Life insurance is an important safeguard to have in your financial portfolio, especially when you have family members that depend on your income to meet monthly obligations. Depending on your stage in life, certain life insurance policies are better than others to obtain.
Some individuals may have a group life insurance policy through their employer. If that coverage is not substantial enough or is not available, others may seek out some kind of private, supplemental life insurance coverage.
The two most notable types of life insurance are term life and permanent life (also known as whole life) insurance policies. Permanent life insurance policies include many different specific types of coverage such as simplified whole life, burial insurance, universal life, and guaranteed acceptance life insurance.
While guaranteed acceptance life insurance with no waiting period might not be the most common type of policy, it can provide much-needed coverage for certain individuals. Doing research ahead of time can help to determine whether or not this policy would work for your individual circumstance.
What is Guaranteed Acceptance Life Insurance?
Guaranteed acceptance life insurance, also sometimes known as guaranteed issue life insurance, is a type of permanent life insurance. Guaranteed acceptance life insurance is geared towards seniors who would not qualify for some of the more common types of life insurance such as term life or traditional whole life insurance.
To obtain this type of insurance, individuals don’t necessarily need to take a medical exam or even answer health questions. That makes this insurance policy ideal for older individuals or those with underlying health issues because they can’t be denied coverage. Some consider this type of policy to be a “last resort” because compared to traditional life insurance, the premiums are much higher.
Many choose guaranteed acceptance life insurance with no health questions to provide coverage for final expenses and to pay some outstanding debts to protect their family members from having to come up with these out of pocket expenses. This is why guaranteed acceptance life insurance with no waiting period was once referred to entirely as funeral or burial insurance for seniors. Now, there are other uses for guaranteed life insurance outside of just paying for final expenses, but this is still a common reason that individuals will secure this type of policy.
Because this is a riskier type of coverage considering the fact that almost no one gets denied, it is much more expensive than most types of life insurance and the payout is relatively low. Additionally, unlike other forms of permanent life insurance, there is not an additional savings component built into the policy.
When an individual first obtains a policy, there is typically a two to four-year waiting period to receive a payout meaning that the individual would have to have the policy for a certain period of time before their beneficiaries receive the funds. This is because the insurance company has very little information about the covered individual since they typically do not ask for medical history.
If an individual wanted coverage without a waiting period, they would need to have some kind of medical exam. This means that individuals who have serious underlying health conditions would most likely be denied from obtaining a traditional form of life insurance. The medical exam/questionnaire is necessary to obtain coverage without a waiting period or with a partial waiting period because the company is able to determine a statistical risk posed to them based on the covered individual’s history.
What Is The Waiting Period For Life Insurance?
The waiting period is the amount of time that would need to go by before the individual’s beneficiaries are eligible to receive their death benefit payout. Depending on the insurance carrier and the type of policy, the waiting period usually ranges from two to four years. However, some policies can provide coverage immediately or after a partial waiting period, which is also known as a graded benefit.
Life insurance companies impose a waiting period to mitigate their risk of insuring the covered individual. With guaranteed acceptance life insurance plans, the carrier has a higher risk because they have no way to determine the covered individual’s health status, which is why there is usually a waiting period with this type of coverage. The lack of a medical exam required for a guaranteed acceptance life insurance policy is the reason that a waiting period is usually imposed to protect the carrier from being completely at a loss if the insured were to pass away a short time after securing the policy.
If the insured passes away during the waiting period, it does not necessarily mean that the life insurance company won’t pay a benefit. Depending on the plan, they might investigate the claim or only pay out some of the benefit if the individual were to pass away before the end of the waiting period.
With guaranteed acceptance life insurance, the company may impose a two year waiting period or a partial waiting period. If the individual were to pass away during the waiting period, their beneficiaries would receive a refund for the premiums paid up until that point, plus interest.
A partial waiting period, also sometimes referred to as a graded death benefit, means that the death benefit could be partially paid out incrementally during the waiting period. For example, if the insured were to pass during the first year, their beneficiaries might receive 20% of the death benefit but if they were to pass away after two years of the waiting period, they would then receive 60% of the benefit.
Different Types of Life Insurance With No Waiting Period
A life insurance policy without a waiting period means that the death benefit can be paid out as soon as the first premium payment has been made. It’s also referred to as immediate benefit life insurance.
