Guaranteed life insurance

Lizzie Nealon

March 30, 2023 at 3:58 PM·7 min read

An older Asian couple sits down at the kitchen table to look at their insurance documents. — MoMo Productions/Getty Images

Guaranteed life insurance is a type of whole life insurance policy that doesn’t require you to take a medical exam to get approved. As a result, it may be a good option for people with significant health risks or who’ve had insurers deny their application for traditional life insurance coverage. Learning how guaranteed life insurance works, including the pros and cons, can help you decide if this type of life insurance fits your needs.

What is guaranteed issue life insurance?

What is guaranteed life insurance? Guaranteed issue life insurance, also known as guaranteed life insurance or guaranteed acceptance life insurance, is a type of policy that does not require any health screenings or medical exams to get approved.

Without a required medical exam as a potential blocker, almost everyone who applies can get coverage. Guaranteed issue life insurance may be a great option for seniors with a history of health problems or individuals who don’t qualify for traditional life insurance.

Guaranteed life insurance is a whole life policy, meaning it offers coverage for your entire lifetime. It also builds cash value over time, which you could use prior to passing away. When you do pass away, your beneficiaries can begin the death benefit claim process to help pay for things like your funeral or unpaid debts.

In most cases, you have to be a policyholder for a minimum of two years before your beneficiaries can claim the death benefit. The minimum age requirement to purchase a guaranteed life insurance policy varies by insurer, but generally ranges from 50 to 80, though some insurers may allow consumers who are older to purchase a policy.

How does a guaranteed life insurance policy work?

Although applicants typically fill out a health questionnaire, you will not need to complete a medical exam to qualify for a guaranteed life insurance policy. Most insurance companies allow you to get a quote online, where you submit your state, gender, birthday and desired coverage amount to receive an instant rate. You could even purchase a policy on the spot.

As long as you continue to pay the premiums, your policy stays in effect. Every time you pay your premium, the insurance company allocates some of that money into your cash value account, which can grow over time. It may be worth noting that guaranteed issue policies generally accumulate less cash value compared to other permanent life insurance policies. At any rate, you could withdraw the money as the account grows — to pay premiums for example — or it can be added to the death benefit. Your beneficiaries should receive the death benefit when you pass away, assuming the policy has been active for at least two years. As an alternative, you can also designate a funeral home as the beneficiary so the money goes directly towards your funeral costs. Guaranteed life insurance policies have a pretty low death benefit cap, which is typically around $25,000.

Most guaranteed life insurance policies have a waiting period for payouts spanning the first two years. If you die before this period ends, your beneficiaries usually will not receive the full benefit of your policy.

How much is guaranteed issue life insurance?

Guaranteed issue life insurance coverage tends to be much more expensive than term life insurance because it covers high-risk parties. For instance, an older individual with a risky medical history who seeks a guaranteed issue policy may pay around upwards of $200 per month for a $25,000 policy. In contrast, a slightly younger individual with an average medical history may pay less than $100 per month for a $250,000 term life insurance policy. However, paying a high premium for guaranteed life insurance may be worth it if you have been rejected by traditional life insurance companies. You may also appreciate the cash value account that you can remove money from before you die.

Guaranteed life insurance premiums are generally issued based on your state, age, gender and the amount of coverage you want. The older you are, the more money you will likely pay. The only way to determine how much you’ll pay is to get a personalized quote.

If you’re on a budget, guaranteed life insurance might not be the best option for you. A better choice might be simplified whole life insurance, which typically has higher amounts of coverage. Simplified whole life coverage requires a medical questionnaire as well, but may be better for applicants who have stable, known health conditions and want a relatively more affordable option than guaranteed acceptance life insurance.

Is guaranteed life insurance worth it?

Now that you know what guaranteed life insurance is, you may be wondering if it’s a good fit for you. Guaranteed life insurance may be a great option for people who have high-risk health issues and would like coverage for end-of-life expenses. However, those who are not interested in paying steep premiums may want to search for alternative policy options. When deciding whether guaranteed life insurance is the right fit for you, it may be helpful to review the following pros and cons.

Pros

Guaranteed life insurance is available to almost everyone, which may be appealing to those who have been declined from other policy options.
It covers final expenses.
Applicants could receive approval instantly.

Cons

The average premiums are steeper than term life insurance policies.
Most insurance providers cap the death benefit at $25,000, which is typically enough to cover funeral expenses, but not take care of loved ones. Additionally, death benefits are often subject to waiting periods.
If you live in a nursing home or have been diagnosed with a terminal illness, you might not qualify for coverage.
You generally have to be 85 years or younger to purchase a new policy

Who is guaranteed life insurance best for?

Here are the people who might benefit from a guaranteed issue policy:

People with significant health risks
People who have been denied coverage
People who only want coverage for end-of-life expenses

Here are the people who may want to consider looking into a different policy, like simplified whole life insurance:

Young people under age 50
People with no or few health risks
People who want a lower monthly premium
People who want a high death benefit