How Simplified Issue and Guaranteed Issue Life Insurance Work — And Who They’re Best For

As you build your career and have loved ones depending on you for income, getting life insurance is an essential step in helping to provide your family with protection if you’re no longer around to take care of them. But for many young people, the process to get life insurance might be too intensive — and confusing.

According to a 2020 survey by IBM iX, 23% of millennial respondents said they put off getting life insurance coverage because there were too many hurdles involved, such as extensive paperwork and medical exams. In the same survey, 28% of respondents said they did not have the time to go through the hassle.

However, getting a life insurance policy doesn’t have to be so time-consuming. Depending on your health, age, and the desired coverage amount, you may be eligible for guaranteed issue life insurance or simplified life insurance policies that streamline the application process.

How traditional life insurance underwriting works

With fully underwritten life insurance policies, the application process tends to be pretty involved. You typically have to submit an application, answer questions about your health and existing medical conditions, and undergo a complete medical exam as part of the underwriting process.

If that sounds too rigorous, you may be eligible for guaranteed issue or simplified issue life insurance, which could offer simpler application processes.

How does guaranteed issue life insurance work?

The underwriting process for guaranteed issue life insurance, also known as guaranteed acceptance life insurance, typically works differently than what you’d experience with fully underwritten policies.

Life insurance companies that sell a guaranteed issue life insurance policy don’t ask health questions, and there’s no need for a medical exam. As long as you meet their eligibility requirements — for instance, many companies restrict guaranteed issue policies to certain age groups — you can't be denied coverage.

Guaranteed issue life insurance policies are generally whole life insurance policies, which means they provide permanent coverage for your lifetime. However, they typically come with much lower coverage amounts than fully underwritten policies, and they often have higher premiums.

Because of the expense, guaranteed issue policies tend to be best for people who are at high risk for certain health issues, have a terminal illness, or have existing conditions that would exclude them from qualifying for fully underwritten policies. Otherwise, this type of life insurance might not be a good investment.

Guaranteed acceptance policies often have a graded death benefit and limit how much your beneficiaries can receive within the first few years after you purchase coverage. Your beneficiaries may not be eligible for the full death benefit unless you die after the waiting period ends.

How does simplified issue life insurance work?

Unlike guaranteed issue life insurance, simplified policies can be whole, term, or universal life insurance policies.

A simplified life insurance policy could be for you if you’d like to purchase coverage but don’t necessarily want to go through a medical exam. Insurers that sell simplified issue policies often require you to fill out a health questionnaire, and they might look up your prescription history and medical records. However, you don’t necessarily have to get bloodwork done or visit a doctor to get approved for coverage.

Not everyone will be eligible for simplified life insurance policies. Although you cannot be denied coverage with guaranteed issue policies, insurance companies might turn you down for simplified life insurance if you have existing health conditions.

Simplified issue life insurance policies can be more convenient than fully underwritten policies. However, you could potentially pay a higher premium for that convenience, depending on the company you choose.

Guaranteed issue life insurance pros and cons

Although guaranteed issue policies can be useful for some people, they’re not a good fit for everyone. Consider these advantages and drawbacks to decide whether this type of life insurance is a good investment:

Pros

• You cannot be turned down for coverage. If you’ve been denied life insurance coverage in the past, guaranteed issue policies can be a way to purchase some insurance to help provide for your beneficiaries.
• You don’t have to get a medical exam. If you’d like to avoid a medical exam and time-consuming questions, guaranteed issue policies could potentially allow you to purchase a policy relatively quickly without answering questions about your health.
• Policies build cash value. Typically, guaranteed issue life insurance is a form of whole life insurance, so policyholders may be able to build cash value over time. Later, you might be able to tap into the cash value while you’re still living, depending on your coverage.

Cons

• Premiums tend to be high. Because people with pre-existing health issues might qualify for guaranteed issue life insurance, insurers could charge much higher premiums for these policies.
• You may only get a small policy. Although other forms of life insurance might allow you to get $1 million or more of coverage, guaranteed issue policies are typically much smaller. In general, the benefit amount is usually $25,000 or less.
• Only certain age groups are eligible. Guaranteed acceptance policies often aren’t available to people of all ages. Insurance companies typically restrict it to people between the ages of 50 to 85, though it varies by company.

Simplified issue life insurance pros and cons

If you’re trying to decide between simplified issue and guaranteed issue life insurance, keep these pros and cons of simplified coverage in mind:

Pros

• You can choose between different life insurance types. With simplified life insurance, you can generally choose the type of insurance that works for you. You might find companies that sell simplified term, whole, and universal life policies.
• You can purchase a larger policy. Unlike guaranteed policies, which tend to have low coverage amounts, some insurers allow you to buy a substantial amount of coverage with a simplified policy. Depending on your health and the company, you could purchase a policy with a benefit as high as $1.5 million.
• Coverage starts quickly. Simplified life insurance policies could potentially be purchased quickly. If you’re approved for a life insurance plan, coverage often starts quickly; you typically don’t have to worry about waiting periods or graded benefits.

Cons

• Premiums are more expensive. Although simplified policies are usually cheaper than guaranteed issue insurance, the premiums might be higher than if you purchased a fully underwritten policy.
• You may be denied coverage. With a simplified issue life insurance policy, you could potentially be denied coverage based on health concerns, your prescription use, or even your weight.
• You’ll receive lower coverage amounts than fully underwritten policies. Simplified issue policies might have lower coverage amounts than fully underwritten policies. If you need a lot of coverage to help to provide for your family’s needs, or if you want to leave loved ones an inheritance, fully underwritten policies might provide $10 million of coverage or more.

How to choose the best life insurance coverage

When shopping for life insurance, keep the following factors in mind to help you choose the right policy:

• Age: The younger you are, the more likely you are to qualify for a policy with lower premiums. As you age, you might still be able to get coverage, depending on the company and policy type, but policies could be more expensive.
• Available riders: Depending on the insurance company and the policy, you might be able to add optional riders to your plan to adjust your coverage. For example, you could potentially use riders to get coverage for your spouse or children. Or if the company offers an accelerated death benefit rider, you could access some of your benefits while you’re still living if you’re diagnosed with a chronic or terminal illness. You might decide to use a portion of your policy’s benefit amount to pay for a nursing home or other medical expenses.
• Company reputation: Look for a company that has been established for some time and has policies underwritten by well-respected insurers. A good resource is the J.D. Power Individual Life Insurance Study; it ranked companies based on their available policies, pricing, and customer service.
• Coverage amount: When thinking about how much coverage to purchase, consider who relies on you for financial support and how much assistance they’d need if you were no longer around. For instance, if you have young children, you might need more coverage to provide for their care and education than if your children are adults.
• Premiums: Make sure you can comfortably afford your policy premiums. Rates often vary by insurance company, so get quotes from multiple insurers to ensure you’re getting the best deal.

FAQs

The bottom line

If you have been putting off getting life insurance because you didn’t want to go through a lengthy application process or get a medical exam, guaranteed issue and simplified issue life insurance policies might be useful solutions. With these types of insurance, you might be able to apply for coverage without undergoing a medical exam and can often do so online.

It’s always wise to compare before selecting a company. Check out our picks for the best life insurance companies to get started.