This is an attractive option for individuals seeking coverage because they want to have peace of mind immediately knowing that their family would be protected if they were to pass away. In many cases, however, obtaining life insurance without a waiting period is not possible, especially when they are looking into a policy that does not ask about medical history. However, in some cases, it is possible to find a policy with no waiting period or with an expedited waiting period.
A traditional term life insurance policy is coverage that is paid for a set amount of time and the premium is based on how much of a death benefit is needed, the amount of time to be covered for, and various individual factors such as age and health status. Once the term expires, the policy is null and void. Most term life insurance policies require a medical exam and if you are in good health, you might be able to secure the policy without a waiting period. Instead of a waiting period, the life insurance carrier might impose a period of contestability, meaning that the company is able to review coverage within a certain amount of time to protect the company from fraudulent applications.
A permanent life insurance policy provides lost income protection, just like term life insurance, but also has an added investment component built in. Permanent life insurance never expires and the insured individuals are able to cash in their policy for an added cash value.
It is possible to obtain a term or whole life insurance policy without a waiting period if one were to consider a no medical exam policy. A no medical exam life insurance policy is similar to a guaranteed acceptance life insurance policy in the sense that a medical exam is not required, however, the individual will be required to answer extensive questions about their medical history to obtain a term life policy this way.
Certain health conditions will result in an automatic decline for a no medical exam life insurance such as having HIV, being diagnosed with a medical condition in the last two years, being on dialysis or being in a nursing home. If an individual were to obtain a no medical life insurance policy, they might not necessarily be subject to a waiting period but the carrier will investigate the cause of their death if it occurs within a certain amount of time.
Will I Need a Medical Exam for Guaranteed Acceptance Life Insurance?
As previously mentioned, when applying for traditional life insurance, a medical exam is usually required. Many individuals believe that they will be denied coverage by the company because they have a preexisting health condition. Remember, certain companies view different health conditions differently so it is always worth looking into a traditional policy first before purchasing a guaranteed acceptance policy because the premiums are much higher.
The medical exam allows the company to review the applicant’s health history and determine their statistical risk posed to the insurance carrier. The first part of the medical exam consists of verbal health questions that review the applicant’s medical history, family history, and any underlying health conditions they may have (both physical and mental). The next step is to complete the medical exam. Medical exams for life insurance are usually quick and can sometimes even be done in the applicant’s home. The examiner will ask for blood and urine samples and review the medical questions that were previously asked.
The medical exam is necessary for the company to verify information provided on the application and also to help determine the monthly premiums that will be paid based on the applicant’s health status. The primary reason that the premiums for guaranteed acceptance life insurance are so high is because the medical exam is not required so that company is unable to determine how risky the potential insured is to the company.
There are certain health issues that will result in being declined almost instantly from traditional life insurance, which is why guaranteed acceptance life insurance is an attractive option for some.
What Factors Affect Life Insurance Rates?
In general, there are many variables that determine life insurance rates, which is why the premium cost can significantly vary amongst individuals. Here are some of the main factors that can affect life insurance rates:
- Current health – Upon answering the medical questions and taking the medical exam, the underwriters will want to know the applicant’s current health status to determine whether or not they are insurable.
- Past health issues – There are certain past health issues or pre-existing conditions that life insurance companies will use to determine rates for the applicant. There are some past health issues that could bar an individual from being covered in general and others that a certain amount of time needs to go by for these issues to not affect the applicant’s rate or insurability. For example, certain chronic illnesses can result in an upfront denial. However, a health condition such as being a previous smoker may require a certain amount of time being a non-smoker to go by before they applicant would be considered for a less expensive, non-smoker rate.
- Family history – Life insurance companies will also take into account the applicant’s family history because in some instances, genetics play a role in determining the health status of the individual. For example, certain diseases such as heart disease or cancer can be hereditary, so the life insurance company will want to know about this when figuring out a premium for the applicant.
- Gender – Gender is another factor that plays a role in determining life insurance rates because statistically, men are riskier to insure than women. This is based on the fact that men are more likely to have underlying health conditions, drink more, have higher stress levels, and therefore, a shorter life expectancy. This is why a male applicant who might have similar credentials to a female applicant will still end up paying more for term life insurance.
- Weight – Because obesity can put an individual at risk for more health conditions, weight is considered a factor that can affect life insurance rates as well.
- Occupation (current and former) – During the initial screening, the applicant will be asked about their occupation to help determine a premium. There are certain jobs that can raise life insurance premiums due to the risk involved. Some of these riskier jobs could include being a pilot, truck driver, miner, electrician, or a police officer.
