Simplified and Guaranteed Issue
Not everyone can qualify for traditional life insurance with full medical underwriting. Simplified issue and guaranteed issue products provide coverage options for those who might otherwise be uninsurable.
Simplified Issue Life Insurance
Simplified issue life insurance requires only a health questionnaire—no medical exam is needed.
How It Works
| Feature | Simplified Issue |
|---|---|
| Medical exam | Not required |
| Health questions | Yes (questionnaire) |
| Underwriting | Based on answers to health questions |
| Coverage amounts | Typically $50,000 to $500,000 |
| Issue time | Faster than fully underwritten |
The Application Process
- Applicant completes health questionnaire
- May include prescription drug database check (MIB, Rx check)
- No blood tests, urine tests, or physical exam
- Approval based on questionnaire answers
- Coverage issued within days (vs. weeks for fully underwritten)
Common Health Questions
| Question Type | Examples |
|---|---|
| Medical conditions | Heart disease, cancer, diabetes, stroke |
| Lifestyle | Tobacco use, hazardous activities |
| Medications | Currently taking certain medications |
| Treatment history | Recent hospitalizations, surgeries |
Trade-Offs
| Factor | Fully Underwritten | Simplified Issue |
|---|---|---|
| Premiums | Lower | Higher |
| Coverage limits | Higher | Lower |
| Medical exam | Required | Not required |
| Approval time | Weeks | Days |
| Qualification | Stricter | Easier |
Who Uses Simplified Issue
- People who dislike medical exams
- Those who need coverage quickly
- Individuals with minor health issues
- Applicants who want convenience
- Small coverage amounts where exam isn't cost-effective
Guaranteed Issue Life Insurance
Guaranteed issue life insurance requires no medical questions and no exam—coverage is guaranteed regardless of health.
How It Works
| Feature | Guaranteed Issue |
|---|---|
| Medical exam | Not required |
| Health questions | Not required |
| Underwriting | None—acceptance guaranteed |
| Coverage amounts | Typically $5,000 to $25,000 |
| Premiums | Highest of all underwriting types |
Key Characteristics
| Characteristic | Description |
|---|---|
| No health questions | Cannot be declined for health reasons |
| Age limits | Typically ages 50-85 |
| Graded death benefit | Often has waiting period for full benefit |
| Higher premiums | Significant premium for guaranteed acceptance |
Graded Death Benefit
Most guaranteed issue policies have a graded death benefit (waiting period):
| Time Period | Death Benefit |
|---|---|
| Year 1 | Return of premiums only (or premiums + interest) |
| Year 2 | Return of premiums only (or partial benefit) |
| Year 3+ | Full death benefit |
Exception: Accidental death during the waiting period usually pays the full benefit.
Why Graded Benefits?
The graded benefit protects the insurer from anti-selection—people who know they're dying buying insurance just before death. Without some waiting period, guaranteed issue would be financially unsustainable.
Trade-Offs
| Factor | Simplified Issue | Guaranteed Issue |
|---|---|---|
| Health questions | Yes | No |
| Coverage limits | Higher | Lower |
| Premiums | Moderate | Highest |
| Waiting period | Usually none | Usually yes |
| Qualification | Some screening | Everyone accepted |
Final Expense Insurance
Final expense insurance (also called burial insurance or funeral insurance) is designed to cover end-of-life costs.
Purpose
To cover costs associated with death:
- Funeral and burial expenses ($7,000-$15,000 average)
- Cremation costs
- Outstanding medical bills
- Legal fees
- Other final expenses
Typical Features
| Feature | Final Expense |
|---|---|
| Coverage amounts | $5,000 to $50,000 |
| Policy type | Usually whole life |
| Target market | Seniors (ages 50-85) |
| Underwriting | Simplified or guaranteed issue |
| Premiums | Level, affordable |
Common Marketing Names
- Final expense insurance
- Burial insurance
- Funeral insurance
- Senior life insurance
- Pre-need insurance
Final Expense vs. Pre-Need
| Type | Description |
|---|---|
| Final expense (insurance) | Life insurance policy; proceeds paid to beneficiary |
| Pre-need (funeral contract) | Contract with funeral home; prepays specific services |
Burial Insurance
Burial insurance is essentially the same as final expense insurance—the terms are often used interchangeably.
Characteristics
| Feature | Burial Insurance |
|---|---|
| Coverage | Small amounts ($5,000-$25,000) |
| Underwriting | Simplified or guaranteed issue |
| Policy type | Whole life (permanent) |
| Target market | Seniors |
| Purpose | Cover funeral and burial costs |
Important Considerations
| Consideration | Details |
|---|---|
| Premium comparison | Compare costs across multiple companies |
| Waiting periods | Understand any graded benefit provisions |
| Inflation | Consider if coverage will be adequate at death |
| Alternatives | May be able to get better value with standard coverage |
Comparison Summary
| Feature | Fully Underwritten | Simplified Issue | Guaranteed Issue |
|---|---|---|---|
| Medical exam | Yes | No | No |
| Health questions | Yes | Yes | No |
| Coverage amounts | Highest | Moderate | Lowest |
| Premiums | Lowest | Moderate | Highest |
| Approval time | Weeks | Days | Immediate |
| Waiting period | No | Usually no | Usually yes |
Key Takeaways
- Simplified issue requires health questions but no medical exam
- Guaranteed issue requires no health questions—acceptance is guaranteed
- Guaranteed issue has highest premiums and lowest coverage amounts
- Most guaranteed issue policies have a graded death benefit (waiting period)
- Final expense/burial insurance is designed for end-of-life costs
- These products serve those who cannot qualify for traditional underwriting
- Trade-off: convenience and acceptance vs. higher cost and lower coverage
Guaranteed issue life insurance differs from simplified issue in that guaranteed issue:
A graded death benefit in a guaranteed issue policy means:
Final expense insurance is designed to:
9.4 Accelerated and Living Benefits
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