# Guaranteed Issue Life Insurance: What It Is, How It Works

![A couple getting advisor from insurance agent about guaranteed issue life insurance.](https://www.investopedia.com/thmb/zGSqc4RFq7bah0TjZnUmgXI1SnI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1449113013-559a6b5c9ff44d39847ad5c134d9d19b.jpg)

*— Nitat Termmee / Getty Images*

> **Definition**
>
> Guaranteed issue life insurance provides lifelong coverage and doesn’t require a medical exam or health questions. If you have a serious health condition and can’t get a standard whole life policy, guaranteed issue life insurance can be a good alternative.

## What Is Guaranteed Issue Life Insurance?

Guaranteed issue life insurance, also called guaranteed acceptance life insurance, is a type of [life insurance policy](https://www.investopedia.com/the-best-life-insurance-companies-8763666) that doesn't require health questions or medical underwriting to qualify. You're automatically approved for this coverage if you fall within the insurance company’s eligible age range, typically 50 to 80.

While guaranteed acceptance is appealing, there are some drawbacks. Most guaranteed issue policies won’t pay the full death benefit to your beneficiaries if you die of natural causes in the first two to three years that your policy is active. Instead, your beneficiaries will receive the sum of premiums you’ve paid, plus interest (around 10% to 20%). This is called a **graded death benefit**, and it's a standard feature of guaranteed issue policies. 

Also, these policies usually have limited coverage, with a maximum payout of $25,000 to $50,000, and the premiums are high compared to the amount of coverage.

### Key Takeaways

*   Guaranteed issue life insurance is a form of life insurance with no health requirements that provides lifelong coverage and builds cash value over time.
*   These policies typically offer death benefits ranging from $2,000 to $25,000, making them suitable for covering your final expenses.
*   Most of these policies come with a waiting period of two to three years before your beneficiaries are fully protected.
*   Guaranteed issue rates are generally higher than medically underwritten policies due to the increased risk and uncertainty for insurance companies.
*   This insurance is primarily designed for individuals with severe health conditions who cannot qualify for traditional whole life insurance.

## How Guaranteed Issue Life Insurance Works

Guaranteed issue life insurance works like it sounds—the insurance company guarantees coverage if you’re within the required age range. Usually, you’re approved if you’re between 50 and 80, but some companies offer this coverage as early as age 45 and up to age 85. 

If you have any of the following medical conditions, you may need guaranteed issue life insurance:

*   You’re terminally ill and have a short life expectancy.
*   You need an organ or tissue transplant.
*   You have Alzheimer's disease or dementia.
*   You have AIDS or HIV.
*   You have cancer. 

These policies generally offer lower coverage amounts than traditional life insurance. Face amounts on guaranteed issue life insurance usually range from a few thousand dollars to $25,000, though some insurers may offer up to $50,000 in coverage. 

While the policy’s [death benefit](https://www.investopedia.com/terms/d/deathbenefit.asp) is relatively low, it’s well-suited for covering final expenses, including funeral costs, outstanding medical bills, or small debts, after you die.

### Understanding Guaranteed Issue Life Insurance Benefits

Guaranteed issue policies also include a [cash value component](https://www.investopedia.com/terms/c/cash-value-life-insurance.asp) that increases over time as you pay premiums. You can borrow against it, often tax-free, potentially giving you added financial flexibility during your lifetime. 

The policy’s graded benefit works differently depending on when you die. For example, if you die from natural causes in the first two to three years (depending on the policy), your beneficiaries will only receive the premiums you paid plus interest. 

However, if you die from accidental causes during the waiting period, your insurer will likely pay out the full benefit. After this period expires, your beneficiaries are entitled to the full death benefit regardless of how you die. 

## Pros & Cons of Guaranteed Issue Life Insurance

Guaranteed issue life insurance offers benefits to people with health challenges or a terminal illness, but these policies have significant limitations compared to standard life insurance. You'll want to weigh several factors to decide whether guaranteed issue life insurance is right for you. 

Pros

*   **No medical exam required**: You won't need to undergo a physical examination or answer any health questions to qualify.
    
*   **Guaranteed acceptance**: If you're within the insurer’s eligible age range, the insurer can't turn you down for health reasons.
    
*   **Cash value component**: Your policy builds cash value over time that you can borrow against during your lifetime.
    
*   **Fixed premiums**: The amount you pay in premiums each month remains the same while the policy is active.
    
*   **Permanent coverage**: As long as you continue paying premiums, your coverage will remain in effect and has no expiration date.
    

Cons

*   **Higher cost**: You may pay more for coverage compared to medically underwritten policies due to the increased risk to insurers.
    
*   **Limited benefit amounts**: Coverage often maxes out at $25,000, which may not be enough if your beneficiaries have extensive financial needs.
    
*   **Waiting period**: Most policies don't provide full benefits for the first two to three years. If you die from natural causes during this time, your beneficiaries will only receive a portion of the face amount.
    
*   **Limited value if you’re healthy**: If you’re healthy enough to qualify for standard life insurance, guaranteed issue is probably not cost-effective.
    

## Alternatives to Guaranteed Issue Life Insurance

Before choosing a guaranteed issue life insurance policy, it’s worth considering other options that might be a better value, depending on your health. 

*   **Simplified issue life insurance**: This option requires you to answer some basic health questions but doesn’t require you to take a [medical exam](https://www.investopedia.com/the-best-no-medical-exam-life-insurance-8773567). You may qualify for this policy if you have less severe health problems. It may have higher maximum coverage and relatively low premiums compared to guaranteed issue policies. 
*   **Group life insurance**: If you're employed, you may be eligible for [group term life insurance](https://www.investopedia.com/terms/g/group-term-life-insurance.asp) through your employer, which often doesn't require individual medical underwriting. 

## The Bottom Line

Even with its limitations, guaranteed issue life insurance can give you and your family a valuable financial safety net if you can’t get standard life insurance coverage. It’s an option not only for older people but also if you have poor health and want to ensure your loved ones are at least partly protected when you die.

> **Article Sources**
>
> 1.  Lincoln Heritage Funeral Advantage. “[A Complete Guide to Guaranteed Life Insurance](https://www.lhlic.com/consumer-resources/guaranteed-life-insurance/).”
>     
> 2.  Mutual of Omaha. “[The Value of Whole Life insurance](https://www.mutualofomaha.com/advice/life-insurance/types-of-life-insurance/the-value-of-whole-life-insurance).”
>     
> 3.  Western & Southern Financial Group. “[Understanding Guaranteed Issue Life Insurance](https://www.westernsouthern.com/life-insurance/guaranteed-issue-life-insurance).”
>     
> 4.  New York Life Insurance. “[Life Insurance Cash Value Explained](https://www.newyorklife.com/articles/life-insurance-cash-value-explained).”
>     
> 5.  Corebridge Direct. “[Guaranteed Issue Whole Life Insurance](https://www.corebridgedirect.com/guaranteed-issue-whole-life-insurance).”
>     
> 6.  New York Life Insurance. “[What Is Group Term Life Insurance?](https://www.newyorklife.com/articles/what-is-group-term-life)”