Updated May 13, 2019

Guaranteed Life Insurance: What You Need to Know

Read more about Life Insurance

Guaranteed Issue life insurance can help if you don't qualify for other coverages. But does the cost outweigh the benefit? Read on.

Designed for the elderly and those with serious health concerns, Guaranteed lssue life insurance offers coverage without medical questions or exams. It's often a last resort coverage for those who have been denied other policies.

How does Guaranteed Issue work? Is the cost worth the coverage? And what are the alternatives? Answer all your questions with our guide.

What Is Guaranteed Issue Life Insurance?

Guaranteed Issue life insurance is for people who wouldn't normally qualify for other life insurance. There are no term limits or expiration dates—you have the policy for as long as you pay for it.

These policies are non-medically underwritten—you won't have to answer health questions or take an exam to qualify.

Life insurance comes in two main types: medically or non-medically underwritten policies.

For medically underwritten policies, you must answer medical questions and take an exam to be approved. The insurance company knows the risk they take on by insuring you. These policies tend to have lower monthly premiums.

For non-medically underwritten policies, you do not take a medical exam and in most cases, don't answer health questions either. The insurance company takes on more risk since they know less about your health. As such, your monthly premiums are higher.

Premiums are significantly more expensive (between $50 and $620 per month, depending on your age).

Death benefits are also generally pretty low (around $10,000 to $20,000 max).

The policies do build cash value over time. But the death benefits typically cannot grow larger than $25,000.

Who Should Consider Guaranteed Issue?

Choose Guaranteed Issue only if you have exhausted other options. This means getting quotes or applying for other types of policies with different companies to get approval.

The policies are best suited for those who don't qualify for other insurance, including:

  • Seniors ages 65+
  • People with chronic medical conditions, like kidney disease or cancer.
  • Those with physical or cognitive impairments.
  • People seeking coverage to pay funeral expense.
  • Those with dangerous occupations or hobbies.

Guaranteed Issue has a two-year hold period before you can collect the death benefit.

This protects the insurance company in case you lied on your application (since there is no health exam to confirm your answers). If you die within that two-year hold period, your beneficiary will NOT receive the death benefit.

Pros of Guaranteed Issue

There are several benefits to this type of policy.

  • Coverage is Guaranteed: You will be accepted even if you are elderly or have a chronic illness that would disqualify you from a typical life insurance policy.

  • No Medical Exam: You'll be approved quickly and easily for coverage.

  • Fixed Premiums: You won't pay more as the policy ages.

  • Option to Buy Multiple Policies: This practice is also called layering your policies. Use it to get a larger death benefit.

  • Builds Value Over Time: As with a whole life policy, your death benefit will grow.

Cons of Guaranteed Issue

Here are some negatives to consider before purchasing your policy.

  • Higher Monthly Premiums: You'll pay more compared to Term or Whole policies.

  • Limited Availability: Not all insurance companies offer this policy.

  • Lower Death Benefit: This insurance used to be called "burial insurance." It often provides enough payout only to cover your funeral expenses.

  • Premiums and Death Benefits Vary: Factors include age, sex, and location. The amount of coverage can vary significantly based on where you live.

  • Some Limitations Apply: While the coverage is guaranteed, there are some "knockout" questions that can make you ineligible.

    For example, if you have HIV or AIDS, currently reside in a nursing home, or are terminally ill, you will likely be denied coverage.

Speak with a life insurance agent to discuss your options. While they might not be able to write you a Guaranteed Issue policy, they can help you determine if it's best for you.

Sample Quotes

Here are sample Guaranteed Issue quotes for Gerber Life Insurance, one of the leading Guaranteed Issue life insurance companies. (All quotes assume the insured lives in the state of California.)

70-year-old male:
Total CoverageMonthly Cost

70-year-old female:
Total CoverageMonthly Cost

75-year-old male:
Total CoverageMonthly Cost

75-year-old female:
Total CoverageMonthly Cost

80-year-old male:
Total CoverageMonthly Cost

80-year-old female:
Total CoverageMonthly Cost

As you can see, depending on your age and sex alone, you could pay as little as $38.23 or as much as $616.92 per month.

Is It Worth It?

Many experts say Guaranteed Issue is NOT worth the expense. Even if you can afford the higher premium, you won't get much death benefit for your buck.

Most Guaranteed Issue policies average only $1,000 to $2,000, up to around $20,000 to $25,000. That's not much when you consider the monthly premiums you'll pay.

If no medical exam is what attracts you to this type of policy, consider your options. Some companies offer policies and other plans that won't require an exam.

