Guaranteed Issue vs Simplified Issue Life Insurance

Guaranteed Issue vs Simplified Issue Life Insurance Policy

For some people, one of the greatest obstacles to obtaining life insurance coverage is the medical exam that they must complete to get the policy issued. Traditional life insurance policies require the applicant to go through a medical exam so that the insurance company can determine:

  1. Whether or not to offer the applicant coverage and if so...
  2. The appropriate premium to charge (based on the results of the medical exam)

However, there are two types of life insurance policies that do not require a medical exam. They are Simplified Issue Life Insurance and Guaranteed Issue Life Insurance. In this article, we will explore the differences as well as pros and cons of each.

Simplified Issue Life Insurance

A Simplified Issue Life Insurance Policy will be offered if your answers to certain questions fit the underwriting guidelines of the insurance company to which you are applying for coverage.

Typical questions asked when applying for Simplified Issue Life Insurance

There are typically four or more questions asked to get a quote on Simplified Issue Life Insurance1. Your answers will determine whether you are approved or not; as well as the cost of the policy (i.e. the premium).

  1. Do you smoke?
  2. Do you currently reside in a hospital or long-term-care institution?
  3. Have you been declared terminally ill?
  4. Do you have AIDS or HIV?

By answering "Yes" to smoking, you may still be able to get a Simplified Issue Life Insurance Policy but it will just be more expensive. If you answered "Yes" to any one of questions 2-4 you should probably try finding another route because the company won't be offering you a policy (perhaps a guaranteed issue would suit your needs - read more below). However, if you answered "No" to questions 2-4, you can expect to be offered a policy. This is an example of the underwriting questions asked by most insurance companies. Some companies will ask a few more questions, and with some, the questions will be slightly different but by definition of the word "simplified" you will experience far fewer questions and invasive tests than the standard life insurance exam.

  • Pro BulletNo medical exam
  • Pro BulletGet coverage in days or weeks compared to months with other insurance policies
  • Pro BulletFull face value or “death benefit” is available immediately upon policy issuance
  • Pro BulletLess expensive than guaranteed issue life insurance
  • Con BulletHigh premiums, sometimes 2-4 times higher than other life insurance policies

Guaranteed Issue Life Insurance

Like a Simplified Issue Life Insurance Policy, a Guaranteed Issue Life Insurance Policy requires no medical exam. One major difference is that unlike simplified issue, there are also no medical questions to answer. As the name implies, if you pay the premium the company is "guaranteed" to issue you a policy2. The major drawback is that the full death benefit is not available until after the policy has been in force for a given amount of time, usually one to two years. In the insurance industry, this is called graded benefits. In some cases, if the insured person dies within 2-3 years of purchasing the policy, then the beneficiaries only get refunded the premiums paid up to that point. Some companies give a percentage of the death benefit, but the beneficiaries won't get the full amount.

  • Pro BulletRequires no medical exam or medical questions to answer
  • Pro BulletYou are guaranteed to be covered by a life insurance policy
  • Con Bullet“Graded benefits” – if the insured person dies within a specified amount of time, they will only get a portion of the death benefit or a portion of their premiums paid will be returned
  • Con BulletProbably the most expensive life insurance you can buy

Quick Facts

  • Designed to pay for funeral expenses which is why the policies are small amounts3
  • Often offered to those 45-85 years old4
  • Typically a "last resort" life insurance policy because you can't get insurance elsewhere
  • Smaller death benefit amounts (range from $5,000-$100,000) compared to most life insurance policies
  • Healthy individuals don't usually choose guaranteed issue life insurance because there are other options
  • Company does not know how healthy you are; that's why it is more expensive

Before deciding

Both Guaranteed Issue Life Insurance and Simplified Issue Life Insurance are usually considered by individuals who are between 45-85 years old and have health issues that make getting life insurance challenging. Always get a quote on life insurance. It costs nothing and can only inform you on making your decision. One good strategy would be to apply for Simplified Issue, since it is usually less expensive. Then, if you are denied then buy Guaranteed Issue. I suggest talking to a person on the phone or even in person when discussing any insurance policy you are considering. Life insurance policies can be very confusing and it will be easier to discuss the policy in person than through email. That way you get all of your questions answered and you understand all the terms before you sign on the dotted line and start paying the premium.

If you have any questions about Guaranteed Issue or Simplified Issue Life Insurance, feel free to ask below in our comment section. We'll do our best to help you better understand your options and which might be best for you.

[1] MCMHA, [2] Wealth Pilgrim, [3] Insure, [4] Insure Chance

Sources: Frankle, Neil. "How To Save Big on Guaranteed Issue Life Insurance"; Frankle, Neil. "Should You Buy Guaranteed Issue Life Insurance - A Surprising Answer"; "The Basics of Guaranteed Issue Life Insurance"; Dudayev, Mack. "Guaranteed Issue Life Insurance aka No Questions Asked"