Fact CheckedHave you heard of Guaranteed Issue Life Insurance? I bet you’ve seen ads for it; they’re all over the internet. Some people refer to it as life insurance of “last resort.”
Traditional life insurance usually requires a medical exam to qualify – but not everyone is in a position where they want to volunteer to have their vitals and fluids taken. Not to mention, people with moderate health or insurability issues may not be eligible… and if they qualify, their premiums may be much higher, sometimes 200% or more.
People who do not qualify or are declined for traditional coverage may turn to simplified issue or no medical life insurance. These plans do not require a health exam to qualify. However, they do involve answering “no” to a series of precise health questions. So what happens to consumers who are unsuccessful in answering these questions and don’t qualify for a tier one no medical policy?
It looks like they may be out of luck… but are they?
Nope, the good news is they can still purchase Guaranteed Issue life insurance because everyone qualifies regardless of their health status – even if they are recently diagnosed with metastatic cancer.
Is Guaranteed Life Insurance Right For YOU?
Guaranteed Acceptance life insurance is the lowest tier of no medical coverage, and it’s available to Canadians who may, unfortunately, be dealing with serious and even life-threatening health conditions.
While the ease of approval makes guaranteed life insurance appealing, especially for older adults or those with pre-existing health conditions, it has benefits and drawbacks. Let’s break down the pros and cons to help you weigh your options.
Guaranteed Life Insurance Canada – PROS
1. No Medical Exams or Health Questions. Period.
Guaranteed life insurance in Canada offers a significant benefit in that applicants are not required to undergo a medical exam or answer ANY health-related questions. This sets it apart from traditional life insurance, where your health status determines eligibility and rates. People with chronic illnesses, severe medical conditions, or those previously denied coverage can secure protection through a guaranteed life insurance policy when other options are unavailable.
To clarify, applicants need to answer a few health questions, including whether you’re a non-smoker or not.
2. 100% Guaranteed Approval
If you have serious health issues or are older, qualifying for traditional life insurance may be impossible. But not with guaranteed life insurance. It’s a sure bet that you can get approved for a policy quickly, regardless of your health condition.
This removes the uncertainty, and for many clients, especially seniors, the peace of mind that comes with knowing they will be covered is invaluable.
3. Guaranteed Fixed Premiums
One advantage of guaranteed issue life insurance is the level premiums. Once the policy is in place, your monthly costs never increase. This makes budgeting more accessible, particularly for retirees or clients on a fixed income who want to ensure their life insurance costs do not increase with age.
4. Your Policy Can Never Be Cancelled
As long as you’re making your payments, your guaranteed issue life insurance policy can never be canceled due to any change in your age or health.
5. Coverage Can Be Used for Final Expenses
If you’ve been dealing with some serious health issues, you may be thinking more about your mortality. A small guaranteed life insurance plan is a viable way to ensure your family is not burdened with funeral costs.
Guaranteed Life Insurance Canada – CONS
1. Two Year Waiting Period (The Elephant in the Room)
Guaranteed life insurance sounds too good to be true, doesn’t it?
Without exception, all guaranteed life insurance policies are issued with a 2-year waiting period. This is how it works:
If death occurs after the first two policy years, the face amount of the policy is paid out. If death is caused by aything other than accidental means WITHIN the first two policy years, the death benefit is a return of premiums to your family.
Wait a minute. Are you telling me that I won’t be covered for two years if I start paying premiums tomorrow? Yes, that’s precisely what I’m telling you, and for some people, this is an absolute deal breaker.
You have to remember no insurance company is going to offer 1st-day coverage to someone who has just been diagnosed with a life-threatening condition or has a severe health issue. If they did, they would go out of business.
In light of this, is it still worth considering a guaranteed acceptance life insurance policy?
I wish I could sell everyone a policy with no waiting period, but unfortunately, it’s not always possible; some have serious health issues, and don’t qualify.
So, is starting a plan with a two-year waiting period challenging? Of course, it is…However, I think it’s more difficult not to do anything. At least with one of these plans, you’re putting protection in place for your loved ones, mid to long-term. And the worst-case scenario? Your beneficiaries get back all the money you paid into the policy.
Personal Example
Recently, a client purchased a guaranteed Issue life insurance policy to leave some money behind for his wife. He was given a terminal diagnosis but his Doctor wasn’t quite sure how long he had left: could be two years or could even be four years.
We had a very frank conversation in which I explained precisely how the waiting period worked. He did the math and decided it was worth it to take out the policy, knowing that there was a good chance it would pay out to his wife after two years. He knew his wife would still get all the money he had invested in the policy if he didn’t survive the waiting period.
2. More Expensive
Guaranteed life insurance offers convenience by not requiring medical exams and providing immediate, guaranteed approval. However, that convenience comes at a cost! Premiums for guaranteed life insurance policies are usually significantly higher than traditional life insurance, especially compared to term life insurance.
The insurer is taking on greater risk by covering individuals with unknown health conditions. These higher premiums are unjustified when more affordable options are available for those in relatively good health. So speaking to an independent life insurance agent at Policy Architects is vital to ensure there isn’t a better option if you are considering this route. There may be, and it could save you thousands!
3. Low Maximum Face Amounts
Guaranteed life insurance policies usually offer coverage from $5,000 to a maximum of$50,000. This amount is typically enough to cover final expenses, but it may not be sufficient for individuals who want to provide a more significant financial cushion for their loved ones. If you have dependents or significant financial obligations, the limited coverage may not meet your needs.
If money is not an issue, you can purchase guaranteed life insurance from more than one carrier and have multiple policies, increasing your total face amount.
4. LImited to Permanent Coverage
Guaranteed issue life insurance is only issued as permanent coverage. You cannot purchase a Term policy.
Who Should Consider Guaranteed Life Insurance?
Guaranteed life insurance is ideal for people who have been denied traditional life insurance or have significant health issues, making qualifying for other types of coverage almost impossible. It’s also a good choice for older Canadians concerned about covering funeral costs and outstanding debts rather than leaving a substantial financial burden on their family.
Moreover, this product may be attractive to those who want a simple, hassle-free application process and are willing to pay higher premiums in exchange for guaranteed approval. However, it’s essential to consider the higher costs and lower coverage amounts for your specific needs and goals.
What’s Right for You?
Deciding whether guaranteed life insurance is the right choice depends on your circumstances – and honestly, there are usually better options. If you are in poor health or are denied life insurance, this policy could be a lifeline, ensuring your loved ones are not burdened with final expenses. However, if you are relatively healthy and have time to explore other options, you might find better value with a no medical life insurance policy.
Perhaps you’re dealing with a serious health challenge that may be temporary. That’s what we all pray for. A guaranteed life insurance policy starts coverage so your family is protected mid-to-long term. If you recover from your illness, you can always replace your guaranteed Issue policy with something better.
At Policy Architects, we specialize in helping Canadians navigate the complexities of life insurance. Whether you are looking for guaranteed life insurance or exploring other options, our team of experts can help you find a policy that fits your unique needs and financial situation.
My Final Thoughts About Guaranteed Issue Life Insurance
Guaranteed life insurance offers a solution for individuals not qualifying for traditional life insurance policies. While the convenience of guaranteed approval without a medical exam may be enticing – the higher premiums, lower coverage amounts, and waiting periods are important factors to consider. For many Canadians, guaranteed life insurance provides peace of mind and a means to cover final expenses. However, it’s crucial to fully understand the pros and cons before deciding.
