How Does Guaranteed Life Insurance Work?

Key Takeaway
  • Guaranteed issue life insurance (also called guaranteed acceptance life insurance) is a whole life insurance policy where you do not need to answer health-related questions, the insurer does not review your medical or prescription records, and you are not obligated to undergo a medical exam.
  • Guaranteed issue life insurance means that you will be issued a policy if you are within the specified age range when you apply for your policy.
  • Guaranteed issue life insurance typically has lower coverage amounts, and often has a higher price for the limited coverage you may receive. 
  • This form of life insurance may benefit those with serious health conditions or who are older. 

Guaranteed issue life insurance–also referred to as ‘guaranteed acceptance life insurance’–is a form of permanent life insurance. Permanent life insurance is guaranteed to remain active for the duration of the policyholder’s lifetime, as long as required premiums are paid or up until the policy’s maturity date, if applicable.

A key difference between guaranteed versus non-guaranteed life insurance is that non-guaranteed life insurance often requires policy applicants to submit information such as medical and prescription records or undergo a medical exam before approving or denying a policy. Guaranteed issue life insurance typically does not hold those same requirements.

In this article, we’ll dive into the intricacies of guaranteed issue life insurance, including how it works and who can benefit from a guaranteed issue life insurance policy.

What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance is a type of permanent life insurance. A major benefit of many other types of permanent life insurance policies is that they give policyholders the opportunity to build cash value. This accumulated cash value can help pay for major milestones–such as college funds or for retirement–or help pay for unexpected costs due to an emergency. However, guaranteed issue life insurance policies do not typically build cash value.

What makes guaranteed issue life insurance stand out from other permanent life insurance policies is that they are considered a type of ‘no health questions’ life insurance. This means policy applicants typically don’t answer health-related questions or undergo a medical exam, and the insurer does not usually request medical or prescription records.

Typically, when insurance companies ask for this type of information, it’s typically to assess what insurance rate to assign applicants or determine whether or not they can approve coverage for the applicant. With guaranteed issue life insurance, policyholders are more likely to be approved, but often pay a higher premium for the benefits.

How It Works

Non-guaranteed life insurance has more flexibility, but that is offset by premiums that are typically more expensive. For example, the premium rate you pay during the first few years of the policy may increase later depending on relevant market scenarios.

This type of policy still provides coverage for life or until the policy's maturity date, and carries a death benefit much like other life insurance policies. These policies may also build cash value, which can also contribute to higher premium costs as compared to guaranteed issue life insurance policies.

Key Differences

With more traditional insurance policies that require a medical evaluation process, underwriters (professionals from the insurance company who assess your risk and determine whether your application is approved or denied) use your health information, along with other personal information, to make a decision about your application. 

In a guaranteed issue life insurance policy, there is usually no underwriting process that determines rates or eligibility. Instead, you are approved for a guaranteed life insurance policy if you fall within the age range determined by the insurer. Most qualifying age ranges are between 50-80 years old.

Because a guaranteed life insurance policy typically only requires the age of the insured, there are a few caveats. For example, most policies will not pay death benefits in the first two to three years of when the policy is issued. However, if the insured person dies during this initial period, most insurer’s will return the premiums paid, sometimes with interest.

Important Considerations

Guaranteed life insurance policies typically have very low death benefit amounts, usually between $10,000 and $25,000. Bear in mind this amount usually only covers small debts, funeral costs, and certain medical bills.

The premiums for these policies are often higher as well, despite the smaller coverage available. This is because insurers take on more risk by not evaluating your health.

Who Can Benefit the Most from Guaranteed Life Insurance?

Guaranteed life insurance is recommended most often to individuals with medical conditions which make it difficult or cost-prohibitive to purchase traditional types of permanent life insurance. This insurance is best for individuals who want to leave behind a small legacy for relatives, pay for final expenses, and have a limited budget for life insurance.

1. Investopedia Guaranteed Life Insurance

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Guarantees are backed by the claims-paying ability of the issuing insurance company. 

The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company.

Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

Policies are issued by Everly Life Insurance Company (“Everly Life”), Topeka, KS. Everly Life is not licensed in the state of New York and does not solicit or transact business in New York.

A.M. Best's 15 ratings are a measure of claims-paying ability and range from A++ (Superior) to F (in Liquidation). Ratings are current as of January 25, 2024 and subject to change at any time. While ratings can be objective indicators of an insurance company's financial strength and can provide a relative measure to help select among insurance companies, they are not guarantees of the future financial strength and/or claims-paying ability of a company and do not apply to any underlying variable portfolios. The insurance agency from which a policy is purchased, and any affiliates of those entities, make no representations regarding the quality of the analysis conducted by the rating agencies. The rating agencies are not affiliated with the above-mentioned entities, nor are these entities involved in any rating agency's analysis of the insurance companies.

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