Who buys guaranteed issue life insurance?There can be many reasons why a guaranteed issue life insurance policy may be an attractive choice. However, they are typically purchased by people who are not in very good health and who may have been turned down for coverage in the past. More often than not, they're meant to pay for final expenses (funeral and burial costs).
What are the benefits?The three main benefits of guaranteed issue life insurance, a type of no medical exam life insurance, is that there is no medical exam, no medical questions to answer, and you don't have to be in perfect health. However, not having to qualify, is the primary reason why premiums are substantially higher than what a healthy person would pay for the same amount of coverage under a policy requiring medical underwriting.
What are some of the limitations?Guaranteed issue life insurance can be very limited. First off, policy benefit limits are typically small. Although every insurance company is different, these types of policies are often less than $25,000. In addition, you usually must fall between a certain age ranges (typically between 50 and 85, but that may vary).
What are some of the drawbacks?
In addition to the above limitations and high premiums, one drawback to a guaranteed issue life insurance policy could be that your beneficiary may not have access to the full death benefit until your policy has been in force for a specific length of time. In the insurance industry, this is known as graded benefits.
Wondering what happens if you die before your “waiting time” is up? Well, if you were to die during the first few years of the policy, most life insurance companies will generally issue a refund of your premiums to your beneficiaries instead of paying out the actual death benefit. This practice prevents immediate full payouts for critically ill individuals who may wish to purchase a policy near death.
Most life insurance professionals and financial advisors agree that the best approach to finding the type of life insurance to meet your needs is to shop around. Even if you've been turned down in the past, take the time to talk to other companies and explore all of your options. This article discusses a few common policy options, some of which Protective does not offer.