Guaranteed life insurance policy is life insurance that ensures there is coverage accessible without a medical exam. This kind of option may match your needs best if you have been rejected for life insurance in the past. Yet even before making a decision, it’s very essential that you count the pros and cons of the policies.
How Guaranteed Life Insurance Works
Guaranteed life insurance, through its eligibility criteria, is for everyone, mostly the 40 to 85 age group. A person’s medical history is not sought by the policy provider or any other office before the application is approved. Thus, the policyholder knows the exact amount of their premiums, and the policy will not be void unless a payment is missing. The best part of this insurance deal is that it is suitable for those who fall under the category of either unhealthy or disqualified for life insurance from any source. Thus, we choose to ignore them if we can get the genuine picture of their health through their actions (whether they are smokers, drinkers, perhaps they disdain healthy practices, etc.).
On the contrary, though, the coverage is easy and effortless, you still need to be aware of the following drawbacks. The premiums that individuals need to pay for guaranteed life insurance are usually more expensive than those of other insurance policies, and the death benefits are mostly not that large. They are offered to customers in a range which starts from a minimum of just a few thousand dollars, covering the needs of burial only, to the maximum of $25,000.
Key Drawbacks of Guaranteed Life Insurance
- Higher Premiums: As health exams are not a must, that automatically means that the risk lies more with the insurance company. This leads to having much higher premiums for the insured compared to typical life insurance policies that also include medical evaluations.
- Small Death Benefits: The death benefit that is usually obtained in guaranteed life insurance policies is mostly much smaller, which is not enough to cover any large expenses such as paying off a mortgage or replacing lost income.
- Delayed Death Benefit: Almost all guaranteed life insurance policies come with a stipulated waiting period. This means that if you die within the first 2 to 3 years, the full death benefit will not be given to your loved ones. Instead, they will simply receive the premiums you have paid.
- Zero Money Value: In the same breathe, guaranteed life insurance policies, unlike others, don’t provide any cash value. It means that you can’t use it as a collateral for a loan or as a profitable investment in the long run.
Are There Any Better Life Insurance Options?
Right, there are more life insurance types that might be more beneficial due to even broader coverage and lower prices. Such example is a simplified issue life insurance, which requires a little bit of health-related information, but it is not that strict compared to traditional life insurance. This would be a good opportunity to increase your cover with a lower premium.
Apart from that, another alternative is term life insurance, which generally entails paying less money, although a medical examination is a prerequisite. This is an excellent option for people who are always in good health.
Guaranteed Life Insurance- FAQs
1. What is guaranteed life insurance?
Guaranteed issue life insurance is the kind of insurance that will guarantee one’s approval without issuing any medical examination or making any health inquiries. It is definitely a product that could match people with health problems as well as those already rejected elsewhere.
2. Why are premiums so high for guaranteed life insurance?
Guaranteed life insurance premiums are higher since the insurer does not carry out a medical examination. Therefore, a higher premium is charged to compensate for the extra risk that the insurance company is undertaking.
3. How long does it take for the full death benefit to take effect?
With a majority of guaranteed life insurance policies, the whole death benefit can’t come into operation immediately. If you happen to die during the first 2-3 years, your beneficiaries might just end up receiving back the premiums you had paid and a bit of interest on top of that.
4. Are there alternatives to guaranteed life insurance?
Right, there are two main alternatives to guaranteed life insurance which are simplified issue life insurance and term life insurance. These policies could be a better choice regarding coverage and price in case of your health and financial status.
RELATED CONTENT:
