Burial insurance

What is Guaranteed and Simplified Issue Life Insurance?

There are two types of burial insurance: simplified issue and guaranteed issue.

Guaranteed Issue Insurance, like a Simplified Issue Insurance policy, requires no medical exam. The main difference is that unlike the simplified issue, there are no medical questions asked. You are “guaranteed” to get a policy as long as you pay the premium.

Simplified issue insurance is a life insurance policy that is offered if the prospective policyholder answers a few questions pertaining to their medical history during the application process, instead of undergoing a medical exam. 

Here is a more in-depth analysis regarding guaranteed and simplified issue:

What are they used for?

Guaranteed Issue Insurance is designed to cater for funeral and burial expenses without prying into an inheritance or estate. Most guaranteed issue insurance plans have much smaller death benefits than conventional life products. Premiums are also higher.

Simplified issue insurance is designed for people who need to procure limited life insurance immediately without the 4- to 8-week moratorium typical for policies that are conventionally underwritten and requiring a medical exam. With a simplified issue contract, you don’t need a medical examination, and you can obtain coverage within days – not weeks or months.

How do they work?

A guaranteed issue insurance plan provides some form of cover for individuals who may not be eligible for other insurance options due to age or health. Most individuals who apply for a guaranteed issue plan usually cannot be turned down unless they are below or above the age bracket requirement. 

A simplified issue insurance plan provides life insurance coverage quickly. Most individuals who sign-up for a simplified issue plan can get insurance upon approval of their application. 

A brief health form must be filled out to allow the insurance carrier to prepare a modified risk evaluation and fix a premium and death benefit.

Some insurance carriers offer simplified issue as either term life or a permanent life policy. You elect to include riders to your plan to diversify and enhance coverage benefits.

Advantages of simplified issue insurance include:

  • They don’t require a medical examination.
  • Coverage is in force as soon as your application is approved, and a premium is fixed.
  • The plans usually offer a higher maximum that is usually available for guaranteed issue policies.

Payout

The death benefit payout for a guaranteed issue insurance plan spans $5,000 to $25,000. If the holder passes on within the first few years after the policy has been set in force, the insurer may possess the exclusive right to reimburse the premiums paid up to the point of death. This option is called graded benefits and may make the holder eligible for a slightly lessened premium.

The death benefit payout for a simplified issue insurance plan can range from $5,000 to over $100,000. Premium rates may be higher than the usual term life or even whole life policy. Evading a medical assessment implies that underlying health problems cannot be weighed in. And since it comes with a greater risk, the premium will be higher as well. 

When to purchase

Premiums for guaranteed issue life insurance plans can be considerably higher than that of term life and even higher than whole life policies in some scenarios. This, alongside the extremely low death benefit, makes them a last-gasp option for many policy prospects.

Also, if you’re having a hard time obtaining life insurance after a term life policy has matured (or due to health issues or advanced age), a guaranteed issue policy can finance your final overheads, shield your beneficiaries from inflating funeral and burial costs, or leave a small treasure to a beneficiary of your choosing.

If you need insurance and are medical exam averse or require life insurance speedily with a very short waiting period, then a simplified issue life insurance policy may be just right for you. Here are some scenarios when a simplified issue plan becomes the right choice:

  • You have been directed by the court to obtain life insurance, naming your offspring as beneficiaries.
  • You need collateral for a loan – some financers accept a life insurance policy as collateral.
  • Your term life insurance has matured, but you need to maintain life insurance.
  • You need life insurance, but undergoing a medical exam is simply out of the question.

Frequent questions asked when applying for simplified issue insurance

There are usually four or more questions that need answering to get a simplified issue life insurance quote. Your responses will affect your eligibility as well as premium costs. Questions you could be faced with include: 

  • Are you a smoker?
  • Do you currently live in a hospital or long-term care facility?
  • Do you have a terminal illness?
  • Do you have HIV/AIDS?

Want to learn more?

Want to find out more about your options for guaranteed issue and simplified issue insurance? Talk to the experts at Senior Life Services.