The Truth About Guaranteed Issue Life Policies

If you spend any time online, or even in front of your television set

, you will see ads for policies that offer to accept all applicants. Some say they do not need a physical or ask any health questions. Do you think they would be a good deal for a person like you? It is important to understand how these types of guaranteed issue life insurance policies work before you buy one.

What you may not know, from watching a quick advertisement, is that insurers are still protecting themself. If they just issued life insurance to everybody without any health underwriting, and they still paid out huge death benefits, they would go broke very fast. You know that insurers are very good at making a profit.

The first thing to understand is that these policies are usually pretty small. They may max out at ten or twenty thousand dollars. In the insurance world, that is considered a small policy. So they are not making lots of million dollar payments on policies like this.

But they are not even taking a big risk with a few thousand dollars. One other thing that policies like this will probably have is a waiting period. That time period may be two or three years. If the insured person passes away before this period ends, their family will not be able to collect the whole death benefit.

You must understand that different companies will have different terms on their policies. Some insurers offer to give back the premiums if the insured person does not survive the waiting period. Some insurers may pay out a fraction of the policy. Some have a combination of these things.

Here is an example of how a graded death benefit may work. Keep in mind that this is an example. It is not intended to explain any particular policy. Let us say the policy will return premiums, with interest, if the insured individual passes away in the first year. It will pay a quarter of the death benefit if the person passes away in the second 12 months. For the third period, it way pay half the premum. After 36 months have elapsed, the family is entitled to the whole death benefit.

In order to get the best life insurance policy for you, if it is guaranteed issue or not, it is important to shop around for the best rates and deals.

by: Mark Bradshaw.

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