Among the best final expense insurance is a segment called guaranteed issue or guaranteed acceptance.
Much as the name confers, applicants looking for life insurance are guaranteed acceptance, as long as a few criteria are met.
Our goal in this article covering all things relating to the best guaranteed issue life insurance is to pull back the curtain and give our visitors all the information they need to make the best decision they can.
And if you have further questions, or would like to talk to a pro, who knows the ins and outs of these guaranteed acceptance policies, please give us a call today.
GUARANTEED ACCEPTANCE LIFE INSURANCE
Before issuing most new life insurance policies, insurance companies require the prospective insured to undergo a medical exam.
It’s not all that unreasonable of a requirement—if the insurer is being asked to insure someone’s life, it wants to have a fairly decent idea of how much risk it’s undertaking.
Healthy applicants are more likely to live longer and make more premium payments, which means the insurer can afford to charge lower rates.
Of course, the opposite is true, too. An applicant who is in poor health or has a significant medical condition poses a greater risk and will therefore have to pay higher premiums. Or, in the case of a serious health issue, the applicant may not qualify for coverage at all.
The unfortunate result of the ordinary underwriting process is that some people who have a genuine need for life insurance might not be able to get it.
However, to address precisely this problem, many carriers offer guaranteed acceptance (or “guaranteed issue”) life insurance policies.
Guaranteed acceptance coverage is intended to provide a reliable alternative for individuals whose medical history might otherwise preclude coverage—or who just don’t want to go through a physical exam or fill out a medical questionnaire.
What is Guaranteed Acceptance Life Insurance?
A guaranteed acceptance life insurance policy doesn’t require an applicant to provide any health-history information or undergo a medical exam.
The insurer doesn’t request or consider that information and “guarantees” that, as long as you are within the applicable age bracket and live in a state where the company offers the coverage, you will be accepted.
Funeral, Burial and Final Expense
Guaranteed issue policies are often marketed as “funeral insurance,” “burial insurance,” or “final expense insurance.”
The idea is that the eventual policy proceeds are a source of cash to pay the substantial expenses incurred by a decedent’s estate or surviving loved ones for funeral and burial arrangements and estate administration.
Importantly, though, there’s not any contractual or legal obligation to use the policy proceeds only for final expenses.
In most regards, the best guaranteed issue life insurance works like standard whole life coverage. The policyholder makes regular premium payments, and the insurance company pays out a guaranteed death benefit when the policy is triggered by the insured’s death.
Like ordinary whole life insurance, the premiums and death benefit remain constant for the duration of the policy. And there’s no risk that the policy will expire or lapse except in the case of non-payment.
Depending on the specific policy, guaranteed issue life insurance can accrue steadily increasing cash value the longer it remains in place—like ordinary cash value whole life. But not every final expense policy is set up to accrue cash value.
A key distinction between most whole life policies that require medical screening and the best guaranteed acceptance policies is that coverage under a standard whole life policy often commences in the full face-value amount as soon as the policy is issued and becomes effective.
A guaranteed life insurance policy, on the other hand, will always have a waiting period before the entire coverage amount kicks in.
What is a ‘Waiting Period’ for a Guaranteed Issue Life Insurance Policy?
Guaranteed acceptance life insurance policies always come with a “waiting period,” a two or three-year period after the policy is issued during which the full face-value coverage amount is not yet in place.
This doesn’t mean that, if the policy is triggered during the waiting period, the premiums already paid are effectively lost, like when term life coverage lapses.
Instead, if the insured dies during the waiting period, the insurer will refund all premiums paid to date, with interest at a good rate (usually around ten percent).
Alternatively, some policies pay out a defined percentage of the policy’s face value if triggered during the waiting period. These policies have what is termed a “graded death benefit.”
So, for example, a guaranteed issue policy might pay out 25% of the policy limits for the first year after issuance, 75% during the second year, and then the full coverage kicks in on the second anniversary.
Why is there a waiting period?
Waiting periods are intended to avoid a situation in which an applicant with a serious preexisting condition purchases a guaranteed-issue policy, makes only a couple premium payments, and then dies—triggering a full policy payout.
To assume that much risk, the insurer would need to charge significantly higher premiums, which would make guaranteed life insurance much less affordable.
Crucially, guaranteed acceptance policies usually have an exception to the waiting period if death during the first two years occurs due to a bona fide accident (i.e., not a medical condition, natural causes, or suicide).
When the cause of death is an accident, the full policy proceeds are paid out, even if the waiting period has not yet ended.
Some policies even increase the policy proceeds in the event of accidental death.
Considering that accidental death is one of the chief risks life insurance is intended to protect against, the exception for accidents makes a waiting period much more palatable.
Pros and Cons of Guaranteed Issue Life Insurance
No Medical Screening
The most obvious reason to purchase a guaranteed acceptance policy is if you don’t want to go through medical screening.
