Is there a history of cancer in your family? When was the last time you saw a doctor? How often do you use tobacco? Guaranteed life insurance.
These are questions you might face on a life insurance application. You know that the answers to these questions can play a major factor in determining your policy rates. And you also know that lying about your answers can result in a cancellation of your policy or death benefits.
Life insurance companies must carefully evaluate applicants to determine the level of risk involved in providing coverage for each individual. As part of this screening process, basic types of life insurance policies will require applicants to complete a health questionnaire and to undergo a physical medical examination. And it’s not uncommon for insurance underwriters to use the Medical Information Bureau (MIB), which is a database of health information, to verify the information on an application.
For older applicants or those not in terrific health; this process may not be a lot of fun and may result in a policy that is unaffordable or unattainable altogether.
Guaranteed issue life insurance is a type of policy that does not require health questions or a medical exam in order to obtain coverage. These policies are designed specifically for older individuals whose health complications may prevent them from getting approved for traditional life insurance policies.
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How does guaranteed issue life insurance work?
Guaranteed issue life insurance works much like basic life insurance. As long as the insured individual continues to pay their premiums, a payout will be made to the named beneficiary upon the insured person’s death.
The difference of course exists within the application process. There are no questions asked about your health and no medical exam is performed. As the name implies, you will be guaranteed to receive coverage. Coverage is subject to receipt of payment and verification of identity as required by law and is effective upon receipt of policy.
There are three things to consider about guaranteed issue life insurance and whether or not this type of policy may be for you:
Because the insurance company does not know the level of risk they are taking on for each individual they insure with this type of policy, premiums tend to be higher per dollar of coverage than those of traditional types of life insurance.
The death benefits for guaranteed issue policies are generally capped at a lower amount than more traditional types of policies. This is just another way for the insurance company to protect itself against loss. Guaranteed issue life insurance is designed more for individuals looking to cover funeral costs, end-of-life care, estate taxes and other matters as opposed to leaving a large inheritance.
Death benefits may not be paid out in full if the insured individual dies within the first two years of activating a policy. This is a measure used to prevent a terminally ill individual from purchasing a policy shortly before dying in order to secure a large payout for their family. Often just the paid premiums will be refunded to the beneficiary if the insured individual dies during this period. This is known as a “graded death benefit.”
Sometimes, even with an underwriting process, a basic life insurance policy can still offer rates that are competitive with those of a guaranteed issue plan and with the amount of coverage that you desire.
Work with an agent who can guide you through the application process for life insurance companies in your area and help you compare quotes across the board. An AIG-appointed insurance agent can help you do just that. Call 1-888-428-8870 today to get started.
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