How many times have you seen a TV commercial or received a letter stating that you can’t be turned down for this life insurance?
“Guaranteed issue” or “guaranteed acceptance” whole life insurance doesn’t require a medical examination or answering medical history questions for approval. In many cases, you must only meet the age requirements, usually between 40 and 85. Premiums are fixed, and coverage doesn’t lapse except in cases of premium delinquency.
Because coverage cannot be denied, guaranteed issue policies are ideally suited for individuals with pre-existing conditions or those who have been declined coverage for other types of life insurance. The limited death benefit can cover some end-of-life expenses, such as funeral costs, medical bills or outstanding debts, ensuring that family members aren’t left with those financial burdens. However, these insurance policies have four significant limitations.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. 'Guaranteed' life insurance comes with higher premiums
While the ads tout low monthly premiums, the policies are actually expensive for the amount of coverage provided — mainly due to the absence of medical underwriting. The insurer assumes more risk and compensates by charging higher premiums.
2. Small death benefits
These policies typically offer minimal death benefits, often ranging between $2,000 and $25,000. This may be sufficient to cover funeral expenses but not significant financial obligations such as mortgage payments or income replacement.
3. Deferral of full death benefit
Beneficiaries usually don’t receive the full death benefit. Instead, they may only receive a return of premiums paid plus interest. Full death benefits typically vest after two or three years following the policy's effective date.
4. No cash value accumulation
With little or no accumulated cash value, you can’t borrow against the policy or build savings over time.
Other options to consider at lower premiums
“Simplified issue” life insurance policies may still require answering some questions about your medical history, but they do not require a comprehensive medical examination. “Guaranteed acceptance term” policies are also available. Be wary, however, of term life insurance policies that may automatically lapse at age 80 and have premiums that may increase in five-year bands.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
Related content
-
Should You Try Tai Chi for Healthy Aging?Part martial art, part meditation, Tai Chi can help you stay strong and fit as you age. This ancient practice offers even more benefits than you may realize.
-
Seven Ways Active Retirees Can Stay Healthy on Any TripPack these tips, along with your suitcase, to help maintain your mental and physical health while traveling.
-
Amex Platinum Just Got More Expensive: $895 Fee and $3,500 in Perks ExplainedAmerican Express raises the Platinum Card’s annual fee to $895 and expands its perks. We break down the changes so you don’t have to.
-
Falling Interest Rates: What They Mean for Homeowners, Savers and InvestorsAs interest rates fall, homeowners may celebrate while savers feel the pinch. Here’s what the change could mean for your money.
-
Refinance Applications Surge as Mortgage Rates TumbleThe window to refinance is reopening as mortgage rates hit their lowest level in nearly a year. Here’s what the market shift means for homeowners.
-
Average Spending by Age for Those 55 and Up: Are You Thrifty?Everybody has their own number for how much they’ll spend in retirement. See if your's is in line with the averages.
-
I’m Not Worried About Saving for Retirement; I’ll Just Work Forever. What Can Go Wrong?Here's why that approach to saving for retirement doesn't always work out.
-
Wages Aren't Keeping Up With Inflation: A Financial Adviser's Tips to Bridge the GapWhile we can't control inflation, there are some simple things each of us can do to help keep our heads above water.
-
New Rules, New Opportunities for Student Loans: An Expert Guide to Preparing for What's NextMajor changes are coming to federal student loan rules, so it's a good time for borrowers to understand how these shifts will impact their financial planning.
-
The Seven Best-Paying Side Gigs For RetireesIf you're worried you won't have enough saved for a comfortable retirement, or that life after work will be boring, these well-paid roles could be the answer.
