Guaranteed issue in life insurance means that you will not be turned down for any reason, regardless of your health condition. Most life insurance policies go through underwriting, which is where the insurance company decides the degree of risk involved with insuring you... i.e., are you healthy and expected to live a long life or do you have health concerns that could potentially shorten your life expectancy. With a guaranteed issue policy, typically there is what they call a "grade in" period in that the policy will not pay the full face amount for a period of time, typically 2 years but sometimes 3 years.
Guaranteed issue in life insurance means that you will not be turned down for any reason, regardless of your health condition. Most life insurance policies go through underwriting, which is where the insurance company decides the degree of risk involved with insuring you... i.e., are you healthy and expected to live a long life or do you have health concerns that could potentially shorten your life expectancy. With a guaranteed issue policy, typically there is what they call a "grade in" period in that the policy will not pay the full face amount for a period of time, typically 2 years but sometimes 3 years.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
To add to the above responses, guaranteed issue policies are, in essence, a "last resort" type of measure for buying life insurance as they generally feature some of the highest rates in the market. The medical histories for individuals who purchase these have conditions that make them uninsurable for traditionally underwritten programs, such as cancer (when current in the body and treatment not yet completed).
Also, these programs are limited to small amounts of life insurance - generally a maximum death benefit of $25,000 under a single policy with most companies.
The structure of a "graded" death benefit mentioned above is generally a return of premiums paid into the program if death occurs in the first 2 years, unless death is accidental (in which the full benefit would be payable) - the full benefit is payable beginning in year 3 of the policy.
Guaranteed Issue Life Insurance means that you cannot be denied for health reasons. Most guaranteed issue life insurance policies require that applicants be at least age 40-50 years old, and the face amount that you can get is usually $25,000 or less.
Since even terminally ill people can get guaranteed issue life insurance, the policy is graded (pays less than the face amount) during the first years for natural death.
There is one other variety of guaranteed issue life insurance not already mentioned already. Many employer based group policies provide guaranteed issue coverage.
In cases where the employer is paying the premium for all employees, the insurance carrier can pool risks with a large number of lives. All employees are accepted regardless of existing health condition.
In other cases the employees pay the premium. The carrier may provide guaranteed issue to all employees choosing the option provided a minimum participation level is met. New employees can purchase guaranteed issue coverage only during the initial open enrollment.
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Also, these programs are limited to small amounts of life insurance - generally a maximum death benefit of $25,000 under a single policy with most companies.
The structure of a "graded" death benefit mentioned above is generally a return of premiums paid into the program if death occurs in the first 2 years, unless death is accidental (in which the full benefit would be payable) - the full benefit is payable beginning in year 3 of the policy.
Since even terminally ill people can get guaranteed issue life insurance, the policy is graded (pays less than the face amount) during the first years for natural death.
In cases where the employer is paying the premium for all employees, the insurance carrier can pool risks with a large number of lives. All employees are accepted regardless of existing health condition.
In other cases the employees pay the premium. The carrier may provide guaranteed issue to all employees choosing the option provided a minimum participation level is met. New employees can purchase guaranteed issue coverage only during the initial open enrollment.