The policies don’t even require a medical questionnaire or health history report, let alone a physical exam.
Basically, the insurer is voluntarily choosing not to consider any health-related information when issuing the policy.
So, if you don’t want to disclose that information or go through the inconvenience of a physical, guaranteed issue policies will still let you obtain life insurance.
You might want to avoid medical screening as a matter of personal privacy or because you just don’t like trips to the doctor.
Or you might be fairly certain that your medical history will lead to higher premiums anyway.
But, remember, medical screening works both ways. A less healthy applicant pays higher premiums, but a healthy applicant qualifies for better rates.
When considering applications for guaranteed issue coverage, the insurer has to assume the applicant is in worse health than average.
So, even if you have a few health issues likely to increase the premiums, there’s still a decent chance you’ll end up with a better rate by going through the medical underwriting process.
Also, keep in mind that most final expense policies don’t actually require a physical examination.
The insurance company will have you fill out an application with questions about your health status and medical history—and the company may run a medical background check—but you usually don’t need to, for example, provide urine and blood samples for final expense policies.
On the other hand, certain medical conditions might not be totally disqualifying for a medically screened policy but nonetheless result in dramatically increased premiums.
In those instances, a guaranteed acceptance policy could end up being the best option.
No Risk of Denial
Perhaps more importantly, some conditions are disqualifying for a medically screened policy.
Applicants who have cancer, HIV, Alzheimer’s, or a terminal illness—or who are currently on dialysis, in a nursing home or other skilled care facility, or are waiting for an organ transplant—probably won’t qualify if they go through screening, though different insurers have different conditions they will or will not accept.
But a guaranteed acceptance policy by definition does not consider your medical history or current health status.
So, an applicant with a significant existing condition can still obtain coverage.
Not Immediate Issue
Waiting periods are how life insurance companies manage the risk involved in writing policies for insureds with significant existing health problems.
If you’re looking for life insurance with no waiting period, a guaranteed acceptance policy won’t do the trick—because insurers don’t issue guaranteed acceptance policies with immediate coverage.
With that said, the best guaranteed issue life insurance policies aren’t the only policies with a waiting period. Many screened final expense policies have them, too.
In fact, even if you go through screening, you still have to pay higher premiums for immediate coverage than you would for a policy with a waiting period.
In the end, it’s a cost-benefit analysis that depends on your individual circumstances and priorities.
If you’re not overly concerned about a waiting period, it can actually be a plus—waiting periods equate to markedly lower premiums.
And, remember, most waiting periods don’t apply when the cause of death is an accident.
Reduced Coverage Limits
A final issue to consider is that even with the best guaranteed issue life insurance, you cannot get coverage limits as high as what’s available for a standard, medically screened whole life policy.
And there’s a very legitimate reason for that.
The most reputable life insurance companies market guaranteed policies as an alternative for people in poor health or who might otherwise not be able to qualify for life insurance coverage.
Insurance companies recognize that, in the aggregate, applicants seeking guaranteed coverage are more likely to die early than medically screened applicants.
In exchange for higher premiums, insurers are willing to accept that risk.
But they don’t want it to be too big of a risk, so they limit coverage amounts to somewhere between twenty and fifty-thousand dollars (depending on the company).
From a practical standpoint, though, if you need guaranteed-issue coverage in higher amounts than what an insurer is willing to offer, you can apply for a second policy through another insurer.
Of course, you’ll have to pay two sets of premiums—and both policies will have a waiting period—but you will be able to obtain aggregate guaranteed coverage greater than a single insurer’s maximum.
Purchasing Guaranteed Acceptance Life Insurance
There are numerous well-known life insurance companies with solid reputations that offer guaranteed issue whole life policies in the U.S.
Colonial Penn, AIG, Globe Life, Mutual of Omaha, and Gerber Life Insurance, among many others, all offer guaranteed final expense policies designed for seniors.
Insurance, though, is primarily regulated at the state level, and not all companies offer every product in every state in which they do business.
So, when shopping for a guaranteed acceptance policy, you need to make sure you’re looking at policies offered in your state by companies that do business there.
Your Age Matters
Another factor to take into account is the age restrictions on guaranteed issue policies. While it’s generally true that life insurance is easier to come by for younger applicants, life insurers have minimum age requirements for guaranteed-issue policies.
Most companies start eligibility at age 50, though a few will issue policies to applicants in their forties.
On the other end, the maximum age to qualify is usually around 80 or 85. Older insureds don’t lose coverage upon reaching their 80th birthdays (the policies are guaranteed for life), you just can’t be older than the maximum when initially applying.
How We Can Help
At I&E, we screen the top guaranteed issue life insurance companies, so that we can keep abreast of the latest and greatest companies in the marketplace.
What that means for you is we have done the research and can align you with the company that is going to provide you with the best policy for the best price.
So what are you waiting for? Give us a call today to experience the I&E difference.