Guaranteed Acceptance Life Insurance Offers Alternative To Uninsurable
We are often told by individuals that there is no possible way that they can purchase life insurance. They feel that due to their health, lifestyle, or choice of profession/activities they would not be accepted for a life insurance policy. The fact of the matter is there are some reasonable alternatives for high risk individuals. One of the most straightforward policies that would work in this situation is called guaranteed acceptance life insurance.
Guaranteed acceptance life insurance is a life insurance policy that turns a blind eye to your life. There are no medical tests, no questions, and no prodding into your personal life or history. You are guaranteed acceptance into the life insurance policy.
How Can Companies Offer Guaranteed Acceptance Life Insurance?
You are probably wondering what the catch is. Why would insurance companies offer guaranteed acceptance life insurance policies? Well you are right in wondering if there are stipulations to the contract. There are three different ways in which the insurance companies can justify offering this life insurance that has a guaranteed acceptance.
The first way that they are able to make up the added risk is by offering the policy for a higher premium than other accounts. This allows them to make up the difference in additional risk that they face. Though the policy is with a higher premium, it still provides coverage that would otherwise be unavailable. The benefit of paying higher premiums often outweighs the additional insurance cost for the policy owner.
The second way that life insurance companies can offer guaranteed acceptance life is by limiting the death benefit available. The company can minimize their risk by only offering relatively low death benefit payouts. Again, because the risk is higher for the insurance company, they can offset their potential loss by capping the payout they are responsible for. Often the death benefit on these guaranteed acceptance life insurance contracts is capped around $20,000 to $30,000.
The third common way in which companies minimize their risk enough to offer these guaranteed life policies is by restricting the death benefit in the first couple of years. If the life that is covered on the account dies during the first couple of years, the beneficiary will only receive a portion of the death benefit. This often comes on a stepped up scale. The first year, the beneficiary will get little more than the premiums back from the policy. Each subsequent year will provide some percentage more back to the beneficiary. This restriction generally only lasts for the first three years or so of the contract terms, though this may vary from company to company.
Keep in mind that the insurance companies may use a combination of all three of these options to cover their added liability. The most common combination is with options two and three. This provides the most comprehensive risk coverage for the insurance company, but also allows them to offer a competitive product.
What Are The Features of Guaranteed Acceptance Life Insurance?
The primary feature of guaranteed acceptance life insurance is that it is no-medical exam life insurance. Not needing a medical exam is one of the most appealing features for the majority of potential prospects. There is a strange sort of overwhelming helplessness when you know because of your medical condition that you will be unable to provide your loved ones with life insurance. Guaranteed acceptance life insurance takes away the helplessness and provides hope to the uninsurable.
Not only does it not require a medical exam, there are no invasive questions about your life as well. They won’t ask about your medical history, prod about your high risk hobbies, and won’t reject you because of your employment.
The next feature that really makes the guaranteed acceptance life insurance policy stand out is that the insurance company will not change your contract after you execute it. They won’t later increase your premiums, reject or cancel your contract, or lower your death benefit. The only way to cancel your policy is if you choose to cancel it. It should be noted that premiums can increase if the company chooses to increase you entire risk class, however, you will never be singled out for a premium rate increase.
Because guaranteed life insurance is capable of covering all types of risk (though you probably wouldn’t use it if you otherwise qualified), it is also often called high risk life insurance. One of the disadvantages of guaranteed acceptance life insurance is that the death benefit is often low. One way to plan for this is by purchasing multiple insurance policies that offer guaranteed acceptance. This way you are able to add additional death benefit payments to your beneficiaries.
A common use of guaranteed acceptance life insurance is to also use the contract as a form of burial insurance. The death benefit is often sufficient to cover the costs of funeral expenses, which average around $7,000 to $8,000. This can be an effective alternative for those that have not made sufficient end of life planning for their families.
High risk individuals can greatly benefit from the guaranteed acceptance life insurance policies offered by insurance companies. As with all other forms of insurance purchases, we strongly recommend shopping around for your policy. Features and benefits may vary greatly between companies and policies should be structured to fit your specific needs.
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