Cost & Coverage
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Worried you won’t qualify for a traditional life insurance policy because of your age and health? Guaranteed issue life insurance can give you peace of mind for end-of-life costs without the hassle.
Guaranteed issue life insurance, also called burial insurance or guaranteed life insurance, is a kind of whole life insurance for seniors or those who can’t qualify for a traditional life insurance policy. Unlike traditional life insurance, guaranteed issue life insurance involves no health questions. If you want the security of knowing you can pay for end-of-life expenses such as funeral costs, as well as cover any outstanding debts so they don’t get passed on to your family, guaranteed life insurance is worth considering.
Premiums for guaranteed life insurance policies are usually pretty expensive – upwards of $200 per month for some consumers – and death benefits are pretty low – usually topping off at around $25,000. Policies last for as long as you pay for them; there is no term limit or expiration date. Usually, you must be a policyholder for two years before you can collect the benefit.
In case you’re not familiar with life insurance terms, let’s define some of them. When you buy a life insurance policy, you pay monthly or annual premiums in order to keep the policy in force. If you die while your policy is in force, the insurer will pay out a death benefit to the beneficiary of your choice. A beneficiary can be anyone – usually a family member – and death benefits come in all sizes.
Simplified whole life insurance:
Guaranteed life insurance:
Unlike a traditional whole life insurance policy, guaranteed life insurance doesn’t have a “cash value,” or savings component. You simply make monthly payments in exchange for a fixed amount to be paid out upon your passing.
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Since guaranteed life insurance is highly accommodating and covers high-risk people, it’s more expensive than other forms of final expense life insurance including simplified whole life. If you can qualify for a simplified whole life policy, you’re likely to get a higher benefit amount at a lower monthly premium than you will with guaranteed life insurance.
Guaranteed issue life insurance is one of the many products offered by well-known and trusted insurance companies. Sometimes, but not always, if a company offers term life insurance, they also offer guaranteed issue life insurance. You may be aware of guaranteed issue life insurance products offered by companies like Colonial Penn and Gerber Life, who frequently advertise their guaranteed issue life insurance products on daytime television. If you’ve seen Alex Trebek try to sell you life insurance, you’ve seen one of these ads.
Unlike other life insurance products, you usually purchase a guaranteed issue life insurance policy directly from the company offering it. Since quotes are based on only three variables – age, sex, and state of residency – many companies offer their own online quoting engines. Independent online quoting engines may also offer quotes for guaranteed issue life insurance products.
In the case of companies like State Farm, which has its own agents, you can also go into one of their offices to request more information and get a quote.
Experts usually describe guaranteed issue life insurance as a "last resort" for those who otherwise wouldn’t qualify for term life insurance. That may sound like a negative thing – and for those who can qualify for term life insurance, it probably is. But for those who need some form of life insurance and have serious health issues, guaranteed issue life insurance is a good option to consider.
The best part about guaranteed issue life insurance is that, if you can afford the premiums, the insurance company will accept your application. Plus, there’s no need for a medical exam, which means your policy goes in force a lot quicker than term life insurance. Unfortunately for some shoppers, the list of benefits mostly ends there.
Guaranteed life insurance used to be called "burial insurance" because it was typically used by the elderly to pay for funeral costs. If you are elderly or otherwise very ill and have little to no savings that could be used for a funeral, guaranteed life insurance could provide you with enough money to pay for a funeral.
There’s a lot bad about guaranteed issue life insurance. It’s important to note that these are reasons that guaranteed issue life insurance is bad for all shoppers, not just those who would otherwise qualify for other life insurance products. Even if guaranteed life insurance is your only option, it’s worth seriously considering the cons.
First off, guaranteed issue life insurance is expensive. It’s probably the most expensive life insurance product on the market per dollar of coverage. When we looked up quotes from a popular guaranteed life insurance provider, we found that in order to get a death benefit that would cover the average funeral, you’d have to pay upwards of $200 every month. Considering that funeral insurance, a type of insurance product that specifically covers funerals, can usually be bought for much cheaper, guaranteed issue may not be the best choice for those looking to cover end-of-life expenses.
You also don’t get much for your premium. Guaranteed issue life insurance death benefits are typically very small. On the high end, policies can provide death benefits of $25,000. However, it’s more likely that a policy would offer somewhere between $1,000 and $10,000.
Guaranteed life insurance, like other types of life insurance, works by offering coverage in "units." With other types of life insurance, like term, the unit price will change depending on variables like age, location, and medical conditions. The amount of coverage, however, will always stay the same.
