Guaranteed cost insurance, or guaranteed accepted life insurance, is a policy that can’t be denied to you. What makes it appealing is that you don’t need to answer any health questions or opt for medical exams to apply for this policy.
Hence, getting this insurance coverage is much easier compared to other insurance types.
According to Forbes Advisor Research, an average $20,000 guaranteed cost insurance policy will cost nearly $154 per month for a 70-year-old woman. On the other hand, an 80-year-old woman needs to pay $329 every month. Hence, it is slightly costlier compared to other types of insurance coverage.
However, let that not discourage you, as there are a set of benefits as well. In this article, we will discuss the pros and cons of a guaranteed life insurance policy so that you can make an informed decision.
Who Is This Policy Apt For?
Simply put, a guaranteed cost insurance policy offers coverage to specific people who require insurance but lack other options. They might want to offer a small legacy for their kids and grandchildren. This insurance coverage is apt for people who:
- Have a limited budget for a life insurance policy.
- Are content with possessing a very minimal amount of insurance coverage, for instance, $10,000.
It is also applicable for people with specific medical conditions that wouldn’t allow them to opt for any other insurance coverage, like whole life insurance. People with the following medical conditions can opt for this policy:
- HIV or AIDS
- Cancer
- Dementia or Alzheimer’s
- Type 2 diabetes
- Patients who require a tissue or organ transplant
- Any terminal ailment with a life expectancy of two years or less
However, if your life expectancy is about or less than two to three years, your policy beneficiaries will get the paid premiums along with the interest owing to the graded period.
Prescient National states that the leading insurance providers in this niche today offer the best coverage plans. They customize these plans using advanced analytics and deep thinking so that their clients get what they need.
Benefits and Drawbacks of the Policy
Even though the guaranteed insurance coverage might appear promising for you, it is necessary to delve deep before making a final decision. Discussed below are both the pros and cons of this policy for you to decide better.
Pros
- No Health Questions or Medical Exam Required: Guaranteed cost insurance has a simple application process. All you need to do is answer a few personal questions, choose a coverage amount, and pay the initial premium. After you get approved, the policy can get activated instantly, as you don’t have to wait for any underwriting decision.
- Easy Qualification: The insurers might specify certain age criteria in this policy. However, since there is no need for any medical exam, almost everyone who applies for this policy qualifies. It is true for patients who have heart ailments, cancer, HIV, and who’ve had a recent stroke.
- Policy Beneficiaries Receive Premiums and Interest: There are times when policyholders die within a couple of years of the policy’s issued date. If that happens to you, your beneficiaries will receive premiums paid for the policy along with the interest. Furthermore, the rate of interest can be approximately 10% and vary based on the insurance company.
Cons
- Low Coverage Amounts: Since insurers bear ample risk because of the guaranteed life insurance policy; the coverage amounts offered are low. Hence, the amount for maximum death benefit differs based on the company, but it doesn’t exceed $25,000.
- Waiting Period: This policy comes with a waiting period before the death benefit is paid out. The time can vary between one to two years. And during this time, it is essential to pay the full premium.
How to Make the Most of Guaranteed Cost Insurance?
The amount you receive from this policy can secure your dear ones and cover the burial costs that are becoming costly. That aside, other uses to which you can put the guaranteed cost insurance coverage are:
- Clearing out debts
- Paying medical bills
- Keeping it as an emergency fund
- Paying for the daily family expenses
In conclusion, guaranteed life insurance can offer coverage to people who are denied insurance because of their age or health condition. This policy comes with its set of benefits and a few cons to deal with as well.
Hence, you should weigh and assess your circumstances and needs before making the final choice.