Who Should Buy Guaranteed Issue Life Insurance – A Surprising Answer

by Neal Frankle, CFP ®

Guaranteed issue life insurance is a last-ditch option for many people. But is it a good bet? First, let’s understand what guaranteed life insurance is.

This is a life insurance policy that the company “must” issue if you pay your premium. The company usually just asks your age. They don’t ask any medical questions whatsoever.

As you know, most life insurance applications ask you lots of medical questions. And they usually have a nurse come to your house for a medical exam. They really only want to insure you if you are healthy. This way, you’ll pay premiums for a long time and possibly even cancel the policy before you die.

Guaranteed issue insurance caters to people who can’t get term life coverage anywhere else. So if you can’t get life insurance elsewhere, why not get a guarantee issue life insurance policy?

There are plenty of reasons:

First, the premiums for a guaranteed issue life  policy are high. They could even be four or five times as expensive as a comparable life insurance policy.

“Well,” you’re saying to yourself, “if I can’t get coverage elsewhere, I’m willing to pay the higher price.” Don’t be so sure it’s a good option. First, even if you think you aren’t insurable or you’ve been declined by other companies, it never hurts to ask other companies for offers.

Understand that insurance companies are really run by actuaries. (These are just accountants with a tad less personality). They determine what your life expectancy is.

Different actuaries interpret risks differently. One mainstream life insurance carrier might offer you a policy where other companies wouldn’t. It never hurts to ask for a life insurance quote.

There is also one big caveat you have to understand if you are going to buy a guaranteed issue policy. In most cases, if you die (other than as a result of an accident) within two years of buying the policy, you only get your premiums refunded. You won’t get the full death benefit. This is the insurance company’s way of protecting itself from very bad risks.

But people facing huge health risks are the ones most interested in buying this policy. For that reason, if you are facing a major health crisis and are scrambling to buy life insurance, make sure you check this provision out before you sign on the dotted line.

Another consideration is that these guaranteed  policies are usually issued for small amounts. Usually, the policies issued for death benefits are between $5,000 and $50,000.

If you need life insurance, don’t assume a traditional carrier will decline you. Find out. It doesn’t cost anything to get a quote. It could be the best move you could make to protect yourself and your life insurance beneficiary. Of course you should be completely honest when you complete your application. But guaranteed  life  should be your very last option and even then, possibly avoided.



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{ 33 comments… read them below or add one }

Laura C. November 21, 2014 at 4:34 PM

Hi Neal,
My 85 yr old mother is one of those who purchased a Mut. of Omaha guaranteed policy for $10,000. Her premium payments are $139.50/month. I believe she will have paid the policy in full sometime this coming year and, thus, will be losing money thereafter. She bought the policy when she was diagnosed with COPD (although her Dr. doesn’t believe she has it) and last year was diagnosed with Pancreatitis. She’ll be 86 12/21, is active, travels, drives herself, does all her own shopping, helps me groom my horses and does some trail-riding, etc. I’m wondering if there are any other insurance alternatives for her at her age (I’ve heard she has to buy before 86?). I hate to see her throwing money away on a “pd in full” policy. I’m her sole beneficiary (and only child) Any thoughts or suggestions? Thanks,


Neal Frankle, CFP ® November 30, 2014 at 12:13 AM


Please contact me at http://www.mcmha.org/ to discuss this… thanks!


Jenn August 1, 2014 at 9:19 PM

Hi Neal,
My mother was diagnosed with lung cancer last December. We have been desperately searching for a policy that does not require a 2 year waiting period. She was recently put on hospice because she is now considered terminal. Is there anything out there at all to help with final expenses? Even if it’s a low amount.



