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Guarantee-Issue Whole Life Policies – What are they? How do they work? Who are they for?

By September 9, 2020 September 14th, 2020 No Comments

These policies are designed for people that cannot typically qualify for traditionally underwritten life insurance policies. Traditional life insurance policies usually require a medical exam and the insurance company reviewing your medical records. Guaranteed-issue policies are small insurance policies (generally $25k or less)  that have no medical requirements. It is kind of like going to the store and purchasing a can of soda – you just buy it, no questions asked.

A lot of people think that if they are extremely ill or elderly with a complicated health history, they are not able to get insurance. That is not the case. There are policies geared specifically towards this demographic.

However, there are some important things to know before purchasing a guaranteed issue policy:

  1. All of these types of policies have a “graded” death benefit. A graded benefit means that in the first two years of the policy, if you were to die due to natural causes, the death benefit will equal the return of premiums paid plus a specific interest rate such as 10%. If you were to pass away during this time period due to an accident, the whole benefit would be paid out.   Starting in the third year, the full benefit would be paid for any cause of death. Be sure to read your policy for details.
  2. Since this product is designed for people that cannot typically qualify for traditional life insurance, the premiums can often, but not always, be quite expensive, especially depending on your age and the benefit amount you are looking at.

For example, you can purchase a $25,000 policy for a man that is 50 years old with a premium of about $100/month. It would take 21 years of payments to have paid more in premiums than the death benefit. Whereas if you purchase a $25,000 policy for a man that is 75 years old, the monthly premiums are about $350, it would only take about 6 years of payments to have paid the death benefit.  Since the full death benefit isn’t paid until the third year a 75-year-old would have to die between the 3rd and 5th policy years to come out ahead.

Even considering the minor drawbacks, if you have conditions such as: kidney failure, cancer, or any other number of major medical problems, and you want to make sure there is money left behind for your family, this can be a great product.

These kinds of policies are exactly why it is so important to purchase life insurance when you’re young and healthy. As we age and develop health issues it can prevent us from obtaining coverage that our families will need when we pass (or at least obtain them at a reasonable cost).

If you have any questions about guarantee-issue whole life policies or any other types of life insurance policies, call us today at 1-888-972-0024.  Send us an email by clicking below:

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