The main point of this article is to help shed some light on the differences between simplified issue and guaranteed issue life insurance. Both life insurance policy types provide insurance without an in-home visit from a paramedical examiner. However, there are some distinct differences that you need to be aware of when making the decision between the two.
With life insurance, there are numerous different choices that one must make. For example, should you be going for term life insurance or a more permanent life insurance option? If you go for the former, you then need to decide how long you want the policy to cover and this is before you even consider any riders you want for the policy. However, there is perhaps one decision that will go on to affect any others you make – guaranteed, simplified, or regular?
Life Insurance – Guaranteed Issue v Simplified Issue
Guaranteed Issue Life Insurance
As the name suggests, guaranteed issue life insurance is a type of policy that is approved regardless of your existing health condition. Why? Because there are no medical questions nor is there a medical exam. As long as the policy is available in your state, you pay the premiums and you qualify for the age brackets predetermined by the insurance carrier, the company is guaranteed to offer you a policy. For those that need to avoid all medical checks, this is a huge benefit.
Who should consider guaranteed issue life insurance?
Anyone who has a pre-existing medical condition that makes it impossible to qualify for ordinary life insurance should consider a guaranteed issue policy. Further, consider this policy type when looking for burial whole life insurance for seniors since it usually can be written for individuals up to age 85.
Also, if you are wanting final expense or burial insurance, this type of policy is generally the best option.
How easy is it to get?
Guaranteed issue is the easiest life insurance to get because there is are no medical exams, no health questions, and no background checks.
Are there any requirements to qualifying for a guaranteed issue policy?
The only requirements are that you fit within the companies age brackets, pay the premiums, and reside in a state that the product is sold in. Generally the ages on guaranteed issue life insurance are between age 50-80 although some companies will go as low as age 45 and as high as age 85.
Great, sign me up…but what’s the catch?
There are a few drawbacks that you need to be aware of if you are considering guaranteed issue life insurance on yourself or a parent or grandparent.
First, the overall cost per unit of life insurance with this type of policy is higher than with ordinary or simplified issue policies. The reason you pay a higher premium per unit of insurance is because there is no security for the insurance company. Seeing as though they don’t know anything about your health, they will be charging a higher amount just to cover their own backs.
Second, guaranteed issue policies have what we call ‘graded benefits’ which means that there will be an amount of time before the death benefit becomes ‘active’. For example, an insurance company may offer a two year graded death benefit (some extend it to three years), which means that, if the insured were to die before the two-year mark has been reached, the policy will pay out only the premiums paid, plus interest. The interest is typically 10% but it depends on the carrier and policy.
Essentially, this is to cover the insurance companies butt once again and to ensure that a terminally ill individual doesn’t receive coverage on their death bed and then the company has to pay out just weeks or days after putting the policy in force.
So to summarize…
Guaranteed Issue Life Insurance Pros and Cons
- Perhaps above all else, you are guaranteed life insurance, which can be incredibly useful if you have previously been rejected by other companies.
- After this, you benefit from not having to answer any medical questions or participate in a medical exam.
- Perfect for covering final expense and burial expenses
- Smaller face amounts ranging from $1,000 to $25,000
- More expensive cost per unit of life insurance than other policy types
- Graded death benefit requires the policy be in force for 2 years if death is due to natural causes
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Simplified Issue Life Insurance
For the second type of no exam insurance, we have ‘simplified issue’ and this is slightly different. Although it isn’t guaranteed like the first option, it is a simplified version of regular insurance which means that some medical questions will be asked. If your answers are deemed acceptable within the underwriting guidelines of the insurance company your coverage will be approved.
Common Questions – Ultimately, the main aim for the company is to gain an overview of your health as well as any conditions that may have existed within your family in the past. Therefore, when applying for simplified issue life insurance you can expect the following questions:
- Do you smoke?
- Have you been diagnosed with a terminal illness?
- Have you ever been diagnosed with HIV or even AIDS?
- Where do you currently reside? If at home, do you receive around-the-clock care for any illnesses?
