What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance is a sub category of permanent life insurance, which clients can qualify for without having to answer health questions. Like typical whole life insurance, guaranteed issue life insurance never ends as long as premiums are paid and typically (not always) comes with a cash value account that the insured can use later to pay premiums or borrow against as a loan.

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How does guaranteed issue coverage work?

Guaranteed coverage is similar to traditional whole life insurance but there are quite a few differences to note:

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• Application - applications for life insurance can be intimidating and tedious. There are many health related questions life insurance carriers ask to make sure they are not taking on too much risk. Depending on how you answer the questions, the amount of co coverage you qualify for and the cost of your premiums may change. With guaranteed coverage there are no health questions, the cost of the premiums are purely based on your age and the coverage amount requested
• Easy approval - Getting approved for a guaranteed policy is very easy and almost all clients get approved as long as they fit inside the age restrictions, typically 40-80 years old.
• Cost - Premiums for a guaranteed issue policy is typically more expensive than a normal whole life policy.
• Graded death benefit - A lot of guaranteed issue policies provide a graded death benefit. That means you will have to wait two years before your policy would pay the entire amount of the death claim.

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Pros and Cons of guaranteed life insurance

There are benefits and drawbacks with every type of life insurance coverage. Guaranteed issue insurance is ideal if your health is too poor to qualify for traditional coverage. But there are risks. For example, if you were to die from natural causes during the first two years of the policy, the beneficiaries would receive all of the premiums you have paid into the policy at the time, plus a small amount of interest.

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Pros of guaranteed issue insurance

• guaranteed (in almost all cases) approval for those who are within the age parameters
• No medical questions
• Very simple and short applications
• Some carriers allow for debit and credit cards as payment instead of bank draft

Cons of guaranteed issue insurance

• Must meet some restrictions such as age, state of residency, etc
• More expensive than traditional whole life insurance
• Waiting period before beneficiaries can receive full death benefit
• can have smaller death benefits than traditional whole life coverage

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When does a guaranteed issue policy make sense?

Guarantee issue whole life policies were designed to help clients who are normally disqualified for coverage because their health is too poor. Clients who have some chronic diseases like diabetes or a mental health disorder like bipolar depression can sometimes be disqualified from getting traditional life coverage. In cases such as these, a guaranteed issue policy would provide those clients with coverage. To put it simply, guaranteed life insurance is best for those who have serious health conditions but are not in danger of dying from natural causes in the next two years. Following that rule of thumb will make sure the beneficiaries have a good chance of having access to the full death benefit when the insured dies.

As an advisor, the best way to utilize guaranteed issue policies is as an "ace in the hole". It is common for those over the age of 50 to have some health conditions and it is the job of the advisor to go over and beyond to make sure every possible option has been exhausted before turning to guaranteed issue. At Blaeos, we help clients quite a bit with guaranteed coverage, but only after making all the necessary calls to our carrier partners to see if there are any other options. While we want to help our clients get day one coverage, the best type of life insurance for the client is the type they can qualify for.

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Want more information on GI policies? Feel free to reach out to us, we'd be happy to answer all of your questions to make sure you have the best possible options for your family

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