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Many consumers purchase Guaranteed Issue Life Insurance to pay their final expenses and often times they can qualify for less expensive life insurance policy to cover their funeral expenses. “Guaranteed Acceptance” and “Guaranteed Issue” means the exact same thing…the difference is the person who is talking about it.
Consumers usually call it Guaranteed Acceptance and insurance agents usually refer to it as Guaranteed Issue or GI.
Is Guaranteed Acceptance Life Insurance A Good Purchase?
Guaranteed Issue insurance is most commonly purchased to pay the costs of a burial, cremation, a funeral service, plot, transportation or any other expense incurred at the end of life– Life’s expenses that are truly inevitable. We will all get to that point one day when a family member will have to pay the expenses for when we die.
Guaranteed Acceptance life insurance is the easiest type of life insurance to get because there are absolutely no health questions to answer, no criminal background checks, they won’t come to your house to draw blood or even order any medical records. If you can pay for it, they will give it to you.
But you pay the price for getting a policy with no questions asked. You literally could end up paying a higher price than if you would take a few minutes to answer some health questions.
Whatever you want to call these “no health questions asked policies” makes no difference. The bottom line is that when you purchase life insurance to pay for your funeral costs, it should be there until the day you die, whenever you die. It is our opinion that term insurance should not be used for this purpose.
Only permanent insurance, including Whole Life or Guaranteed No Lapse Universal life should be used for this purpose. I have a very hard time classifying any type of “Term Insurance” as a Final Expense Insurance, Funeral Insurance or a Burial Policy. Why not? Simple…You could out live the term of the policy.
What’s the Difference between Whole Life and Term?
You can classify life insurance into two major categories; Permanent Insurance and Term Insurance. Term insurance is typically meant to last a specific number of years or time. Depending on the type of term insurance purchased, the premiums will either stay level for a certain period of time, or they will increase at specific ages along the way and eventually end. For some consumers, that’s just fine because they never planned on keeping it anyway, and only needed it for a certain amount of time.
The reason that consumers should buy Term insurance is to have some financial protection for a specific amount of time. For example, new home buyers commonly purchase a 30 year term policy because the mortgage is for 30 years. Others may purchase Term insurance to provide their spouse with income if they die before they reach retirement and start to collect Social Security and their pension. Once they do, they don’t need the coverage any longer.
If you are purchasing a life insurance policy to pay for your final expenses, the need to be buried or cremated will NEVER end. It will always be an expense that someone has to pay for. You know the old saying that “nothing in life is guaranteed but death and taxes?” Well they forgot about the guarantee that someone has to pay for your death. It’s not free! Guaranteed!
From time to time we’ll have a client tell us they don’t care how long it will last, only that it’s the lowest price. Usually after explaining the difference, they understand and are willing to take a lower amount of death benefit in exchange for the coverage lasting a lifetime. But, occasionally we get the consumer who listened to some speaker telling them never to by Whole Life only term, so if they absolutely insist on term insurance, we’ll find them a term policy but make sure they understand what they are getting.
Can you imagine having to look for new life insurance at age 76 after paying your premiums for the last 20 years with nothing to show for it? If paying for your final expenses is really what the coverage is for, you should be looking at whole life insurance which is guaranteed to never change in any way as long as you pay your premiums on time and don’t have any outstanding loans against it.
The premium won’t change, the death benefit stays the same and it lasts until you die or it endows. If a policy endows, then you have lived so long that the policy is worth cash equal to the death benefit, typically at either age 100 or now 121.
Now that you understand the difference between the two different kinds of life insurance that are marketed as final expense, let’s look at the difference between buying Guaranteed Acceptance and Simplified Issue final expense/ burial insurance.
How Underwriting Is Different Than Other Types Of Coverage
Most of the time, Guaranteed Acceptance Life policies will cost more money than Simplified Issue policies, and you will get an inferior product. All you have to do is answer a few health questions and let the agent do what we do best. Even more important than the price, is the death benefit payout. All Guaranteed Acceptance policies have some type of limited benefits during the first 2 years, and a few even limit the death benefit during the third year.
The companies that market these plans directly to customers don’t tell you what your other options are, and they make it sound so attractive by pointing out things like:
- No Physicals—Simplified Whole life does not require physicals either
- Locked In Benefit—Simplified Whole Life locks in your benefit too
- Coverage Can’t Be Canceled—Simplified Whole life won’t cancel you if you pay your premiums either
- Flexible Payment Options—All companies let you choose the mode of payment
- Peace of mind—You’ll have more piece of mind knowing your family gets the FULL death benefit from day one!
There is absolutely no reason to go straight for a policy that should only be used as a last resort. Unfortunately, most people who contact a company directly to purchase a Guaranteed Acceptance Life insurance policy really don’t have to. If you are using our independent agents to look for life insurance, I can promise you that there are very few health conditions we will go straight for GI. Those conditions include:
- Diagnosis of HIV, AIDS or ARC
- Diagnosis of Alzheimer’s or Dementia
- Residing in a Nursing Facility
- Currently hospitalized
- Current use of Oxygen
- Have a terminal Illness
Anything else, we are going to do our research to find the company who will offer you the BEST QUOTE and approve you for the BEST death benefit at the lowest price.