The Benefits and Drawbacks of Guaranteed Life Policies
Some of the products advertised to the senior audience are extremely helpful in enhancing their lives throughout retirement. Other products, however, offer little real value and make a lot of promises that are simply untrue. One of the products often advertised to seniors through mail and television commercials is something called a guaranteed issue life insurance policy. While these policies might be a good idea for some seniors, they can be a waste of money for others.
How Guaranteed Issue Life Insurance Works
A guaranteed issue life insurance policy is one that requires no medical exam or medical questions to be answered before the policy is issued. All the senior must do in order to get a policy is disclose their name, date of birth, gender and pay the initial premium. These types of policies should not be confused with what’s called a simplified issue policy, which is one that asks a handful of questions including whether the insured smokes or is terminally ill.
The Benefits of Guaranteed Issue Insurance
For some seniors, a guaranteed issue policy gives them the opportunity to get life insurance protection they otherwise wouldn’t be able to. Some seniors have illnesses and general health conditions that make normal policy approval impossible. For these seniors who want something to leave behind for their heirs, either to cover funeral expenses or to give loved ones a financial leg up, guaranteed issue policies can be hugely helpful.
Guaranteed Issue Customers: Beware
Because guaranteed issue policies are issued without the benefit of assessing the risk that the insured presents to the insurance company, these tend to be very expensive policies. For some seniors, especially those who are in good health, a term or permanent policy with full underwriting could be a much cheaper option.
Another drawback of the guaranteed issue policy is that the full death benefit might not be paid out unless death occurs many years after the policy is issued. When death occurs in the first few years, the death benefit might only equal a portion of the premiums paid or a percentage of the overall death benefit.
Life insurance policies can be a great tool for both retirement and estate planning, but it’s important that you meet with a knowledgeable agent so that you can explore the options available and find the perfect fit.