What is Guaranteed Whole Life Insurance?

Everything you need to know to determine whether it is right for you or not.

Life insurance has different policies that have been carefully curated to cater to every individual’s needs. One such policy is a guaranteed whole life insurance policy.

What is Guaranteed Whole Life Insurance?

Guaranteed Whole Life Insurance is a type of whole life policy that does not require a medical exam. You do not need to answer health questions or allow an insurance company to review your medical or prescription history. That is why it is also sometimes referred to as “no questions asked” insurance.

However, like everything that seems easy, guaranteed whole life insurance has a catch. There is always a long waiting period before the policy is put in effect.

Since this is a policy essentially for people with poor health, which includes people over the age of 60, insurance companies do not want people to only opt for guaranteed whole life insurance as it might end up putting these insurance companies out of business. Which is why they have put the waiting period as a factor so that they can discourage people from buying it.

However, if you die during the waiting period, your insurance company will pay back all your insurance premiums to your beneficiaries with 10% more.

How Guaranteed Life Insurance Works

The “guaranteed” word comes from the insurance company’s guarantee to provide you a policy. They will accept you as a candidate even if you have serious health conditions. The typical range in which individuals qualify for a guaranteed life insurance is 50 to 80 years old. Which is why, guaranteed whole life insurance for seniors is a good option.

However, guaranteed whole life insurance for under 50 is also available. You might just get fewer options, making it difficult to opt for this policy when you can opt for other life insurance policies.

Guaranteed whole life insurance is essentially for those people who have been denied other life insurance policies because of their poor health. Below is a list of reasons why other life insurance policies might have denied coverage:

  1. Terminal illness.
  2. Organ or tissue transplant.
  3. Dialysis.
  4. Alzheimer’s or Dementia.
  5. Nursing home resident.
  6. Cancer.
  7. AIDS or HIV.
  8. Chronic disease due to which you are in a wheelchair.

These might keep you from purchasing coverage from other policies but should not matter when purchasing a guaranteed whole life insurance.

Cons of Guaranteed Whole life Insurance:

  1. Insurance companies will not issue guaranteed whole life insurance for people above the age of 80.
  2. The coverage amount for a guaranteed whole life insurance is usually very low which is why people typically use it to pay off final expenses only.
  3. It would be advisable to look into other policies if you do not have serious health conditions as guaranteed whole life insurance is a very expensive policy to purchase with high premium rates.
  4. Guaranteed whole life insurance policies use graded death benefits to discourage people from applying for these policies. If you pass away within the first two years of the policy, you will receive only a refund of the premiums you have paid during that time with interest that varies company to company.
  5. Some guaranteed whole life policies also have a cash value component that you can borrow against. However, if you do not pay back that loan, your beneficiaries will only get the amount after what you owe has been deducted.

However, there are certain pros to the policy as well.

Pros of Guaranteed Whole Life Insurance:

  1. The policy is easy to apply to. Since there is no medical exam that follows the application process or any reviewing of the history, these policies have a very hassle free process.
  2. As said before, there is no medical exam required which means you can stop worrying about being denied the insurance because of any health issues you may have.
  3. Guaranteed whole life insurance no medical questions asked policy can be a deciding factor for people with poor health when getting life insurance.

However, as you can see, the disadvantages of getting the policy clearly outweigh the advantages. This is why it is encouraged to apply to the other life insurance policies before you decide to apply to a guaranteed whole life insurance policy. There are ways to determine whether or not guaranteed whole life insurance is the best option for you.

How to determine if this policy is right for you?

There are essentially two instances where a guaranteed whole life insurance policy may not be the best route to choose.

One, if you live long enough that your premium amount exceeds the total death benefit you would get. This is not a good idea for obvious reasons. You will be paying more to the insurance company than you will get. It will end up with you in severe loss.

Two, if you buy an expensive guaranteed whole life insurance policy when you could have bought other life insurance policies with lower rates or one that has medical underwriting.

Policies that have medical underwriting usually have lower premiums since people with considerably good health buy these policies and there is less risk. The more the risk there is in insuring an individual, the more insurance companies charge them.

So what’s the bottom line?

The bottom line is, now you know what guaranteed whole life insurance is and why it is a good idea for people who have tried every other life insurance policy and were denied due to their health conditions. It can be a valuable financial asset for these people who will not have to worry about funeral costs after their demise.

The best way to secure any policy, including guaranteed whole life insurance, is to make sure you look and shop around before settling on this one. This will give you at least a vague idea about the market and your worth. You should then speak to an insurance agent who can connect you to insurance companies offering what you need. Once you have looked around, you will have a better sense of how much you need to invest in life insurance. You can then decide to purchase a policy in line with your financial situation. It is necessary to purchase a policy which you can afford even if your financial situation changes. The biggest mistake people make is going for an expensive policy that they have trouble affording later on. After you have made these decisions, all there is left to do is purchase a policy and secure your future.

Nabeel Ahmad

Nabeel Ahmad

Nabeel Ahmad is the founder and editor-in-chief of Insurance Noon. Apart from Insurance Noon, he is a serial entrepreneur, and has founded multiple successful companies in different industries.

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