Guaranteed Issue Life Insurance
Guaranteed issue life insurance has many benefits and drawbacks and both should be considered by those who are contemplating this type of plan. The first main benefit is that the policy holder can be approved regardless of their current medical health and underlying medical conditions as an exam is not required for these policies. Because they are guaranteed, however, they do contain several drawbacks; the first of which is that the benefit is limited and often smaller than what you’d find with other life insurance policies. For those who have medical illnesses, are elderly or find that obtaining life insurance is extremely difficult or too expensive to obtain, guaranteed issue life insurance may be the best choice.
As guaranteed issue life insurance policies are destined to make some sort of payout the premiums are more expensive. It may seem a bit contradictory that many insurers automatically disqualify some people from coverage only to find others who offer guaranteed insurance prompting many to ask what the catch is. Though guaranteed life insurance policies are legitimate they aren’t as straightforward as they may appear at first.
The higher premiums help the insurer turn a profit from these policies and many insurers place strict rules on how and when they will pay out the benefit. For instance, some policies specify that if the policy holder dies within one or two years from the time the policy was enacted, either a limited benefit or no benefit will be paid. Due to these prerequisites found in guaranteed issue life insurance policies it is imperative that policy holders well understand the terms of their policies. Additionally, since many guaranteed life insurance policies pay a smaller benefit, many insurance companies find that they can afford to issue these policies. As a supplement for those who wish to ensure they have some sort of protection should the policy holder die before the policy comes to term, is accidental death coverage. This will ensure that the beneficiaries can receive a benefit should the policy holder die before the time period. As there are many people who are facing medical illness or are elderly and are generally labeled as “uninsurable,” guaranteed issue life insurance policies are a great choice.
Most guaranteed life insurance policies have limited benefits that often never include more than $55,000 worth of coverage. Still, many find that these plans are the best solution for those who are concerned about the costs of a funeral, burial, mounting medical bills and other debts that need to be tended to. Additionally, guaranteed life insurance is considered permanent therefore the policy holder may borrow from their policy as needed. Due to the “graded benefit” system that is in place, these policies are selected by those who expect to live for at least two years so that the policy will pay out. Those who are facing terminal illness and only have several months to live will find that these policies are not a good choice.
Guaranteed life insurance policies use the graded benefit (or the clause that states should the policy holder die before a two year period) in order to prevent fraud. Because these policies have high premiums and low benefits, most people do not take out these policies unless they absolutely need them. Many will find that over a long period of time these policies aren’t valuable as the high expense of the premium combined with the low benefit makes them an unworthy investment. This ensures that they are not sought after for fraudulent reasons but by those who are truly uninsurable, have at least a few years left to live and need the assurance of having an insurance policy that will pay a benefit to their beneficiaries.
If you have been told you are uninsurable but expect to have at least two more years to live, then speak to an insurer regarding a guaranteed issue life insurance policy.