Guaranteed issue life insurance. Sound interesting. You must have seen the fliers, heard the radio spots, and seen the commercials. They send out the same message – get approved with no medical exams and no medical questions. Too good to be true? Guaranteed issue life insurance is a policy that’s guaranteed to anyone without regard to health conditions. Guaranteed issue life insurance is here to stay and is being marketed aggressively by insurance companies. But before you buy a guaranteed issue life insurance policy, there are a few things you need to consider. Firstly, guaranteed issue life insurance sounds to good be true. It kind of is. The target consumers for guaranteed issue life insurance are senior citizens or those with medical problems. They are enticed with the message of guaranteed life insurance with no medical exams and no medical questions. Now here comes the catch. Such policies generally do not offer coverage over $20,000. The cost you have to pay for not undergoing a medical exam or answering medical questions is high premiums. The logic is simple. You pay high premium to avoid medical exams and medical questions but your coverage is limited. You could possibly end up paying more in premiums than your beneficiaries will see in death benefits.
Guaranteed life insurance policies accrue a cash value over time generally after the first two years. A portion of the premiums pay the cost of insurance, while the rest builds the cash value. You can use the cash value in a guaranteed issue life insurance policy to cover emergency expenses while you’re still alive. You can withdraw the money, and end the policy or accept a lower death benefit. You can even borrow against the cash value and keep your benefits the same once you’ve paid the loan. Guaranteed life insurance polices have a graded benefits clause which states that if the policyholder dies within two to three years of buying a guaranteed issue life insurance policy, a refund of the policy’s premiums, plus interest, will be paid instead of paying out death benefits. So if the insured dies within a specified amount of time, the beneficiaries only receive a portion of the death benefits. Most guaranteed issue life insurance policies only pay full benefits after the first two years of the policy. Most policies will still pay the full amount of death benefits if the insured dies in an accident.
Guaranteed issue life insurance isn’t for everyone. You should only consider such policies if you have trouble obtaining other insurance policies because of a health condition, and expect to live for at least two years.
