Guaranteed issue life insurance offers convenience, at a price.
Guaranteed issue life insurance is a policy you can't be turned down for. There are no questions at all and no life insurance medical exam for the application. The price is based on your age and policy amount.
What to know: Health conditions
Guaranteed issue life insurance is best for people who can't qualify for life insurance any other way due to health. It's a very expensive way to buy life insurance because the insurer knows almost nothing about you and therefore can't "price" the policy based on life expectancy.Don't assume you can qualify only for guaranteed issue life insurance just because you're older or have a few health problems. Ask an independent life insurance agent for quotes; an experienced agent will know which life insurers are more likely to offer competitive pricing even when there are health conditions.
The severe health conditions that could disqualify you from life insurance vary by company, but might 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.
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 your only option.
Less-severe health conditions like 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 issue policy.
What to know: PayoutsGuaranteed issue life insurance has a safety net for the insurer in case a chronically or terminally ill person buys a policy: The policy likely won't pay out the full death benefit for at least a couple years. This is usually referred to as the "waiting period." The policy paperwork will show the schedule for these "graded death benefits," meaning what percentage of the policy's face value will be paid out if the insured person dies within a few years after buying the policy.
If you die within a time frame where there's no death benefit, the life insurance company will give your beneficiaries a refund of the premiums you paid and some interest.
Here's an example of what graded death benefits might look like:
|If the insured person dies within:||The beneficiaries get:|
|Year 1||Return of premium plus 15% interest|
|Year 2||30% of the full death benefit|
|Year 3||60% of the full death benefit|
|Year 4 and beyond||100% of the death benefit|
|Accidental death in any year||100% of the death benefit|
|The graded death benefits in your policy might be different|