Neal Frankle, CFP ® August 3, 2014 at 1:40 AM

Jenn, sorry to hear about your mother being ill. Please contact me here for help on life insurance. Thanks…


Peter September 18, 2013 at 12:20 AM

Guarenteed issue life isnt a bad deal for someone who cannot get anything else. I’ve sold many policies for $5,000-$10,000 in coverage to people who would not qualify for anything else. Guarenteed issue coverage pays back premiums + 5%-20% (depending on the carrier) should the PI die within the first two years. To the comment below of those that need it cant afford it ect…These people have not been savers for whatever reason for their whole life…If someone dies after 1 year of paying $50/month and their beneficiary gets 50 x 6 + 10% back – hey not much but better than zero. Its a forced savings account for the first 2 years with an interest rate one CANNOT get anywhere else without risk.


Peter September 18, 2013 at 12:21 AM

*math should have been $50 x 12 + 10%


Neal Frankle September 19, 2013 at 3:40 AM

With respect to what?


Neal Frankle September 19, 2013 at 3:42 AM

Peter, you make some valid points. However, many times people call me and immediately jump at the idea of Guaranteed Issue when they could save money by going a different route. Also, given that there are still medical questions people must answer, it may not be available to everyone. But, I do agree, for some people it might work if there is no other choice And your comment on the forced savings element is insightful. Nice.


Kathy September 16, 2013 at 10:52 AM

How many guaranteed life insurance policies can I have? Could I get 5 policies of $20,000 to get a total of $100,000?


Neal Frankle September 19, 2013 at 3:44 AM

Doubtful. But this is a good question which I’ll look into.


Neal Frankle September 19, 2013 at 10:34 AM

I can checked into this. The companies do ask about your other policies so this strategy would not work. Sorry….


Jeff Ambrose August 29, 2013 at 8:11 AM

Hi Neal,

Point well taken but if you want to bring agent misrepresentation into the equation you can make a case for not buying anything product under the sun. I’ve seen a lot of G.I. products come and go over the years and there are less options now than there used to be. My conclusion is companies were experiencing adverse selection. So who was really getting the “bad deal”? If companies could legally rip people off, the market would be flooded with G.I. products.


Jeff Ambrose August 27, 2013 at 7:08 AM

Hi Neal,

I’ve worked in the substandard risk life market for the last 20 years. I’ve found that very few people require a GI policy but they are not a bad deal. What you failed to mention is beneficiaries get all the premium back plus about 5% interest if death occurs in the first 2-3 yrs. Try getting that interest rate on a CD. GI policies are a great deal if your pretty sure your going to die in 3-5 yrs. You only lose by living too long. My other observation of the GI market is, “Those need it, can’t afford it and those who can afford it already have a Final Expense plan.”


Neal Frankle August 29, 2013 at 5:20 AM

Well said Jeff. My only problem is that people who buy it and don’t make it the 2 years may not understand that they are proceeding under false assumptions. As long as the agent clearly explains the 2 year window, I have no problem with this. Also, I agree that very few really need the GI. They just have to pick up the phone and speak to a qualified person and they can usually find a better deal. Thanks sir!


Diana Guerrero June 28, 2013 at 2:55 PM

How can we avoid being scammed? It seems that scammers have tapped into almost, if not all consumer markets.


Lynn February 8, 2013 at 4:42 PM

Thanks for this interesting read. I am confused though about what to do for my father. He is very ill, age 75, recently suffered a stroke. He has no money for a funeral or cremation.
We are trying to find a “TRUSTWORTHY” insurance plan to cover burial expenses.
I contacted an agent from SelectQuote, she said, he could qualify for Globe Life Guaranteed Plan.
But I am suspicious, she said it would be an immediate coverage, no waiting period.
So after one premium is paid, and he dies, they cover the funeral costs? What is the guarantee any of these insurance companies will pay out?
I immediately did a google search on this company and found horror stories of them not paying customers or stalling them.
Any advice would be greatly appreciated.


Neal Frankle February 10, 2013 at 8:26 AM


Most of these policies that provide immediate coverage for people like your dad will NOT pay off if he passes within 2 or 3 years of buying the policy. This is why I am not a fan of this kind of policy. If he is that ill, I fear that you will find it difficult to find any insurance company that will write this policy. But if you email me at neal DOT pilgrim AT gmail.com I can look into this further.



