As people age, they often worry about their loved ones being left financially burdened in the event of their death. While life insurance is designed to help with this issue, many seniors are hesitant to purchase a policy because they fear being rejected due to health concerns. Guaranteed life insurance can provide peace of mind for seniors by ensuring that coverage will be provided, regardless of health status.
While life insurance is designed to help with this issue, many seniors are hesitant to purchase a policy because they fear being rejected due to health concerns or that their guaranteed life insurance policy might be unaffordable.
This type of policy does not require a medical exam and provides coverage regardless of health concerns. For seniors who want to make sure their family is taken care of after they’re gone, guaranteed life insurance is an ideal solution.
How Does Guaranteed Life Insurance Work?
Typically, guaranteed life insurance plans have a waiting period before the benefits go into effect. Most of these policies would be fully functional after 2 to 3 years.
However, if the policyholder died within the waiting period, the beneficiary would not receive the full death benefit but rather, the insurer would return all premiums paid into the policy plus interest (generally 10%).
Insurance companies require these waiting periods to dissuade end-of-life applicants from purchasing a life insurance policy knowing that death is likely to happen within the next 24 months. Without the waiting period requirement, life insurance companies would suffer a significant loss.
Additionally, eligible applicants must be between 50 and 80 years old (depending on the company) and agree to purchase a death benefit that is less than $35,000.
Since guaranteed life insurance policies are whole life insurance contracts, the policies contain the same guaranteed benefits as traditional whole life insurance policies:
- Once issued, the insurance company cannot cancel your policy for any reason other than non-payment.
- The premium payments for your whole life coverage can never be increased by the company. Even if you become terminally ill shortly after your policy is issued, the insurance company cannot increase your premiums.
- Your guaranteed issue whole life policy contains a cash value account that will grow over time earning guaranteed tax-deferred interest paid by the insurance company
- Policyholders can access the cash value in the policy at any time and for any reason via policy loans or withdrawals.
Is Guaranteed Life Insurance Affordable?
When compared to Term Life Insurance or Universal Life, guaranteed life insurance rates are considerably higher because the insurance company is accepting an unknown medical risk. Most insurance companies that offer the lowest rates can do so because the company requires a medical exam and have numerous health questions on their application.
Companies that offer guaranteed life insurance or guaranteed acceptance life insurance never require a medical exam and there are no medical questions on the application.
Here are actual rates for a $15,000 Guaranteed Issue Life Insurance policy for a Male and Female who are unable to medically qualify for traditional life insurance:
|Age of Applicant||Male||Female|
These are actual rates for the ages listed. To find an accurate rate for your actual age, click the insurance rate button below.
How does the Waiting Period Work?
As we mentioned earlier, guaranteed life insurance policies will have a waiting period of generally 2 years. I the policyholder dies from natural causes the beneficiary would not receive the death benefit but rather a refund of all premiums paid plus an additional 10%.
Is Guaranteed Life Insurance and Final Expense Insurance the Same?
Just like Final Expense Life Insurance, Guaranteed Life Insurance is a product designed for individuals aged 50 to 80 who cannot medically qualify for traditional life insurance. Generally, the primary purpose to purchase this type of coverage is to cover an individual’s final expense when the pass away.
By doing so, the policyholder will have peace of mind knowing that their final expenses like funeral and burial expenses will not be left for surviving loved ones and close friends to pay out of pocket.
Insurance companies that offer final expense insurance (and there are many of them), almost always use whole life insurance since the coverage will last for a lifetime, the payments remain level, and the policy will build cash value over time. Final expense is generally available for applicants between the ages of 50 and 85 and provides a death benefit between $5,000 and $35,000.
Once again, different companies have different products so be sure and check with your independent agent who will generally represent most of the companies that offer guaranteed issue life insurance.
Additionally. guaranteed life insurance and final expense life insurance generally come in three types of policies that differ in how the death benefit is paid to the beneficiary:
- Level Benefit – A level benefit policy is generally offered to applicants who medically qualify for a Final Expense policy because any health issues they have falls within the liberalized medical guidelines of the insurance company. This means that the insurance company will pay the full death benefit if the insured dies from natural or accidental causes from day one. Certainly, this is the best of the three options available because the rates are lower and there is no modification placed on the death benefit.
- Graded Death Benefit – A final expense policy that contains a graded death benefit generally will generally pay a percentage of the full death benefit over the first two or three years and then the full death benefit thereafter. The graded benefit typically will only come into play if the insured dies from natural causes. A typical example would be if the insured dies during the first year, the beneficiary would receive 25% of the death benefit, if death occurs during the second year, the beneficiary would receive 50% of the death benefit, death during the 3rd year would be paid out at 75%, and then 100% thereafter
- Guaranteed Issue – Insurers that offer guaranteed issue (guaranteed acceptance) policies typically place a two or three-year waiting period for death from natural causes. If the insured dies within the waiting period, the beneficiary will generally receive the sum of all premiums paid into the policy plus an additional 10%. After the waiting period expires, the beneficiary is entitled to the full death benefit. However, death from accidental causes is not subject to the waiting period and is paid 100% from the first day of coverage.
How are the Premiums Impacted by each type of Final Expense Policy?
With most insurance companies that offer final expense whole life insurance, Level Benefit will be the cheapest, then Graded Benefit will cost a little more, and then Guaranteed issue will be the most expensive.
Here is an example of insurance quotes for a $10,000 policy for a male non-smoker for each type of policy:
|Age of Applicant||Level Benefit||Graded Benefit||Guaranteed Issue|
Who should consider Guranteed Life Insurance?
Although guaranteed life insurance is recommended as a last resort, there is a segment of the population, especially seniors, who will not medically qualify for traditional life insurance.
People who are terminally ill, undergoing long-term care or kidney dialysis, need an organ transplant, are on hospice, living with a chronic condition, living with AIDS or HIV and/or Alzheimer’s or dementia typically have a harder time finding traditional medically underwritten life insurance.
These folks, for whatever reason, may not have any life insurance and are generally concerned that upon their death, the cost of their funeral and burial will be passed on to their friends and loved ones.
In today’s economy, a traditional funeral and burial service will typically cost between $8,000 and $12,000. If you are concerned about leaving this debt for your loved ones or friends then you should certainly consider purchasing guaranteed life insurance today!