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The Risks of Guaranteed Accepted Life Insurance

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The Risks of Guaranteed Accepted Life Insurance

We have already touched on a few high-risk occupations that life insurance carriers hesitate to cover, but we want to take the time to let our clients know the number-one thing they should not do if they are high risk. If you are shopping for life insurance, you’ve probably seen companies like Colonial Penn advertising “guaranteed accepted” life insurance.

The biggest risk high risk clients take when shopping for life insurance is buying guaranteed or no-exam life insurance simply because they are afraid of being declined for coverage.

To a client whose health, age, occupation or hobbies deem them high risk, the promise of guaranteed coverage is an enticing one. However, in life there are no guarantees and the fine print of life insurance without medical exams could end up costing you more money and leaving you inadequately protected.


What Is Guaranteed Accepted Life Insurance and How Does It Work?

Guaranteed accepted life insurance – sometimes known as no-exam insurance – is life insurance coverage that does not require applicants to undergo a traditional medical exam or to answer questions concerning their health history.

Here’s the catch: This type of coverage comes with high premiums and many stipulations. By forfeiting your medical exam, you will end up paying a large sum for low benefits.

For example: if a relatively healthy middle-aged adult were to purchase a 20-year term policy for $25,000 20 with a guaranteed-coverage company, he or she would end up paying a premium of about $37.25 per month. Over the course of that 20-year-term, that individual would end up paying $8,940! That’s over 25% of the policy’s death benefits.

This is what allows companies like this to remain profitable and to continue offering this type of coverage: the premiums are high and the death benefits are low, so the company is not paying out as much as they are making off the premiums paid by their policyholders.

If you are high risk, you do not have to fear declines and high premiums. With the right agent, you can find a high risk policy at a comparable price – with better benefits.

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You’re Guaranteed Policy Might Not Protect You

Underwriters will require applicants to undergo a medical exam in order to determine their risk class. A risk class sets the coverage premiums.

There are companies that may not view your occupation as high risk. If you could earn the premiums of a preferred risk class, why would you risk paying the premiums of a substandard policyholder? Another downside to this type of coverage is that these policies come with a “waiting period.”

This period can last between 1 and 3 years, and if you pass away before the period ends, your beneficiaries can be denied the death benefits associate with your policy. For individuals in high risk jobs, this waiting period is a dangerous gamble.

You Have Options

A traditional, medically-underwritten policy is always a better bet than a guaranteed accepted life insurance policy, even for high risk clients.If you are afraid that your medical exam or occupation will result in a decline, you may want to consider an alternative to no-exam coverage, such as simplified risk policies. This type of policy only requires applicants to answer a few questions – which can include your smoking history or history of terminal illnesses – and will rate you based on your answers.

Your best option is to speak to a reputable agent who will be able to assess your risk and help you find the best coverage possible. If you need a high risk policy, an agent can help you find a policy that will provide you with bigger death benefits, so that you are getting more for your money.

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