Guaranteed issue life insurance provides permanent coverage without medical exams or health questions. With approval guaranteed for all applicants, it serves a vital role – but comes at a cost.
This article examines everything you need to know about guaranteed issue life insurance.
What is Guaranteed Issue Life Insurance?
Guaranteed issue life insurance, also known as guaranteed acceptance life insurance, offers lifetime coverage without any medical underwriting. Applicants do not need to take medical examinations or answer extensive health history questions.
With conventional life insurance policies, applicants undergo full medical underwriting. This includes lab tests, a medical exam, and often a doctor’s assessment. The insurance company reviews these results and the applicant’s health history and lifestyle to determine premiums and eligibility.
Guaranteed issue life insurance skips this underwriting process entirely. The insurance company does not review medical history, ask health questions, or require an exam. All applicants are guaranteed approval regardless of age or medical conditions.
However, premiums for guaranteed issue life insurance are significantly higher than conventional policies – often double or more. This compensates the insurance company for taking on higher risk clients without health assessments.
While guaranteed issue life insurance is more expensive, it serves a valuable purpose by providing coverage to those who cannot qualify for underwritten policies.
How Does Guaranteed Issue Life Insurance Work in Canada?
Guaranteed issue life insurance provides permanent, lifelong coverage just like traditional whole life insurance. However, there are some key differences in how it works:
No Medical Exam
Applicants do not need to take any medical tests, provide blood work, or undergo screening. Approval is guaranteed without any health records.
No Health Questions
Applicants only need to provide basic personal information, such as their name, birthdate, contact details, and beneficiary designation. No health history is required
Higher Premiums
Since medical underwriting is skipped, the insurance company cannot determine individual risk levels. To compensate, guaranteed issue premiums are significantly higher – often double the cost of conventional life insurance.
Limited Coverage
To control risk exposure, guaranteed issue policies offer more minor death benefits, usually from $10,000 to $25,000. Traditional underwritten policies often offer over $500,000 in coverage.
Waiting Period
Most guaranteed issue life insurance contracts impose a 24 month waiting period before the full death benefit is payable. If the insured dies of natural causes within the first two years, the policy will refund all premiums paid plus interest.
Pros and Cons of Guaranteed Issue Life Insurance
Guaranteed issue life insurance offers several advantages but also comes with drawbacks to consider:
Advantages of Guaranteed Issue Life Insurance
Guaranteed Approval: The most significant benefit is guaranteed approval regardless of age or health conditions. Applicants cannot be denied
No Medical Exam Required: Skipping invasive tests and screening provides convenience and speed.
Quick Application Process: With minimal paperwork and no underwriting, policies can be issued in days.
Coverage for High-Risk Applicants: It offers permanent protection to those normally denied life insurance.
Disadvantages of Guaranteed Issue Life Insurance
Higher Premium Costs: Guaranteed issue premiums can be 2-3 times higher than conventional life insurance.
Limited Death Benefits: Maximum coverage amounts top out at $25,000 to $50,000.
Waiting Period: The two-year waiting period delays the total payout if the insured dies from natural causes.
Total Premiums Can Exceed Payout: For long-living policyholders, lifetime premiums paid can surpass the death benefit received.
Eligibility for Guaranteed Issue Life Insurance
Guaranteed issue life insurance focuses on higher-risk segments underserved by conventional life insurance underwriting. It most commonly provides coverage for:
Seniors Over 70
Once applicants reach their 70s, many chronic conditions can arise, making conventional coverage difficult.
Declined Applicants
Provides a safety net for anyone who declined regular life insurance due to health.
Chronic Illnesses
Offers coverage to those with ongoing conditions like heart disease, COPD, and diabetes.
Terminal Diagnoses
Extends permanent coverage to applicants with terminal illnesses.
HIV/AIDS
Provides coverage often unavailable to those who have HIV or AIDS.
Ideal candidates for guaranteed issue life insurance are those between 50 and 85 years old who are considered high risk for regular underwritten policies.
Cost of Guaranteed Issue Life Insurance
Due to the lack of underwriting, guaranteed issue life insurance comes at a steep price. Monthly or annual premiums are significantly higher than comparable term life insurance or whole life insurance products.
Premiums vary based on the applicant’s age, gender, and the amount of coverage selected. However, guaranteed issue policies often cost 2-3 times more than conventionally underwritten permanent life insurance.
Here is an example of estimated guaranteed issue policy premiums for different ages and death benefit amounts from one leading Canadian provider:
| Age | $10k Coverage | $25k Coverage | $50k Coverage |
| 50 Male | $17/month | $43/month | $85/month |
| 60 Male | $38/month | $95/month | $191/month |
| 50 Female | $12/month | $31/month | $62/month |
| 60 Female | $25/month | $63/month | $125/month |
Exact premiums vary between insurance providers based on the policy terms, so be sure to compare rates. An independent broker can help find competitive pricing.
Maximum Coverage Available
Given the substantial risk posed by guaranteed issue life insurance clients, most policies restrict death benefit amounts to between $25,000 and $50,000.
