We often get asked questions along the lines of “My aging parent is very ill and medical bills have drained his/her savings account, but I cannot afford to pay for the funeral if he/she should pass away. Can I buy life insurance on my parent?” In this scenario, we do not advise purchasing “regular” fully underwritten life insurance. More often than not, term life insurance is going to be ideal for most people, but not in this scenario.
Why we wouldn’t recommend term insurance in this case…
Term life insurance would typically not work in this case because the coverage amount would be too small, the client would likely be uninsurable because of health issues, and the client’s age would be outside the range a life insurance company would approve coverage for.
What we would recommend…
When we get this question, we usually tell inquirers that they have two options:
What is a guaranteed issue life insurance policy?
Guaranteed issue life insurance is a type of life insurance that you cannot be denied coverage on, hence “guaranteed”. There are a few things you should know about this type of insurance.
So, if you’re in relatively good health, fully underwritten life insurance may be a better option for you. However, guaranteed issue life insurance is a great option for those with a desperate need.
How much does guaranteed issue life insurance cost?
While you can get millions of dollars’ worth of term life insurance coverage, guaranteed issue life insurance coverage often caps at $50,000. Again, its design is based around simply helping your surviving loved ones pay for your final expenses.
Quotacy works with Gerber Life to provide guaranteed issue coverage options. Gerber’s guaranteed issue policy is available in all U.S. states except for Montana. Take a look at the examples and table below to get an idea on what a guaranteed issue policy can cost.
John Smith is 55 years old and has been denied for traditional life insurance because of his Stage IV prostate cancer. He does not want to burden his children with his final expenses so he plans on purchasing guaranteed issue life insurance.
He’s automatically approved without having to undergo a medical exam or fill out any health forms. John obtains $20,000 in coverage and his premiums are $91.30 per month.
If John passes away within two years, Gerber Life will refund to his beneficiaries all premiums that had been paid plus 10% interest. However, if John happens to die because of an accident unrelated to his health within those two years, his beneficiaries will receive the full $20,000 death benefit. After two years, his beneficiaries will receive the full death benefit regardless of how he dies.
Jane Doe takes care of her 79-year-old mother Sally. Sally does not have any life insurance and Jane is worried that she won’t have the funds to give her mother the funeral she deserves. Jane decides to buy a guaranteed issue life insurance policy on Sally.
A $12,000 policy is enough for Jane to ensure she can pay for a proper funeral and burial. Sally is approved for coverage and the policy will cost $165.70 per month.
Although this type of policy is easy to acquire, it offers less coverage and higher premiums than traditional life insurance, so explore all your options. If you aren’t sure if guaranteed issue life insurance is the best choice for you or want more information,