Charles Pennington November 4, 2012 at 5:41 AM

Hi Neal, Unfortunately I waited much too lomg to get insurance. I was a smoker (have COPD) and got lung cancer this year. (I no longer smoke) They removed 1/3 of my lung and I was in stage 2. I did 4 rounds of chemo and they said they think they got it all. But will go back for periodic testing to make sure. I am a borderline diabetic and had had some kidney stones issues. But I still cut my own grass and work 3 days a week at a Convenience store. (I am retired USN of 20 years) My wife is 56 and we have two daughters that we adopted at birth and they are now 13 & 16. I feel bad about putting insurance on the back burner. My wife has been home for years & I worry about what is to come for them if anything should happen to me. Am I eligible for any insurance at all? Please respond~
Charles Pennington
PS For all you people procrastinating an getting insurance…DON’T WAIT! DO IT NOW!


Neal Frankle November 6, 2012 at 1:05 PM

Charles, I delayed responding because I thought about you for several days. First, I am terribly sorry that you had these maladies but very happy to hear that the docs think they got it all. I am also really happy that you are working and being active at home. My hat is off to you. Finally, thanks for your service to our wonderful country. I bet your daughters are very proud of their dad.

Your best course of action would be reapply for life insurance once you get past a certain number of years. That threshold depends on your diagnosis. In your shoes, I would try to find out how many years must pass symptom-free before you can reapply for life insurance. I did a little research and found that you may be able to get some coverage. Try this site…..I am not sure how reputable they are (or aren’t) but they seem to know what they are talking about.



FLORENCE August 17, 2012 at 6:47 PM

My spouse and I do not work. He currently gets permenant SSDI due to a brain injury from an accident. I am also injured, spinal cord and working on SSDI claim. My question is, what would be the best life insurance for us to get as a couple? Since we are on a fixed income, it needs to be affordable but enough to help compensate either one of us if the other should pass away. What do you suggest? And, approx. how much would monthly premiums be?


Neal Frankle August 18, 2012 at 1:41 PM

Florence, I am sorry you and your husband have been though so much. Sadly, I can’t be much help here. I would get some quotes from a variety of agents and then as a last resort check out guarantee issue. If you qualify for it, consider senior term insurance.


Laura c February 8, 2015 at 7:08 AM

Go to a funeral home look into pre payment options. They operate like life insurance where you do installments but there is no medical. Ask if you don’t get it paid off what will they pay. Like if you pass after one year vs five years etc.


Neal Frankle, CFP ® March 13, 2015 at 2:29 AM

Not a bad idea at all!


Jeff the Investor April 11, 2012 at 6:35 AM

Thanks Neal.

It is always good to show the other side of the coin.
For people with grave sickness, getting an insurance is next to impossible. And guaranteed life insurance is a good option.
Your points are good things to consider before anyone ever buys a guaranteed issue life insurance.


Missy May 30, 2010 at 7:54 AM

Hi, Neal:

Read your story on your about page, very interesting. Thank you for sharing that. Plus nice blog!

Question for you. Which life insurance policy do you recommend, what type and which provider?

You left us hanging by not providing an alternative. Look forward to your reply.


Neal June 1, 2010 at 10:26 AM


Sorry about that. I am a huge fan of term life. I w/write a post on how to select a provider soon. It’s more than I can fit in a reply…


Missy June 1, 2010 at 5:59 PM

Hey, Neal:

Look forward to it, thanks!


