Simplified issue life insurance
Simplified issue is a term used to describe the underwriting process. These types of policies are reserved for people in good to excellent overall health.
If your health is good, chances are you’ll be approved instantly. Insurance companies won’t just take your word for it, though. They will verify your health status by pulling your health records.
If your health history includes a serious or chronic illness, insurers might require a medical report from the doctors you’ve seen. And if they can’t get the records they need, they will require a medical exam.
Guaranteed issue life insurance
As the name implies, with these policies, acceptance is generally guaranteed. No health questions are asked to determine whether you’re eligible. If you are asked health questions, your answers are used to determine the price of your policy, not your eligibility.
While that may seem like a wonderful convenience, it comes at a cost. And the cost is typically so high that only those who can’t qualify for other types of insurance decide to buy a guaranteed issue policy.
That’s why guaranteed acceptance life insurance is most often bought by seniors whose health status is less than average.
These policies offer up to $25,000 in coverage and are usually used for:
- Burial expenses
- Paying off debt, such as credit cards, a mortgage, or a car loan
However, guaranteed issue life insurance isn’t just for seniors. Sometimes people in their 40s or 50s choose this type of policy — usually if they have, or have had, one or more serious illnesses. Health issues such as cancer, a heart attack, or a stroke make it very hard to qualify for term life insurance.
It’s important to know that a guaranteed issue policy usually has a 2-year waiting period. What that means is the insurer wouldn’t pay the full death benefit if you were to pass away during that 2-year period. Instead, the company would return the payments you had made so far, plus interest.
In other words, if your life expectancy is 2 years or less, a guaranteed issue policy may not be worth considering.
If your health is a concern and you want life insurance, it pays to look into group insurance. The benefit of life insurance through a group is that qualifying is much easier. Rather than qualifying you personally based on your health, the insurance company looks at you as part of a group.
Learn more about guaranteed issue life insurance
Buying group insurance is similar to getting life insurance through an employer. Instead of individually applying for and individually owning your insurance policy, you become part of an association.
Getting a group term or whole life policy involves answering a few health questions. Generally, insurers only require that you not be in a medical facility or require full-time medical care.
Depending on which insurance company you choose, the application will have 7–12 questions. There’s only one health class, and the premium costs typically increase every 5 years.
For people who are in poor health, this type of policy is a good option. But if you’re in good health, it’s probably in your best interest to choose individual term life insurance instead. The price will never increase during the term, and you can lock in a better rate.
Learn more about group life insurance
Accidental death insurance
Accidental death and dismemberment coverage can be an excellent alternative or addition to life insurance. AD&D policies only cover a death that results from an accident, so they cost much less than regular life insurance.
And, since AD&D policies don’t cover a death resulting from natural causes, no health questions are asked and no health exam is required. This makes this type of insurance a plausible option for seniors as well.
A 70-year-old can expect to pay about $100 per month for a $10,000 policy. That same person could get a $50,000 AD&D policy for just $5 per month.
Learn more about accidental death and dismemberment insurance