- High-risk habits and hobbies – Another question that might be asked during the initial life insurance screening is the type of hobbies or habits that individuals may have. One of the most common habits affecting individuals’ life insurance rates is smoking (including vaping), but there are many other activities that could also affect life insurance rates. For example, scuba divers, sky divers, mountain climbers and aviation enthusiasts might find themselves paying above average premiums because of their riskier lifestyle.
What Does Guaranteed Acceptance Life Insurance Cover?
Guaranteed acceptance life insurance differs from traditional forms of life insurance because the coverage is usually capped at a much lower amount. Guaranteed acceptance life insurance usually covers around $10,000 to $25,000 in most cases, whereas traditional life insurance policies offer coverage for much larger amounts.
Many individuals choose this type of policy to put the coverage towards end-of-life costs. Because there might be additional money left over after the end-of-life costs are paid for, the insured can choose to leave family members additional funds for an inheritance.
Who should purchase a guaranteed acceptance policy?
Because guaranteed acceptance life insurance is much more expensive with a much lower payout than traditional policies, it is optimal for a niche group of individuals. Individuals that are between 50 and 80 are the typical age range for this type of policy. This is because at this point, it is more likely that they will have underlying health conditions that would bar them from securing a traditional term or whole life policy. A guaranteed acceptance policy can also sometimes be the best option for securing life insurance for elderly parents.
Burial insurance is a type of guaranteed life insurance used specifically for end-of-life expenses. Because burial insurance also falls under this category, some may choose to look into burial insurance for their parents as well. Burial insurance for seniors over 60, 70, or even 80 can be a good option for those who have underlying health concerns that would not otherwise qualify and are just seeking coverage for their end-of-life costs.
How Long Does It Take to Get the Life Insurance Payout?
Depending on the type of life insurance policy, the amount of time to receive the death benefit payout can vary. This leaves many questioning: how long does it take to receive life insurance death benefits? In most cases, the payout can be expected between 30 to 60 days. The payout can be made in various ways such as in a lump sum or through installments. Additionally, it is possible for the insured to have named multiple beneficiaries so the payout would be split amongst these parties accordingly.
To file a claim, it is important for the beneficiaries to be in contact with the life insurance carrier immediately after the insured passes away. Depending on the company, they may ask for the claim to be made online or through paper documentation. The carrier may ask for various documents such as the original policy, a claims form, and the death certificate.
If the insured passes away before the waiting period, this can prolong the payout being made as the company may investigate the circumstances of their death. In the case of a guaranteed acceptance life insurance policy, the company will refund the beneficiaries the amount that had been paid into the policy, plus interest.
How to Obtain a Guaranteed Life Insurance Policy?
There are multiple guaranteed issue life insurance carriers but because it is not as common as traditional life insurance, it may be a bit more difficult to find. To purchase a policy, the individual can find different coverage options through an initial online search. Also, it can be helpful to go directly to an insurance agency to get more information about obtaining a policy.
Pros and Cons of Guaranteed Life Insurance
Guaranteed life insurance serves a niche market and would not be suitable for everyone. However, this can be a helpful policy for individuals that would be looking for this kind of coverage. One positive aspect of guaranteed life insurance is the fact that individuals cannot be denied coverage based on their medical history. This allows for the applicant to pay for a policy that would cover their end-of-life expenses and even additional funds leftover to leave as an inheritance for their family members.
Some of the cons associated with guaranteed life insurance are the higher cost of premiums compared to a relatively low payout. Additionally, the waiting period to receive the death benefit may seem longer than average. Alternatives to guaranteed life insurance would be traditional term or whole life insurance, depending on the health of the individual. Because certain companies are not as strict as others with who they will cover, it is always worth at least looking into these policies first. If the individual is unable to receive other types of life insurance but they are employed, it is also worth checking with their employer to see if there is a low cost policy through their benefits package.
Guaranteed Acceptance Life Insurance With No Waiting Period Summary
In conclusion, guaranteed acceptance life insurance is best for seniors or those with underlying health conditions due to its restricted coverage options. It is worth looking into this type of policy if the individual has exhausted all other insurance options available and been denied due to health concerns.
This type of policy can provide added peace of mind to both the insured and their family members that some money will be left to pay for both end-of-life expenses and other small debts that may be owed. As with any life insurance policy, it is always best to speak to a licensed expert to discuss all potential options.