What are Guaranteed Life Insurance Policies?

Many people know that they need a life insurance policy, but either don’t want to fill out a long medical questionnaire, or don’t have the time. Perhaps they have some other reason for desiring a quick and simple approval and coverage. In those cases, a guaranteed life insurance policy often seems appealing… But is there a catch?

First, understand that this type of term life insurance policy is offered without knowing much at all about you and your personal risk factors. In fact, the insurance company will generally ask you four questions:

• Do you smoke?
• Are you currently living in a hospital or long-term care institution?
• Have you been declared terminally ill?
• Do you have HIV or AIDS?

If you answer yes to the last three questions, your application will be denied. If you’re a smoker, you can probably still obtain a guaranteed life insurance policy, but your premiums will be increased.

So, you can get a guaranteed policy, and it’s quicker and easier. Are there any down sides?

Yes, potentially. Because the insurance company is taking a bigger risk on you, your premiums will probably be higher than they would have been otherwise.

The policy will also be limited, usually between $10,000 and $100,000 for the death benefit. This might be acceptable to some younger people, or those who are purchasing a secondary policy for some reason, but typically is not enough coverage for most.

You will also be subject to a waiting period. Generally you can’t die within two to three years of purchasing the policy, or your beneficiaries won’t be able to collect the full death benefit. A traditional life insurance policy, on the other hand, usually offers coverage from the first day.

A guaranteed life insurance policy can work for some situations, but we urge you not to make this important decision without professional guidance. Come talk to us first. There’s no obligation, and we can help you decide upon your insurance needs. Then, together we can match you with a policy that best meets your requirements.