Guaranteed Issue Life Insurance
A type of financial-protection policy that provides cash to a named beneficiary upon the insured’s death, which an insurance company will offer to an applicant regardless of health. Guaranteed issue life insurance tends to be a last resort for individuals who can’t qualify for life insurance because of their current or past health problems and who don’t have the option to purchase life insurance as a benefit through their employer.
The only requirement to receive a guaranteed issue life insurance policy is that you pay your premiums. However, because there are no qualifications to receive such a policy, those premiums tend to be substantially higher than what a qualified applicant would pay for the same amount of coverage under a term life insurance policy that requires medical underwriting.
In addition to higher premiums, insurance companies that issue guaranteed life policies protect themselves against risk in two additional ways: (1) by offering relatively low payouts, and (2) by typically not providing a death benefit during the first two years after issuing the policy (if the policyholder dies during this time, the company issues a refund of premiums instead). This protects the insurer from having to make payouts for people who sign up for policies when they are close to dying, just in time for their loved ones to receive a death benefit.