What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance, also known as no-questions life insurance, is a permanent insurance policy without medical underwriting. No medical exam is required to qualify for coverage. However, these policies come with higher premiums and a smaller death benefit.

Understanding Guaranteed Issue Life Insurance

Undergoing a medical exam is a standard part of applying for life insurance. However, some policies let you bypass this step.

Guaranteed issue policies allow you to apply for permanent life insurance without answering questions about your health.

This can be beneficial if you’re older and have severe preexisting conditions that prevent you from qualifying for other types of life insurance.

Key Features of Guaranteed Issue Life Insurance
  • Lifelong coverage
  • Fixed premiums
  • Graded death benefit
  • Small death benefit
  • No medical exam or health questions

Guaranteed issue policies are almost always a type of whole life insurance, which offers permanent coverage. This ensures a lifelong safety net so long as premiums are paid.

Because no medical exam is required, premiums for guaranteed issue policies are often much higher than premiums for other types of permanent coverage.

As with all life insurance, you can also expect higher premiums if you’re older. Guaranteed issue policies may also be referred to as no-medical-exam life insurance and are generally available only to people between ages 40 and 85.

These products also feature small death benefit payouts averaging between $1,000 and $25,000. In contrast, many other life insurance policies offer death benefits of $100,000 or more.

It’s important to note that not all insurers offer guaranteed issue policies, and availability can vary by state.

Graded Death Benefits

Guaranteed issue life insurance features a waiting period, also known as a graded death benefit.

Your beneficiaries will not receive the full payout if you die of natural causes during the first one to three years your policy is in place.

Instead, if you pass away during this waiting period, your beneficiaries will receive the premiums you’ve already paid to the insurance company, plus some interest.

This helps insurers hedge against risk. When you bypass the medical underwriting process, life insurance companies are taking on a major risk by offering you coverage. A graded death benefit system protects these companies from potential losses.

There is one exception to the graded death benefit rule: If you die of accidental causes during the waiting period, the death benefit is paid out in full.

Who Can Benefit from a Guaranteed Issue Policy?

Guaranteed issue life insurance is often considered a last resort for seniors who cannot qualify for other types of coverage due to poor health.

Some health conditions may exclude you from other policies, including:
  • Terminal illnesses
  • Alzheimer’s disease or dementia
  • Cancer
  • AIDS or HIV
  • Blood disorders, such as sickle cell anemia
  • Heart conditions
  • Liver and kidney diseases
  • Neurological conditions, such as multiple sclerosis and epilepsy

Guaranteed life insurance makes financial sense if you cannot qualify for anything else and you die two to ten years after purchasing your policy.

If you live longer, you may actually pay more in premiums than the policy is worth.

For example, the average annual cost of a $10,000 guaranteed issue life policy is about $841 a year for a 60-year-old man.

If he lives to age 72, this man will have paid $10,092 for a death benefit of $10,000.

Even if you are in poor health, you may still qualify for better coverage, even if a medical exam is required.

Most experts agree that it’s smart to shop around, compare quotes and explore your options before purchasing guaranteed issue life insurance. You may be able to get more coverage at a better rate.

Pros and Cons

Guaranteed issue life insurance offers a modest safety net for people who are otherwise ineligible for coverage.

However, it has limitations.

Advantages of Guaranteed Issue Life Insurance
No Medical Exam
You will not be required to undergo a medical exam or answer questions about your health to qualify.
Fixed Premiums
Even though premiums trend higher, they will not increase over time or if your health worsens.
Money to Cover Final Expenses
The death benefit may be small, but the payout might suffice if you need only to provide money for funeral costs or final expenses.

Make sure to weigh your options before purchasing guaranteed issue life insurance. An independent insurance agent or financial advisor can help you shop around with multiple companies.

Drawbacks of Guaranteed Issue Life Insurance
High Rates
These policies feature some of the highest life insurance rates out there, according to Forbes. And because the death benefit is small, the overall value is low.
Age Restrictions
Many insurers offer no-exam life insurance only to people of a certain age, usually 40 to 85 or 50 to 80. Your application may be denied if you fall outside this range.
Waiting Period
A graded death benefit means your beneficiaries will receive very little money if you pass away one to three years after purchasing your policy.
Last Modified: October 16, 2020

5 Cited Research Articles

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  4. Huddleston, C. (2020, April 17). How No-Exam Life Insurance Works. Retrieved from https://www.forbes.com/advisor/life-insurance/no-exam/
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