Guaranteed issue

Guaranteed issue means the insurer accepts every applicant within the eligible age range without asking health questions or requiring an exam. Individual guaranteed issue policies are usually small whole life policies sold as final expense or burial insurance, commonly for ages 50 to 80 or 85, with face amounts often $25,000 or less. Basic employer group life insurance is also typically guaranteed issue.

Because the insurer can't screen out sick applicants, it prices for adverse selection: premiums per $1,000 of coverage are much higher than on underwritten policies, and most individual policies carry a graded death benefit for the first two or three years. Say, hypothetically, a 70-year-old buys a $10,000 guaranteed issue policy and dies of cancer 18 months later. The beneficiary may receive only the premiums paid plus interest rather than $10,000.

Guaranteed issue suits people who have been declined elsewhere or have serious conditions. Healthier buyers usually get more coverage per dollar, and full benefits from day one, with simplified issue or fully underwritten policies. Check the waiting period and maximum face amount before buying. See guaranteed issue life insurance: no health questions, with limits.