Kimmel M. Craig January 23, 2012 at 9:28 AM

Hey, Neal, I have always favored term over WL or UL products until I began researching the Final Expense market and because “term” means exactly that, “term” it can only be written up to certain ages, will end at the end of the “term” of years, with the only option for the client being to convert it to permanent (WL)insurance at whatever their age cutoff is or term expires. I’m sorry, but I couldn’t in good conscience, sell term life insurance to anyone over age 50 for their Final Expense needs, because if they convert to WL at age 75 or 80, it will be exhorbitantly expensive without substantially lowering the death benefit amount. These people need Permanent Insurance that will ALWAYS be there as long as they pay their premiums with no increases or cancellation due to changes in their age or health as long as they pay their premiums. These type policies don’t always have to be guaranteed issue, and have generally liberal underwriting guidelines so if a client only qualifies for Modified or Guaranteed Issue with one company, they’ll more than likely only qualify for these type plans with any company, as a result. For example, if a proposed insured has had an organ transplant and is required to take anti-rejection drugs for the rest of their life, who do you know that will issue that person standard? I don’t know of any! What about a diabetic that is being treated for it by oral medication, plus circulatory medication, and has high blood pressure? Who’s going to insure them standard? No company I know of! Anyway, there are plenty of clients out there that can get preferred or standard rates for WL plans for Final Expense at reasonable rates as long as they don’t wait until they’re over age 70 to get it. Also, advising people to “shop around” if they have nothing in place means every day they’re “shopping” or “thinking about it” puts them at risk of dying without coverage and possibly entering a new age category that will make the premiums higher at time of purchase. Even those who can only qualify for Guaranteed Issue have to go through a 2-3 year waiting period for full death benefits coverage to kick in, unless death is due to an accident, so every day they wait to apply and get issued increases their risk that they may not make it through the waiting period and higher rates due to age. Anyway, these plans DO have their place in the market and I wanted to put in my two cents worth.


Nate June 5, 2014 at 10:28 AM

Mr. Craig,

You are, respectfully, wrong. You state, “I couldn’t in good conscience, sell term life insurance to anyone over age 50 for their Final Expense needs, because if they convert to WL at age 75 or 80, it will be exhorbitantly (sic) expensive without substantially lowering the death benefit amount”.

If a 50 year old buys term insurance, and then actually lives to be 75 or 80 years old, they almost unquestionably will have had the opportunity to save enough to cover the whatever final expenses they may incur. Take the whole life premium, subtract the term premium, buy the term, and invest the difference. I know it’s an argument you’ve heard before! The insured will have more money and a lot more flexibility by doing it my way. And even if things go really sideways, conversion is still an option (they’ll even have a nest egg to help fund it). Simply look at the IRR of the whole life policies you are writing today, and then look at the historical “safe money” interest rates. Life insurance loses given a long enough time period.

Bottom line: Over historically long periods of time (like the 25-30 years you cite above) personal savings has almost always yielded a larger end result (net of taxes) than life insurance (and with more flexibility). Insurance companies are a useful tool, but they are certainly in the “for profit” business. Barring complicated (niche) estate planning cases and the like, life insurance is always most useful when death is premature. Anyone that lives to full life expectancy could have done just as well (or better) without coverage at all. The hitch is that none of us know if we’ll make it to full LE. But then again, if we don’t, term would have sufficed just fine.


Laura c February 8, 2015 at 7:18 AM

Wake up to to reality.
The average person is not saving believe me.
I wish they were.

Laura c February 8, 2015 at 7:15 AM

You are over generalizing. People like Susie Orman and Dave Ramsey say term term term ….they are speaking to younger healthy folks and have too much term propaganda out there. So many folks are older and disabled and cannot qualify for full products guaranteed is their only hope. If you ha e bills to pay and need lower premiums get the term and ask the company when you buy it if it’s convertible to whole life later. Get the debts paid diwn and then use that money to payer the higher rates on the whole lufe later.


Belmont Thornton May 28, 2010 at 8:42 PM

A great post which is quite useful especially for those who is yet to have a life insurance due to various hassles. Guaranteed life insurance is a great way to achieve peace of mind in a hassle free way.


Nunzio Bruno May 27, 2010 at 10:32 AM

Great post! Life insurance can be a great tool but if you rush through the process when it comes time to collect clients can be in for some not-so-helpful surprises. You never know what kind of mood your underwriter will be in when they get to your application so going to a few places before taking the guarenteed bet is solid advice. Something to keep in mind if you are struggling to find coverage is to hit all the big names..odds are bigger insurers will be better able to assume bigger risks because they have a larger premium pool to draw from.


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