What Is Guaranteed Life Insurance?

Just about anyone can buy this type of policy, even folks in poor health, but that easy access comes at a cost.

Written by Devon Delfino / May 12, 2022

Quick Bites

  • Guaranteed life insurance does not require a medical exam to qualify, making it an option for people in poor health.
  • Guaranteed policies usually have smaller death benefits and higher premiums than traditional life insurance policies.
  • These policies may impose a waiting period before the beneficiary can collect the death benefit, often lasting two or three years.
  • These policies don’t make financial sense for most people, but those who can’t qualify for traditional policies can take a look.

Guaranteed life insurance—also called guaranteed acceptance life insurance and guaranteed issue life insurance—sounds like a great deal. After all, it doesn’t require you to take a medical exam first before a policy is issued.

And the less amount of uncertainty you have around life insurance, the better right? Well … not always. There are trade-offs for that guarantee.

Here’s what you need to know about guaranteed life insurance, including the costs, who it makes sense for and who should avoid it.

Inside this article

  1. What’s guaranteed life insurance
  2. What’s the cost?
  3. Who should buy it
  4. Who should not buy it

What is guaranteed life insurance?

Guaranteed life insurance is a type of coverage that doesn’t hinge on your health. With this policy, insurance companies accept any and all applicants—no medical exam or health questionnaire required.[1]

Instead, rates are based solely on factors like your age, gender and location, depending on the insurer.[2] This low bar for acceptance may appeal to anyone with a serious health condition who can’t qualify for traditional life insurance.

Typically, the guaranteed policies you’ll find will be whole life ones, so they will stay in force as long as you continue to pay your premiums. These permanent policies can also build up a cash value, which you can borrow against if needed.

You may also see guaranteed term life policies, which last for only a specified period of time (such as 10, 20 or 30 years) and don’t have a cash value component.[3]

In general, guaranteed acceptance life insurance will not provide as much coverage as you’ll find with other types of life insurance.

“Most of these have a cap of $25,000, which is a much smaller death benefit than other policies,” says Certified Financial Planner Steven Fox of Next Gen Financial Planning. “Term life, for example, is often multiple hundreds of thousands of dollars. That’s one of the biggest downsides.”

That small death benefit, adds Fox, “could be helpful for covering funeral or final medical expenses, small amounts of credit card debt or something else [you’re] worried about leaving behind for a spouse or cosigner.”

You may also encounter restrictions that you typically don’t find with traditional life policies. For example, insurers may enforce a waiting period before the death benefit can be paid out. If you die within the first two to three years of the policy, the insurer might pay only a percentage of the premiums you paid (like 110% to 120%), not the full death benefit.[3] It’s important to be aware of restrictions like that before signing.

How much does guaranteed life insurance cost?

Because of the risks insurance companies are taking on with these policies, guaranteed life insurance usually costs more than other types of life insurance. Insurance companies assume that you probably have a medical condition that would otherwise prohibit you from getting insurance, notes Fox. “Per unit of coverage, it’s going to be more expensive to get this policy.”

Premiums can be two to three times higher than a traditional policy. And you get less for your money. For example, a 50-year-old might pay $109 per month for a $25,000 guaranteed life policy, compared to as little as $95 a month for a $35,000 whole life policy that requires a medical exam.[3, 4]

The key factor, of course, is whether or not the applicant is healthy and able to qualify for the rates that a traditional policy will charge.

Tip: Talking to a Certified Financial Planner who is a fiduciary can help you figure out what kind of life insurance you need and how much.

Who should buy guaranteed life insurance?

There are some situations when guaranteed life insurance could make sense. For example, if you find that you can’t qualify for traditional life insurance and absolutely need coverage, guaranteed acceptance life insurance is an option.

Another potential reason to get guaranteed life is your age. “Some of these policies can be used for people who are older than the policy age limits for some other types of insurance,” says Fox. “For example, if you’re over 65, regardless of your health, companies might not issue policies at all. So that might be another reason to get guaranteed life insurance.”

Still, for most young and healthy people, guaranteed policies don’t make sense.

Tip: If you’re interested in getting insurance, you can find agents near you via the National Association of Insurance Commissioners’ (NAIC) online tool.

Who should not buy guaranteed life insurance?

“For anyone under the age of 50 to 60, I think there’s probably no sense in this at all,” says Fox. “It’s probably going to be more expensive.”

Another way your age factors in: Some insurers may require applicants to be over a certain age, like 50, to access a guaranteed life policy.[5]

As long as you can qualify for a traditional life insurance policy, you will likely pay less for the same or more coverage. And because you may be paying that premium for decades, those cost differences will add up.

One last group that would probably not benefit is those with terminal illnesses. That’s because guaranteed life policies may not pay the full death benefit if the insured person dies in the first few years.

Article Sources
  1. “What Is Guaranteed Issue Life Insurance?” ​​Fidelity Life, https://fidelitylife.com/learn-and-plan/learning-center/types-of-life-insurance/guaranteed-issue-life.
  2. “Guaranteed Acceptance Life Insurance,” Colonial Penn, https://colonialpenn.com/products/guaranteedacceptance.
  3. “A Complete Guide to Guaranteed Life Insurance,” Lincoln Heritage Funeral Advantage, https://www.lhlic.com/consumer-resources/guaranteed-life-insurance.
  4. “How Much Does Life Insurance cost?” Progressive, https://www.progressive.com/answers/how-much-is-life-insurance.
  5. “Guaranteed Life Insurance Plan,” Gerber Life, https://www.gerberlife.com/adult-life-insurance/guaranteed-life-insurance.

About the Author

Devon Delfino

Devon Delfino

Devon Delfino is a writer who’s covered personal finance—including everything from student loans to budgeting to saving for retirement and beyond—for the past six years. Her financial reporting has appeared in publications like the L.A. Times, U.S. News and World Report, Teen Vogue, Masha

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