These may offer higher coverage amount with a lower premium. Keep reading for more information.

Other Life Insurance Alternatives

Simplified Issue
With this type of policy, you do not take a medical exam. But underwriters will ask more thorough questions. These questions are meant to be more in-depth and telling of your health and medical conditions.

Once you submit your application, the underwriter may approve you for coverage or request medical records from your doctor. If records are requested, it may take longer to be approved as the underwriter. You could be also be denied coverage.

While this policy is typically not as expensive, it still costs more than medically underwritten policies.

Traditional Term life insurance provides coverage for a certain period of time, or "term." This type of policy is designed to ensure protection for your loved ones should you die prematurely.

With this policy, your beneficiary receives the full death benefit if you die within the period of the term. The most common terms are 10, 20 and 30 years, though some companies also offer 15- and 25-year options.

Term life insurance is usually a cheaper option because it's temporary. You are more likely to pay out the full cost of the policy before dying.

Most term policies do not end up paying the death benefit because the majority of policyholders live through the end of the term.

A term policy is a good fit for you if you want a simpler, more affordable policy. It can also replace your income for the years you:

  • Raise children
  • Have a mortgage or other outstanding debts

Whole life insurance provides lifelong coverage and includes an investment and cash value component.

The three main benefits to a whole life insurance policy are guaranteed:

  • Cash value growth
  • Level premiums for life
  • Death benefit.

Since this type of policy typically involves investing dollars, the cash value account will grow over time. You can normally access the cash value any time through withdrawals. You can use these for retirement, emergency funds, or other bills.

Withdrawals often come with a fee or other contingencies, so you'll want to be sure you're familiar with your policy.

Consider a whole life insurance policy if you:

  • Want to provide money to your heirs to pay estate taxes.

  • Have lifelong dependents such as a child with special needs.

  • Plan to spend your retirement savings but still desire an inheritance for your beneficiaries.

Funeral Insurance
This is a special type of insurance offered by funeral homes or funeral directors. The death benefit is used solely to cover funeral expenses or other specific services that are pre-designated with your policy.

With funeral insurance, the funeral director or home is named as the beneficiary.

Because you buy this policy in advance, you can usually lock in the prices for services and burial costs.

Mortgage Term
This policy helps guarantee a tax-free benefit that can be used to help with mortgage payments. Policy terms are available for 15 or 30 years. You choose the coverage you need based on your mortgage balance.

With this type of policy, your mortgage lender is the beneficiary of the policy.

The national average for a mortgage is about $120,000. Assuming that's your situation, you would pay roughly $50 per month for a policy.

How to Purchase a Guaranteed Issue Policy

Unlike most life insurance policies, you usually must purchase Guaranteed Issue directly from the company offering it. Unless the agent works solely for the insurance company offering the policy, they cannot bind a policy for you.

Your quote will be based on three variables:

  • Age
  • Sex
  • Home state

You can usually get a quote online through the company's website. Or call the company to get a quote from one of their agents.

Once quoted a policy, you are immediately given the option to purchase. This can usually be done online or through one of the company's agents.

Since there is no medical exam, you will likely be approved immediately (or at least very quickly) for a Guaranteed Issue Policy.

Wondering where to purchase a policy? Below is a list of the top Guaranteed Issue companies.

Best Life Insurance Companies for Guaranteed Issue

We reviewed a number of life insurance companies offering Guaranteed Issue policies based on:

  • The age you can purchase a policy
  • Death benefit hold period
  • Payout during the waiting period
  • Minimum and maximum coverage options
  • Customer ratings.

Using these criteria, the four best companies are AAA, AIG, Gerber Life, and Mutual of Omaha.

AAAAIGGerberLife Mutual of Omaha
Age Availability45-8550-8550-8045-85
Waiting Period2 years2 years2 years2 years
Payout During Waiting Period100% of premiums paid, plus 30%100% of premiums paid, plus 10%100% of premiums paid, plus 10%100% of premiums, plus 20%
Minimum Coverage$5,000$5,000$5,000$2,000
Maximum Coverage$25,000$25,000$25,000$25,000

Though a traditional life insurance agent can't help you purchase a Guaranteed Issue policy, they likely can help you determine which company offers what you need.

Bottom Line

Life insurance coverage is an important part of your financial planning and your family's future. Guaranteed Issue life insurance can help if you don't qualify for other types of coverages.

But consider your choices carefully. Guaranteed Issue provides limited benefit with high premiums.

Write to Caitlyn Callahan at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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