You may have seen the commercials or gotten information in the mail about “no exam” or guaranteed issue life insurance and wondered if it was true. Can you really get life insurance with no health questions and an easy application process?
The short answer is: Yes.
There are two types of life insurance that allow you to apply without completing a medical exam. But, you will want to read on to learn more about what “no exam” life insurance really is to help you decide if it’s the right choice for you.
Chances are if you are looking for an easy way to get life insurance, there might be a better option out there for you.
When referring to Guaranteed Life Insurance, you may have heard it called various different names, including:
- Guaranteed Issue Life Insurance
- Guaranteed Acceptance Life Insurance
- Guaranteed Payout Life Insurance
- Guaranteed Acceptance Final Expense Insurance
- GI Life Insurance
We will refer to guaranteed life insurance under the various names throughout this article, so don’t get confused because all the different versions mean exactly the same type of life insurance policy.
Read on to learn more about what guaranteed acceptance life insurance is, what it isn’t, how to get it, and things to consider before purchasing.
Denied for Traditional Life Insurance?
If you have received the dreaded denial on a life insurance application, you are not alone. The most common reasons people are denied for traditional life insurance are:
- Hazardous Occupation
- Travel plans
- past, present, and future travel to certain countries
- Driving Record
- Income limitations
- death benefit too high compared to income/net worth
- Cancer history
- Previous denial of a life insurance application
- When you apply for life insurance, the approval or denial and the reason for denial are entered into a databased called the Medical Information Bureau (MIB)
- Drug use
- High-risk activities
- skydiving, racing, base jumping, etc.
- Elevated levels
- Blood sugar/glucose
- Cholesterol, Lipids, Triglycerides
People usually learn about guaranteed acceptance life insurance if they were denied for a traditional life insurance policy. Or, they discussed their health issues with an agent who advised them that they likely won’t qualify for a standard policy, so they offer them simplified issue life insurance or a guaranteed issue option.
Guaranteed Issue Life Insurance vs. Simplified Issue Life Insurance
Guaranteed issue life insurance and simplified issue life insurance are sometimes confused for each other. They are both referred to as “no exam” life insurance because neither type of policy requires a medical exam to get the coverage.
However, the simplified issue life insurance policy does have some health questions that will need to be answered. Guaranteed payout life insurance requires no health questions.
What is Guaranteed Issue Life Insurance?
Guaranteed Issue Life Insurance is an insurance policy that is guaranteed to be approved and issued on the insured. There are no health questions on the application, and the premium is based off just a few criteria:
- State where insured lives
That’s it! Provide those three items and you can easily get a quote for a guaranteed acceptance life insurance policy. If you can afford the premium and want to proceed, pay the first premium to bind the policy and you will have a copy in the mail in a matter of weeks.
As long as the premium is paid each time it is due, then the policy will continue to stay in force and a death benefit will be provided to the beneficiary upon the insured’s death.
While this may sound too good to be true for some people, it’s not. It may sound like a very attractive option, but this type of life insurance is typically the last resort for most people. This is because it is the most expensive type of life insurance you can get with the lowest amount of death benefit offered. There are also limitations to the guaranteed acceptance life insurance policy.
Limitations of Guaranteed Issue Life Insurance
There are a few limitations that you need to be aware of for a guaranteed acceptance life insurance policy. Not everyone is eligible for this type of life insurance.
One of the questions that will be asked when quoting GI life insurance is how old the insured is. Typically, the youngest person requesting this type of policy is at least 18.
However, there is a cap on the oldest age you can be to apply and that is age 100. This is simply because anyone who has lived to be 100 years old has the highest mortality risk and that is something too great for any life insurance company to take on.
Some companies cap their maximum age even lower, with the most common caps being anywhere from age 75 to 90.
Graded Death Benefit
Most guaranteed payout life insurance policies have a waiting period in the policy that is referred to as a graded death benefit.
When the policy has this type of clause, it means that the beneficiary will only get part of the death benefit. If the insured person dies within two years of the date the policy was issued, the beneficiary will only get the equivalent of the premiums paid into the policy instead of the entire death benefit amount.
For example, say you have a guaranteed payout life insurance policy with a death benefit of $10,000 that costs $100 a month. If you die 14 months after the policy is issued, your beneficiary will only get $1,400. But, if you die 26 months after the policy is issued, your beneficiary will get the full $10,000 death benefit.
Each life insurance company is different, so you want to make sure you read about the waiting period and what the conditions are.
Low Death Benefit Amount
You can get up to a $1 million traditional life insurance policy, and some companies will offer even more coverage on a single policy. But most GI life insurance policies have a maximum death benefit you can get, regardless of income and need. Most companies will only allow up to a $25,000 death benefit amount, but there are a few companies that offer up to $50,000 – if you can afford it.
When you are getting quotes for life insurance, ask what the maximum death benefit amount is and the cost. If you need more than what the company is offering, let your agent know so they can get you a quote for the highest death benefit allowed.
The Cost Might Exceed the Death Benefit
We already mentioned that guaranteed acceptance life insurance is more costly than any other life insurance policy. If you have to go this route, make sure that you do some research before you purchase to make sure it makes financial sense.
First, the way you make your premium payment can make a difference. Typically, you have the choice to pay your premiums monthly, quarterly, semi-annually, or annually. What you may not know is, most insurance companies will tack on administrative fees if you decide to pay any way other than annually. Check the math when you get your quote to see if you save by paying annually.
Then, calculate the amount you will pay over the life of the policy and compare it to the death benefit amount. See how much you will pay into the policy over the next 10, 20, or 30 years to see if it makes financial sense to keep.
Ability to Have More than One Policy
Because the death benefit amount is so low on guaranteed issue life insurance, you can have more than one life insurance policy in place. This is great news for someone who can only qualify for GI life insurance but needs more than the highest death benefit amount.
However, just make sure you can easily afford to pay the premiums each time they are due. And as outlined above, do the work to make sure that the policy is cost-effective and makes sense before you apply and get approved.
Guaranteed Issue Life Insurance vs. Guaranteed Premium/Guaranteed Level Life Insurance
We want to make sure you know the difference between Guaranteed Issue Life Insurance vs. Guaranteed Premium Life Insurance or Guaranteed Level Premium Life Insurance. The names are very similar but mean very different things, so be sure you check the type of policy carefully when getting quotes.
Guaranteed Premium Life Insurance
- Term Life Insurance
- Subject to underwriting
- Premium stays level for the life of the policy
- Level death benefit
Guaranteed Issue Life Insurance
- Whole Life Insurance
- Guaranteed to be approved
- Premium stays level for the life of the policy
- Level death benefit (after grading)
Check with an Agent before You Apply
If you haven’t been denied for a traditional life insurance policy but think you won’t qualify, speak with one of our licensed agents. They can work with you to try to find a cost-effective life insurance policy that will meet your needs.
We work with some of the best life insurance companies that all have different underwriting criteria, so it’s always best to speak with an agent to get a quote. We want to make sure you can find a policy with the death benefit amount you need at a price you can afford.