- Have you had a history of any illness or disease?
- Has there been a history of a particular illness or disease in your family?
With these questions, people often say that a ‘Yes’ to any of them means an automatic rejection but this isn’t necessarily the case. For example, you may still be accepted as a smoker but you will see an increase in the price of premiums. With this being said, guaranteed issue life insurance may be required if you answered ‘Yes’ to more than two of the questions above.
If the answers are largely negative, you are likely to be offered a policy. Of course, you must keep in mind that these are generic questions and different companies will have their own list of questions that they like to ask. With simplified issue life insurance you can expect to be asked similar questions.
Also, for the lowest priced simplified issue policies you may also have to agree to a back ground check pertaining to your medical history, prescription medications, motor vehicle records and criminal background.
Simplified Issue Life Insurance Pros and Cons
- Once again, this is a no exam insurance policy. Often, having an exam for insurance is more about the timing than anything else because it can take weeks to have the results come through but, this way, you don’t have to worry about going through the process of making an appointment.
- Compared to guaranteed issue life insurance, the cost will be less expensive because the insurance company has a little more information regarding your mental and health condition.
- There isn’t a graded benefit system involved and the death benefit should be available from the very first day of the policy.
- Overall, the process is faster than the traditional fully underwritten life insurance options.
- Although the premiums will be lower than guaranteed issue insurance, they are still much more expensive than insurance with a medical exam. If you want to add life insurance riders to the policy to add a little more protection, this will increase your premium even more. On this topic, you might find that some riders are restricted or cannot be added to this type of policy at all which is something to bear in mind.
- Because you aren’t willing to complete the steps that the insurer has laid out, your insurance might be limited. As opposed to reaching $1,000,000, you might be limited to a maximum of $500,000 for your coverage.
- Many simplified issue products are capped at age 65.
Simplified Issue Insurance – Detailed Overview – Of the two options above, simplified issue is more common than guaranteed issue because the latter is often a last resort. With this in mind, we are going to take a more detailed look into why a simplified issue might be worth it for you.
Before we go any further, we should point out that simplified issue insurance can be a good choice as long as it is in the right circumstances. If you are just looking to save a bit of time but are in perfectly good health, the medical exam will be worth the effort in the long run because, without it, premiums can be a lot higher.
However, simplified issue can be important if time is of the essence. Even after taking part in the examination, the insurance still might not go through if more information is required so the right circumstances certainly warrant the decision.
Although the examination is generally very basic, some people genuinely do not like the thought of it because they find it a little invasive so this is another consideration. If something is highlighted within the first examination, the doctors will delve further into your family history and this process can add both time and stress into your application process. With simplified issue insurance, you can normally get set up in a matter of days and you can relax knowing that it is there when needed.
Simplified Issue Life Insurance Quotes
Final Considerations – Now, you should be well-placed to make a decision regarding your life insurance but let’s not forget that you will have personal requirements and circumstances that will affect your decisions. For us, all we can do is provide you with advice based on your specific needs, health and lifestyle. But you need to pay attention to your needs as well as the factors that might prevent you from buying one insurance policy over the other.
First, your age will need to play a role because, typically, it is people between 45-85 years of age that go for no exam guaranteed issue life insurance.
When you are slightly younger, health problems might not play as big of a part which is why most tend to go for ordinary life insurance with a medical exam.
However, this will all depend on your health and that is perhaps the biggest consideration of all. If you are ill or have been diagnosed with health issues, it no longer means that you have to forgo life insurance completely. In years gone by, this was the case most of the time but these two options we have provided today give you another route. Regardless of your health, you can have a death benefit for your family to cover all of the necessary costs which can bring great peace of mind.
In the end, the policy that is best for you will depend on many factors. At TermLife2Go we stay on top of the latest trends in the final expense and burial insurance world. We work with the top simplified issue life insurance companies as well as the best guaranteed issue life insurance companies.
If you are curious who will be best for you and your unique needs, give us a call today. We will help guide you to the best policy based on your unique circumstances.