Most of us have seen the TV commercials featuring Alex Trebek and other celebrity endorsers offering consumers easy-to-buy final expense or burial coverage simply by “answering 3 simple health questions.” It’s no coincidence that these ads tend to target elderly people, as well as those with serious health issues.
The guaranteed issue life insurance policies shown on television are normally offered through well-known and trusted companies such as AARP/New York Life, Colonial Penn and others. The concept seems simple and beneficial to the applicant–you pay a low price, and when you pass away, your beneficiary receives a tax-free death benefit.
Is it really as easy as they make it sound? When things seem too good to be true, they usually are. As a consumer, it’s important to ask yourself, “Is this policy really worth the money, and what might be hidden in the fine print?”
Quick Article Guide:
1. What is Guaranteed Issue Life Insurance and How Does it Work?
2. Questions to Ask Your Agent When Shopping For Guaranteed Issue Insurance
3. Actual Rates by Age for Guaranteed Issue Life Insurance
4. We’re Here to Help You Make an Informed Decision
Guaranteed issue or “GI” policies tend to be a last resort for those who are looking to buy life insurance. If you are permanently disabled, have serious health issues, or have a mental disorder that you are currently collecting Social Security or SSDI for, guaranteed issue life insurance may be your only option to secure coverage. Guaranteed issue life insurance is also the only option for high-risk candidates who have been recently diagnosed with cancer, COPD, congestive heart failure, and for those who have an implanted heart defibrillator or are on kidney dialysis.
If you previously applied for term life insurance and were turned down or “declined” for coverage, chances are that Guaranteed Acceptance Life Insurance (commonly referred to as a “Guaranteed Issue” or “Guaranteed Approval” policy) is the best life insurance option available to you. “Guaranteed Approval” is just what it sounds like–you’re pretty much guaranteed coverage as long as you meet a few very minimal requirements.
With guaranteed issue life insurance, there is no medical exam required and there are very few (or sometimes even zero) health questions asked. Guaranteed approval life insurance is available for anyone between the ages of 50-85, and offers anywhere from $5,000 to $25,000 in coverage. Traditional term life policies tend to take several weeks to receive an approval; in many cases, GI policies only take a few days to get approved, since they require no medical exam and have light underwriting guidelines.
There are only a few types of guaranteed approval life insurance policies in the marketplace, and they aren’t all created equal. In this article, we’ll review important questions to ask when shopping for coverage.
But first, understand that there’s no such thing as “free money” for dying. Otherwise, everyone would buy a life insurance policy from their deathbed. For life insurance companies, this is a business. They mitigate their exposure when offering guaranteed issue life insurance policies through protection waiting periods, lower death benefits, higher premiums, or coverage that cancels at a set age.
The three key questions to ask your agent when shopping for a guaranteed issue life insurance policy are:
- How long is the policy’s waiting period?
- Will my coverage end at a specific age?
- Will my policy cost increase over time, or will the death benefit ever be reduced?
What’s My Policy Waiting Period for Death Due to Any Reason?
A newly purchased guaranteed issue life insurance policy will pay the entire face value right away if the insured’s death is the result of an accident (such as a car crash), or if the insured was the victim of a crime. Most GI policies have at least a 2-year waiting period before the beneficiary can receive the full death benefit as a result of a death due to a medical condition. This waiting period begins the day you pay your first premium.
At JRC, we favor Gerber’s Guaranteed Issue policy for a few reasons. One is that the two year waiting period provides a “return of premium + 10% guarantee.” This means that if you die within the first two years of your policy, all of the money that was paid into the policy is returned to your beneficiary, plus 10% interest, guaranteed. If you look at this as an investment, it’s better than any “guaranteed” return that we’ve found.
At What Age Will My Coverage End?
You may be surprised to learn that many “final expense” polices usually end at age 80. This could come as a big shock to you or your children down the road. With many guaranteed issue policies, you have a window of time. Ask yourself, “Am I likely to live at least two years and pass before my 80th birthday?” If not, the products advertised on television are probably not right for you, despite the attractively low rates.
The cost of whole life policies, such as Gerber’s Guaranteed Issue, is based on mortality tables for your age and gender. The rates for this policy are guaranteed to age 100. As long as you don’t “over commit” by purchasing a life insurance policy that you can’t afford, you’ll rarely reach the point of paying more into the policy than the death benefit received.
Insurance companies do not make much money from those who keep their policies and pay their premiums on time. Instead, they make the majority of their profit from those who cancel their policies or let them lapse by not making their payments. This is a big reason why we urge our clients to focus on affordability rather than the death benefit. Before purchasing any life insurance policy, understand your comfortable monthly budget.
Will My Policy Cost Increase?
Of the GI policies that we’ve reviewed, including the majority of those pitched on TV, more than half increase their premiums every 5 years. Even though these policies are considered to be “lifetime coverage,” you’re actually buying a 5-year renewable term policy. In fact, many of these policies double in cost every 5 years, making them impossible to budget for, especially with the increasing cost of living. They also initially offer attractive teaser rates, only to become less affordable as you get older. This is known as “pricing you out” of your policy.
After comparing the cost and benefits of each option, most of our clients choose a “fixed rate and death benefit plan.” With these types of policies, there are no moving parts. Your coverage may be a few dollars more than other policies, but you’ll save a lot of money in the long run compared to a policy with an increasing cost.
With the fixed cost policies we recommend, you can budget for the cost of your coverage for the rest of your life. We frequently receive calls from clients who can no longer afford the cost of their policy because the rates have continued to increase to the point where they have become unaffordable.
Most of the clients that we speak with have already waited too long to purchase life insurance. Remember, the younger you are when you buy life insurance, the less expensive it will be. If you’re over the age of 80, expect to have a bit of sticker shock when receiving quotes. Buying life insurance before the age of 75 will usually cut your rates in half compared to age 80.
Depending on your budget and your need for coverage, our agents may recommend buying a little less coverage than what you may have originally intended. With life insurance, affordability is extremely important, because if you are unable to pay for the cost of your coverage, you will eventually lose it. Some life insurance is always better than no life insurance, and any amount that is left behind will be a blessing to your loved ones.
Are you aware that the current Social Security provides a one-time death benefit of only $255!
Guaranteed issue life insurance is also commonly referred to as a “final expense” or “burial” policy, because this is primarily what the insurance benefit is used for. As of 2016, the average funeral costs between $7,000 to $10,000 or more. GI policies will provide the insured’s loved ones with a tax-free lump sum of cash to help cover these expenses after they pass away. Many of our clients purchase a GI policy to ensure their family does not encounter any additional stress during their time of mourning.
If you’d like additional rates for your specific age or different amounts of coverage, please feel free to give us a call toll-free at 855-247-9555.
To Summarize, Here Are the Benefits of Gerber Life’s Guaranteed Issue Life Insurance
- Insurance rates are guaranteed to never change.
- Policy face value amounts range from $5,000 to $25,000 and are sold in $5000 increments.
- Available to men and women between the ages of 50 and 80.
- No health questions are asked, and no medical exam is required.
- Payments can be made by checking account, EFT, credit and debit cards.
- They are rated by A.M. Best as an “A” (Excellent) Company.
- Gerber Life has been in business since 1928.
- Gerber’s guaranteed issue policy is offered in all states except Montana.
Do you have questions about what type of life insurance you should buy, or have you been turned down for life insurance in the past? JRC works with more than 40 different life insurance companies, and our agents are experts in finding our clients affordable life insurance coverage that fits their needs.
With a few simple questions, we’ll be able to assess your health and evaluate your options to find the best policy available for you. Call us toll free at (855) 247-9555. We’re here to help!
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