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Simplified Issue vs. Guaranteed Issue Life Insurance

Licensed Life Insurance Agent/Marketing Manager
April 06, 2020

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 a life insurance medical exam. 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?

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 final expense or burial insurance if you are older since it usually can be written for individuals up to age 85.

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Pros and cons of guaranteed issue life insurance

Pro HeadingPros
  • Pro BulletEasy to get
  • Pro BulletHealth not considered
Con Heading Cons
  • Con BulletCost can be higher
  • Con BulletGraded death benefit
  • Con BulletLower coverage amounts

Guaranteed issue is the easiest life insurance to get because there is are no medical exams, no health questions, and no background checks. As long as you far within the required age bracket you can get coverage. Generally, the ages are between 50-80, though some companies will go as low as 45 and as high as age 85.

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.

The overall cost per unit of life insurance with this type of policy is higher than with ordinary or simplified issue policies. Seeing as though they don’t know anything about your health, they will be charging a higher amount just to cover their own backs.

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 amount and exact stipulations will vary by the life insurance company.

Also, because the company knows nothing about your health and lifestyle with these policies, they typically come with a lower coverage amount. The average coverage amount for this type of policy is $25, though you may be able to find a larger amount at certain companies.

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 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:

  1. Do you smoke?
  2. Have you been diagnosed with a terminal illness?
  3. Have you ever been diagnosed with HIV or even AIDS?
  4. Where do you currently reside? If at home, do you receive around-the-clock care for any illnesses?
  5. Have you had a history of any illness or disease?
  6. 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 background check pertaining to your medical history, prescription medications, motor vehicle records and criminal background.

Who should consider simplified issue life insurance?

Anyone who is having a difficult time or can't qualify for a traditional life insurance policy, but who don't have severe health issues. 

Pros and cons of simplified issue life insurance

Pro HeadingPros
  • Pro BulletNo health exam
  • Pro BulletLess expensive than guaranteed issue
  • Pro BulletNo graded benefit
Con Heading Cons
  • Con BulletStill more expensive than traditional
  • Con BulletLower coverage amounts than traditional

The simplified issue policy also allows you to skip the medical exam, though you will need to fill out a health questionnaire so the life insurance company can learn a little more about you. Because the insurance company is getting some information about your health there isn't a graded benefit with this policy. 

While this policy is typically less expensive than a guaranteed issue policy, it can still be much more expensive than a more traditional life insurance policy or a no medical exam policy

As mentioned above with a guaranteed issue policy the insurance amounts can be much lower with a traditional policy. While simplified issue amounts can be much higher than guaranteed issue, they will still likely be much lower than with a traditional life insurance policy. 

Conclusion

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.

Your age will need to play a role in your decision because, typically, it is people between 45-85 years of age that go for 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 doesn't mean that you have to forgo life insurance completely. 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. If you are curious about which policy and which life insurance 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.

Written by
Chelsie Ball
Chelsie is fixated on developing innovative ways to present complex ideas and maneuvering people to the information they need. She has worked in digital marketing for the past eight years and has been a licensed life insurance agent since 2010. When she isn’t looking out for the user, you can find her watching Netflix or desperately trying to find a real hobby.