In contrast, conventionally underwritten term life insurance often approves coverage up to $500,000 or higher for younger, healthy applicants.
The limited payout amounts help insurance companies minimize potential losses from insured applicants passing away shortly after the policy issue. It also controls claims of exposure from those with life-threatening conditions.
For applicants requiring higher death benefits, alternatives like simplified issue life insurance may provide more sizable coverage options without needing full medical underwriting.
Waiting Periods Before Full Payout
Nearly all guaranteed issue life contracts impose a waiting period between 24 and 48 months before the full death benefit is payable.
This helps prevent losses in case an applicant signs up while terminally ill and passes shortly after.
If the insured dies of natural causes during the waiting period, the policy will refund all premiums paid plus interest, not the total sum insured. The full death benefit is only payable in cases of accidental death.
Once the waiting period ends, the guaranteed issue policy works just like any other permanent life insurance. The total death benefit will be paid to named beneficiaries regardless of the cause of death.
Who is Ideal for Guaranteed Issue Life Insurance?
Guaranteed issue life insurance serves a niche role providing coverage for applicants considered high risk and ineligible for conventional underwritten policies. Ideal candidates include:
Applicants Declined for Traditional Insurance
Offers permanent coverage for anyone refused life insurance due to health conditions.
Seniors Over 70
Provides affordable final expense coverage for older seniors.
Terminally Ill Applicants
Extends fast coverage to terminally ill patients.
Needing Small Coverage Amounts
Perfect for those just needing final expense money.
Suffering from HIV/AIDS
Offers coverage usually denied to HIV/AIDS patients.
For young, healthy applicants or those requiring substantial death benefits, alternatives like simplified issue insurance often provide more suitable options. However, for higher-risk demographics, guaranteed issue life fills a vital role.
Alternatives to Guaranteed Issue Life Insurance
If guaranteed issue life insurance premiums are unaffordable, applicants have several alternatives:
Simplified Issue Life Insurance
Requires limited health questions but skips invasive underwriting. While not guaranteed, approval is faster with lower premiums than guaranteed issue products
Group Life Insurance
Offered through employers and associations without individual underwriting. Premiums are reduced by the power of the group buying the master policy.
High-Risk or Impaired Risk Life Insurance
Involves a modified version of underwriting but uses more relaxed criteria for approving applicants with health issues or risky hobbies.
For young, healthy individuals, fully underwritten term or permanent life insurance remains the most affordable option. However, guaranteed issue life insurance fills an important coverage gap for higher-risk demographics at an affordable price.
Which Canadian Providers Offer Guaranteed Issue Life Insurance?
Many of Canada’s top insurance companies offer guaranteed issue life insurance policies, including:
- Empire Life
- Sun Life
- iA Financial Group
- Manulife
- RBC Insurance
- Beneva
- Canada Protection Plan
Work with an independent life insurance broker to shop and compare guaranteed issue products from these and other providers. Make sure to evaluate policy terms, pricing, ratings and customer service.
Who Should Get a Guaranteed Issue Life Policy?
Guaranteed issue life insurance is ideal for higher-risk applicants who cannot qualify for conventionally underwritten policies. This includes:
- Anyone declined for medical reasons
- Seniors over age 70
- People with chronic illnesses
- Those diagnosed as terminally ill
- Anyone requiring small final expense coverage
- Those suffering from HIV/AIDS
Younger, healthy applicants are often better served by simplified issues or fully underwritten policies. However, for impaired risk demographics, guaranteed issue life insurance provides critical protection.
The Takeaway
Guaranteed issue life insurance serves a vital role by providing permanent coverage to higher-risk applicants often unable to qualify for conventional underwritten policies.
While premiums are higher and benefits more limited, guaranteed issue life insurance offers a crucial safety net for the uninsurable. For this demographic, there are often no better alternatives.
By skipping invasive underwriting, guaranteed issue policies make attaining coverage convenient and worry-free. While not the right fit for everyone, these policies provide vital protection when needed.
FAQs of Guaranteed issue life insurance
What is the difference between guaranteed issue and simplified issue life insurance?
Guaranteed issues involve no underwriting, while simplified issues require applicants to answer a few health questions. A simplified issue is not guaranteed, but it offers lower premiums.
Does guaranteed issue life insurance require a medical exam?
No, guaranteed issue policies do not require any medical records, blood work, or exams since approval is guaranteed. The only requirement is an application with basic personal information.
How long are waiting periods for guaranteed issue life insurance payouts?
Most guaranteed issue policies impose a 24-48 month waiting period before paying the full death benefit amount for deaths from natural causes.
>What health conditions make applicants ineligible for conventional life insurance?
Serious conditions like cancer, heart disease, dementia, COPD, diabetes and HIV/AIDS often make it difficult to qualify for fully underwritten life insurance.
Does guaranteed issue life insurance cover accidental deaths during the waiting period?
es, the full death benefit is payable for accidental deaths, even during the waiting period. Only natural cause deaths trigger a limited payout during the first 2-4 years.