With most guaranteed life insurance, the unit price is always a fixed amount, such as $9.95 at Colonial Penn. Unlike most other life insurance products, the coverage amount you get is what changes. Coverage is usually decided according to three variables: age, sex, and location. When we ran quotes at Colonial Penn, we found that a 60-year-old male from California could get a death benefit of $1,214 for $9.95 per month. A 75-year-old male, on the other hand, could only get a death benefit of $560. You can buy multiple units of coverage in order to get a larger death benefit.
Methodology: Sample quotes based on policies offered by Policygenius in 2020.
Guaranteed issue life insurance also usually features something called graded benefits. Graded benefits means that if you die within a certain period of time, typically the first two years of your policy, you do not get the full death benefit. Instead, you merely get your premiums refunded. If you’re seriously ill and looking for a quick way to get life insurance, graded benefits can stop you from getting the full benefit that you think you’re buying.
There are some knockout questions that guaranteed life insurance will ask you. They’re called "knockout" questions because if you answer yes to any of them, you are knocked out of eligibility. Knockout questions are the only cases where you can be denied coverage. Knockout questions usually ask if you have AIDS or HIV, currently reside in a nursing home, or have been diagnosed as terminally ill. However, like all life insurance products, no matter what you’re diagnosed with or where you move after you buy the policy, you can keep your coverage as long as you keep paying your premiums.
Guaranteed issue life insurance is usually described by life insurance agents as a "last resort." If you can’t qualify for the insurance alternatives we’ve listed below, it often is one of your only choices.
Some shoppers with serious illnesses are discouraged too easily from shopping for a traditional term life insurance policy. Just because you’re rejected from one term life insurance policy does not mean that you do not qualify for term life coverage from another company. Each company has their own underwriting guidelines and view serious illnesses very differently from each other. An independent life insurance agent will know which companies view your illness favorably and help you find the right term life insurance coverage.
If you are under the age of 65, there is a good chance that you can qualify for some sort of term life insurance policy. While it may be expensive, you’ll get a higher death benefit and better terms than if you purchased a guaranteed issue life insurance policy. If you’re over the age of 65, your chances of getting a term life insurance policy are much smaller.
There is a life insurance product that exists between term life insurance and guaranteed issue life insurance. It’s called simplified whole life insurance, also known as simplified issue life insurance, and it’s similar to guaranteed issue life insurance in many ways. They’re more expensive than term life insurance policies and they don’t offer as much coverage. (However, they can be competitive for otherwise healthy smokers). But you don’t need to take a medical exam, so they’re faster to issue than term life policies.
Simplified issue life insurance is also less expensive than guaranteed issue life insurance because you have to answer medical questions to qualify. Simplified issue life insurance is also available for higher coverage amounts, usually up to $350,000.
Here’s the catch: if you apply for a simplified issue life insurance policy, the insurer will ask you a handful of medical and lifestyle questions. They will run a database check to verify that information and see what prescriptions you've had filled and what your driving history is like. They will do a check with the Medical Information Bureau (MIB) to see if you’ve applied to any other life insurance companies. If you have, they will look at the results of that application.
Why does this matter? If you’ve recently had a term life insurance application declined, that will signify that you're a high life insurance risk and will probably render you ineligible for simplified issue life insurance.
If you don’t qualify for either term life insurance or simplified issue life insurance, guaranteed issue life insurance does not have to be your last resort. There are other options for paying end-of-life expenses.
There is a special type of funeral insurance that is primarily sold by funeral homes or funeral directors. Typically, the funeral director is named as the beneficiary. The death benefit usually covers specific services that you pick out in advance with the funeral director. Because you’re buying this insurance in advance, you can often lock in prices for services at their current rate. If the price increases before your death, your estate or family will not have to pay the difference.
Your other option is pre-need life insurance with a funeral home. You still pick out the services you want ahead of time with your funeral director, but instead of buying a life insurance policy, your monthly payment goes directly towards paying for your future funeral. If you die before you’ve paid for the services in full, your family or estate will be expected to pay the difference.
You should only look at guaranteed issue life insurance if you have exhausted your other life insurance options, especially if you are under the age of 65. After that, guaranteed issue life insurance may be worth it if you are healthy enough to survive past the graded benefits period (typically two years).
If you’re looking for a product that would help your family pay for your final expenses, you may be better off with alternative insurance products or pre-paying your funeral expenses. If you want to leave your next of kin a small inheritance or let them make decisions about your funeral service, a guaranteed issue life insurance policy may be a better choice.
When you’re shopping for life insurance, talk to a licensed and independent agent or broker who can help you analyze your full array of options from multiple insurance companies.
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