What is Guaranteed Issue or Guaranteed Acceptance Life Insurance?

What is Guaranteed Issue or Guaranteed Acceptance Life Insurance? 

Life insurance can be confusing, especially because of the different requirements and conditions attached. You may have heard about guaranteed issue or guaranteed acceptance life insurance at some point (both mean the same thing), but may have forgotten or lost track of it in the sea of other types of life insurance. Below, we’ll try to explain all the key aspects of guaranteed issue life insurance in a simple way.

The first point to remember about guaranteed issue that is permanent (as long as you pay for it) and  will automatically qualify for it if you fall within the eligible age range (normally 50–80, depending on the company). Most types of life insurance require medical underwriting or a health questionnaire—meaning they’ll ask you about different health conditions and evaluate your overall health before deciding whether you’re worth the risk. But for guaranteed issue, there’s no such process. It’s guaranteed that you’ll qualify for life insurance regardless of your health conditions.

What is  Graded Benefit?

So far it all sounds good, right? But of course, there’s a catch—most guaranteed issue policies won’t pay the full death benefit to your beneficiaries if you die of natural causes in the first two to three years (this is called the waiting period) after your policy starts. Instead, your beneficiaries will receive the total amount of premiums you’ve paid, plus interest (usually around 10% to 20%). This is known as a graded death benefit, and it’s a standard feature of guaranteed issue policies. So basically, it depends on when you die. If you die during the waiting period, your beneficiary won’t get the full payout—just the premiums you paid, plus the interest earned.

It’s important to point out that like Whole Life insurance – Guaranteed issue policies also include a cash value component that grows over time as you pay premiums. You can borrow against this cash value, often tax-free, which may give you added financial flexibility while you’re still alive.

Now it should be clear that this type of policy is especially popular among people who have serious health conditions and usually can’t qualify for other types of life insurance—which also tend to be cheaper, have no waiting period, and don’t include a graded death benefit. So, you may want to consider a guaranteed issue or guaranteed acceptance life insurance policy if you have any of the following conditions:

• You’re terminally ill and have a short life expectancy.
• You need an organ or tissue transplant.
• You have Alzheimer’s disease or dementia.
• You have AIDS or HIV.
• You have cancer.

So to sum up, here are the key takeaways-

• Guaranteed issue life insurance is a type of life insurance that doesn’t ask about your health. It lasts your whole life and can grow some cash value over time.
• These plans usually pay out between $2,000 and $25,000 when you die, which is often just enough to help with funeral and final costs.
• Most of the time, there’s a waiting period of 2 to 3 years before your loved ones can get the full payout if you die from natural causes.
• Because the insurance company takes a bigger risk by not checking your health, the monthly cost is usually higher than other life insurance types.
• This kind of insurance is mainly for people with serious health problems who can’t get regular life insurance.

Pros of Guaranteed Issue:

• No medical exam: You don’t have to get a check-up or answer health questions to get this insurance.
• Guaranteed approval: If you’re the right age, the company will accept you no matter what your health is like.
• Builds cash value: Over time, the policy earns money that you can borrow while you’re still alive.
• Same monthly payments: Your payments stay the same every month and won’t go up.
• Lasts your whole life: As long as you keep paying, your coverage stays active and won’t end.

Cons of Guaranteed Issue:

• More expensive: It costs more than other types of life insurance that do check your health.
• Low coverage: The maximum payout is usually $25,000, which might not be enough to cover big expenses.
• Waiting period: If you die of natural causes in the first 2–3 years, your loved ones might not get the full amount.
• Not great if you’re healthy: If you’re in good health, this type of insurance usually isn’t worth the higher cost—you could get better coverage for less with other options.

For More –

FAQ

https://www.investopedia.com/terms/g/guaranteed-issue-life-insurance.asp

https://www.progressive.com/answers/guaranteed-life-insurance