Guaranteed Life Insurance - When Does It Make Sense?

I'm sure that almost all of us heard about the newest advertisement hype in life insurance. "You can qualify for life insurance without a medical and no salesperson will ever call". It's a very attractive vision - you don't have to bother filling out forms with health questions, don't have to undergo medical tests and the seemingly best of the entire deal - no pushy salespersons.

On the first sight, it really seems like an exceptional offer. However, all this convenience comes at a heavy price, and these guaranteed issue plans have several serious caveats.

First, the coverage is usually limited between $5,000 and $50,000. Some plans are tricky and will give you the ability of making the total coverage larger with inexpensive and realistically speaking, worthless accidental coverage which will double or triple your total benefit if you die by accident. The problem with this is that the vast majority of insurance claims are not by accident, moreover, this number continues to diminish as the insured ages.

Second, the premiums on these plans cost much more compared to traditional life insurance, in some cases up to 300%. This makes sense as the plans put healthy people and individuals with poor health in the same boat - people that don't have problems qualifying for regular insurance are being substantially ripped off by this form of coverage.

Third, the death benefits are usually limited to a return of premium plus interest in the first two years after the guaranteed issue plan policy takes effect, unless the insured dies by accident. As mentioned before, this is highly unlikely.

Fourth - and touching by far the most deceiving point in the advertisements - there is no actual guarantee that you will be approved for in these life insurance plans. In most cases, you will still need to answer basic health questions. This makes it possible for the insurance companies to filter out truly high risk clients.

Despite all these facts, guaranteed issue life insurance can still make sense in some cases. If you, for example, have trouble qualifying for traditional life insurance policies and got declined several times before, you should consult with an independent life insurance broker and ask him/her to find you a plan that will group you with a set of healthier people and translate into lower premiums. Otherwise, it's likely that traditional policies will be likely available at lower rates than guaranteed issue life insurance.

Lorne S. Marr has been a very accomplished financial planner since 1993 and runs his own company LSM Insurance Services Ltd, which specializes in Canadian life insurance. He's recognized as an industry leader thanks to the commitment to providing clients with value-added services. Find more information on his website