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Should You Buy Guaranteed Issue Life Insurance?

Amy Danise

Guaranteed issue life insurance is a policy you can't be turned down for. There are no health questions on the application and no life insurance medical exam. The price is based on your age and policy amount. It’s also called “guaranteed acceptance” life insurance.

Who buys guaranteed issue life insurance?

Guaranteed issue life insurance is generally a last resort for people who can't qualify for life insurance any other way due to health conditions, such as some forms of cancer or heart disease. It’s often purchased as a way to pay for a funeral or other final expenses when there are no other options.

Don't assume you qualify only for guaranteed issue life insurance just because you're older or have a few health problems. Ask an independent life insurance agent to get quotes; an experienced agent will know which life insurers are more likely to offer competitive pricing even when you have certain health conditions.

The severe health conditions that could disqualify you from many forms of life insurance vary by company but can include Parkinson's disease, Alzheimer's disease, liver disease and congestive heart failure. Still, don't assume your health condition means an automatic "no" for other kinds of life insurance such as term life insurance before you get help from a life insurance agent.

Less severe health conditions such as high blood pressure, being overweight and certain types of cancer that have been treated are typically not an obstacle to buying life insurance at a better price than a guaranteed acceptance policy.

For special cases of health problems

There are also "impaired-risk specialists" who work with other insurance agents to find life insurance for folks with severe health conditions (and even hazardous occupations like race car driving). So have an agent help you investigate the possibilities before you assume that guaranteed issue life insurance is the only option.

Can you be too old to buy guaranteed issue life insurance?

Companies selling guaranteed acceptance life insurance generally have both minimum and maximum ages for buying a policy, such as 40 to 80.

Why is guaranteed issue life insurance expensive?

Guaranteed issue life insurance is usually a very expensive way to buy life insurance because the insurer knows nothing about you (no medical history, what medicines you take, etc.) and therefore can't "price" the policy based on life expectancy.

Does guaranteed issue life insurance pay out if someone dies right away?

Guaranteed issue policies usually have graded death benefits. This means they won't pay out the full death benefit for at least a couple of years, unless the cause of death was an accident, such as a car crash.

Here's an example of what graded death benefits might look like:

If the insured person dies within:The beneficiaries get:
Year 1Return of premium plus 15% interest
Year 230% of the full death benefit
Year 360% of the full death benefit
Year 4 and beyond100% of the death benefit
Accidental death in any year100% of the death benefit
The graded death benefits in your policy might be different

Who sells guaranteed issue life insurance?

Life insurance companies offering guaranteed acceptance life insurance include:

  • AAA Life Insurance
  • AARP, from New York Life
  • AIG
  • Alfa Insurance
  • Colonial Penn
  • Gerber Life
  • Mutual of Omaha
  • TruStage

Can a dying person get life insurance?

A dying person could buy a guaranteed issue life insurance policy, but it won’t do any good if they die shortly after the purchase. That’s because the graded death benefits will generally provide only a refund of premium payments and some interest.