Guaranteed life insurance: how does it work?

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It’s easier to buy life insurance when you’re young and healthy, because the best rates and policy conditions are granted to those who pose the least risk to an insurer. But not everyone has enough life insurance when they’re young, and even some young people have chronic health conditions that make it difficult to get an endorsement. If you find it difficult to get life insurance because of your age or medical condition, guaranteed life insurance might be your best option.

With guaranteed life insurance, you normally cannot be turned down, which is ideal for people who have existing health conditions or simply prefer not to have a medical exam. It can also be a good choice for consumers who buy term life insurance and outlive their policies, finding themselves in a position where they will need more coverage later in life. But there are exceptions, so let’s take a look at the pros and cons of this type of life insurance coverage.

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Guaranteed acceptance life insurance works exactly as it says: you are guaranteed to receive a policy regardless of your health condition and even your age (up to certain limits). There’s a chance you can even lock in a policy with premiums that never increase.

The good news about guaranteed acceptance life insurance is that you don’t have to take or pass a medical exam. This type of cover is not just for young people, as you may be able to purchase a policy until you are 70 or 80, and the cover is designed to last a lifetime.

However, guaranteed acceptance life insurance also has some disadvantages. Since the insurance company is taking on a greater risk by issuing a no-medical policy, you may have to settle for less robust coverage with higher premiums than you might otherwise pay. Costs vary depending on the type of policy you choose and whether you buy coverage that creates cash value.

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Some life insurance companies specifically target seniors for guaranteed acceptance life insurance, and it’s easy to see why. After all, older people are older and have a higher level of risk. They are also more likely to have health issues that make purchasing other types of life insurance expensive.

You will typically find that guaranteed acceptance life insurance policies for seniors offer a small death benefit and charge relatively high premiums. For example, AIG offers guaranteed life insurance coverage with death benefit amounts ranging from $5,000 to $25,000 for people between the ages of 50 and 80. Although there is no medical exam, the policies are expensive – with AIG, a 71-year-old woman could get $25,000 in guaranteed acceptance life insurance for about $220 a month.

Some companies offer final expense life insurance (also called funeral insurance), which is another type of guaranteed-issue coverage for seniors. With funeral insurance, the death benefit is usually just enough to cover funeral costs and final expenses, but seniors can get a policy without a medical exam.

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Another type of guaranteed life insurance is guaranteed whole life insurance. Again, coverage is guaranteed with this type of insurance, meaning you can be approved without a medical exam. But as a result, the death benefit of guaranteed whole life insurance tends to be low and premiums can be higher.

Guaranteed whole life insurance is permanent, so the death benefit lasts your lifetime as long as you continue to pay premiums. You may also be able to lock in a specific rate and get a death benefit that never decreases. Generally, due to the design of guaranteed whole life insurance, this type of coverage is for people over the age of 50.

As with all policies, if you’re considering buying whole life insurance with guaranteed approval, it may pay to shop around and compare prices. With AAA, for example, we found that a 71-year-old woman could get guaranteed $25,000 whole life insurance coverage for $175 a month, while Gerber Life Insurance charges a premium of over $205 a month. months for a policy with the same death benefit. .

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Unlike the other types of guaranteed life insurance we’ve covered so far, guaranteed universal life insurance doesn’t offer guaranteed endorsement, which means you’ll likely need to pass a medical exam to qualify for this coverage. .

Instead, the “guaranteed” part of guaranteed universal life insurance refers to the death benefit, which is guaranteed for your lifetime as long as you continue to pay the premiums. However, guaranteed universal life insurance does not have all the benefits of whole life insurance, so it is often seen as an inexpensive alternative. For example, a guaranteed universal life policy does not create cash value.

Some guaranteed universal life policies allow you to opt for a death benefit that decreases over time as your expenses go down and your needs change. Also, with some guaranteed universal policies, you may be able to surrender your policy at certain times and get your premiums back, although this option depends on the insurer.

Like other types of life insurance, guaranteed life insurance comes in many forms. Therefore, you will want to do some research to find out which type of guaranteed life insurance will benefit you the most. If you can pass a medical exam, you may also want to consider the standard term and whole life insurance policies first, as both options are likely to be cheaper than guaranteed life insurance.

Before you buy a policy, you’ll also want to dig deep to calculate how much coverage you really need. Do you need coverage for burial expenses only? Or do you want life insurance with a death benefit large enough to provide your family with some extra money for expenses once you’re gone?

Most types of guaranteed life insurance will approve you regardless of your health, but your death benefit may be small compared to the premiums you’ll be asked to pay. Either way, it pays to shop around for a guaranteed life insurance policy because some life insurance companies charge a lot more for the same amount of coverage with similar benefits. But you’ll never know unless you check.

Learn more about guaranteed life insurance at Policygenius.

Read CNN Underscored’s guide to all the different types of life insurance.

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