, and lifestyle. Approval can be denied based on the information you provide.
Guaranteed issue, on the other hand, doesn’t require a medical exam and doesn’t delve into your health, finances, or lifestyle. Approval is guaranteed as long as you are under the age limit and don’t have a terminal illness.
Why Choose Guaranteed Issue Over Traditional Whole Life Insurance?
Both types of whole life insurance cost more than term life insurance, so why would someone choose the even-more expensive guaranteed issue over traditional whole life insurance? The answer is in the details mentioned above. A person who isn’t in great health can be denied coverage from a traditional whole life insurance policy. He can also be denied coverage for traditional term life insurance and no exam term life insurance. If that person has his heart set on buying life insurance, guaranteed issue is the only remaining option.
Fortunately, today more carriers than ever offer guaranteed issue no exam life insurance policies. This means that consumers can be more selective about which carrier they choose and take precautions to get the best possible terms.
