Guaranteed Issue Life Insurance: Is It Worth It?

Guaranteed issue life insurance, often referred to as no medical exam life insurance, is a permanent life insurance policy with no medical underwriting. Simply put, you’re not required to answer questions about your health or complete a life insurance medical exam to qualify for coverage.

What’s the catch? This type of life insurance typically comes with higher premiums and lower coverage. Benefits are also subject to a waiting period and won’t be paid out if you die of certain causes within the first few years.

That’s not to say these policies are without merit. As the name suggests, your application is guaranteed to be accepted regardless of your medical history. If you’re over a certain age and have health problems, a life insurance policy that guarantees coverage can open the door to an otherwise unobtainable safety net.

Guaranteed issue life insurance, sometimes called guaranteed acceptance life insurance, comes in many different shapes and sizes, with varying age restrictions and death benefits. But there are a few features that apply to almost all guaranteed issue products:

• Premiums stay the same for the length of the policy. Failure to pay your premiums may result in cancellation.

• The death benefit won’t decrease over time. However, withdrawals or loans taken out against the cash value may reduce the death benefit.

• A waiting period is enforced at the start of the policy, typically for two years. If you die of accidental causes during this time, the insurer pays out the full death benefit. However, if you die of natural causes during this time, your beneficiaries receive only a percentage of the premiums already paid into the policy.

• There are no medical exams or health questionnaires. You’ll qualify for coverage regardless of your health.

• Policies are a type of whole life insurance. This means they can last your entire life and build cash value.

Term life insurance policies, which last for a set number of years before expiring, rarely guarantee acceptance.

You may see guaranteed issue life insurance referred to as “no medical exam life insurance,” but the exam is only one part of the medical underwriting process for life insurance. So if a policy skips the exam but asks you to complete a short health questionnaire, it’s not a true guaranteed issue policy.

» MORE: No medical exam life insurance explained

Although your medical history isn’t used to determine eligibility, your age is. In general, guaranteed issue products are available to applicants from 45 to 85 years old. Age restrictions vary among insurers and can be more narrow, with some accepting applicants from 50 to 80 years old only.

Your age can also impact the cost of your insurance premiums. As with all life insurance policies, rates are influenced by risk. The older you get, the riskier you are to insure, resulting in higher premiums.

The good news? Aside from meeting this one qualifying factor, everyone who applies for a guaranteed issue policy is eligible. However, not all insurers offer guaranteed issue products, and even if they do, availability can vary among states.

On average, death benefits for guaranteed issue life insurance policies max out at $25,000. For the most part, these policies are used to cover final expenses, such as funeral costs. In fact, covering burial expenses is one of the top reasons why Americans purchase life insurance today.

The median cost of a funeral is over $7,848, according to 2021 data from the National Funeral Directors Association. The cost will be different for everyone, so defining your priorities and setting a budget can help you calculate coverage amounts.

» MORE: How much life insurance do I need?

For the price you pay, guaranteed issue policies don’t offer much coverage. For example, a 60-year-old woman can buy a $25,000 guaranteed issue whole life policy for $1,630 a year. But if she’s in excellent health, for roughly the same annual premium ($1,673) she can buy a $500,000 20-year term life policy. While the prices are similar, the term life policy offers 20 times the coverage.

» MORE: Average life insurance rates

Guaranteed issue life insurance annual rates for 50-year-olds

Guaranteed issue life insurance annual rates for 60-year-olds

Guaranteed issue life insurance annual rates for 70-year-olds

If your age or health prevents you from finding a competitively priced policy with medical underwriting, you may want to consider this type of insurance. You can get a small amount of coverage with no questions asked.

But don’t assume you can’t get a term or whole life insurance policy with medical underwriting. You can often buy life insurance with a pre-existing condition, and it may be cheaper than a guaranteed issue policy. Shop around, compare life insurance quotes and see what coverage you qualify for before purchasing a guaranteed issue life insurance policy.

If you just want to avoid the exam but don’t mind answering a few questions about your health, a simplified issue policy might be a better option. Providing any information about your health — no matter how minor — may help you qualify for a cheaper policy with larger death benefits than a guaranteed issue policy.

» MORE: A guide to buying life insurance for seniors

Although small, the death benefit can be used for any purpose. This makes it a flexible solution for anyone looking to leave their life insurance beneficiaries a lump sum. Here are some common scenarios that might call for a guaranteed issue life insurance policy:

• You want to help your beneficiaries cover final expenses, such as burial costs.

• Your term life insurance has lapsed and you still need coverage, but your current health or medical history prevents you from purchasing a standard policy.

• You want to purchase life insurance quickly, without waiting for medical exams or questionnaires to be verified, and are willing to pay more for it.

The following health conditions are generally considered high risk for standard life insurance policies with medical underwriting. While you may be able to get insurance, these conditions can increase the cost and restrict the type and amount of coverage available to you.

• Autoimmune conditions, such as lupus or rheumatoid arthritis.

• Blood disorders, such as sickle cell anemia.

• Cancers, such as breast cancer.

• Diabetes.

• Heart conditions, including transplants.

• HIV/AIDS.

• Liver and kidney diseases.

• Mental health conditions, such as PTSD and schizophrenia.

• Neurological conditions, such as multiple sclerosis and epilepsy.

• Respiratory conditions, such as emphysema or asthma.

» MORE: Buying life insurance after cancer

Guaranteed issue life insurance typically comes with a "graded death benefit," often referred to as a waiting period, which spans the first few years of the policy.

In general, if you die of natural causes within this time frame, the benefit isn't paid out. Instead, your beneficiaries receive a percentage of what you’ve already put into the policy, such as 110% of your paid premiums.

Here comes the loophole: If you die of accidental causes during the waiting period, such as a car accident, the benefit is paid in full.

After the waiting period ends, the benefit is paid out regardless of the cause of death.

In short, during the waiting period you’re not covered for natural deaths nor, if your policy includes “living benefits,” the costs associated with chronic or terminal illnesses.

Without collecting information on your health, insurers don’t know if an underlying medical condition will result in a claim as soon as you purchase the policy. The waiting period is imposed to help balance this risk and ranges from one to three years, depending on the policy. Waiting periods, premium payouts and accidental death definitions vary among companies.

Insurance companies aren't the only ones calculating risks; after all, you’re the one purchasing the policy. Your budget, long-term priorities and expected costs play an important role in deciding which type of life insurance to buy.

Policies that guarantee coverage no matter what sound enticing, but the overall costs might outweigh the benefits. Here are a few pros and cons to help you balance your priorities and better understand the risks.

Simplified issue is a type of permanent life insurance that lets you skip the exam by answering a few questions about your health.

Accelerated underwriting relies on big data to calculate risk and eligibility. Insurers use information such as your age, gender or smoking habits to determine life expectancy. As a result, some applicants can avoid the exam and still qualify for coverage.

Group life insurance policies obtained through employers don’t typically include an exam. Medical questionnaires may be required and certain health conditions might not be covered. They typically offer higher benefits than standard guaranteed issue products. What’s more, eligible applicants can convert their group life insurance policies to individual plans without re-examination.

Accidental death and dismemberment policies don’t typically require an exam or health questionnaire. However, accidental death and dismemberment policies cover eligible accidents only rather than natural deaths.