When it comes to life insurance options, we have an array of choices. But, due to lack of awareness or proper knowledge, individuals often find it tricky to figure out which kind would be the best for them, physically and financially. Two such options where people often find difficulty distinguishing between are Simplified Issue and Guaranteed Issue Life Insurance.
Before we dive into the distinguishing factors and mechanics of these two types of life insurance, let’s establish an understanding of what each is in its essence.
What is Simplified Issue Life Insurance?
In essence, simplified issue life insurance is a type of life insurance that does not require a medical examination but asks a series of health-related questions. Without a medical exam, it’s easier and quicker to obtain, and some people qualify even if they have certain health issues. The insurers usually verify the information you provide with your medical records and databases.
What is Guaranteed Issue Life Insurance?
Guaranteed issue life insurance, on the other hand, is a type of policy where the coverage is guaranteed, regardless of health status. The policyholder does not answer health questions or undergo a medical examination. Basically, anyone who applies gets the insurance.
Now that we have a clear understanding of what each type means, let’s delve into the key differentiating factors that set Simplified Issue and Guaranteed Issue Life Insurance apart.
Key Differences
Application Process
The most noticeable difference between simplified issue and guaranteed issue life insurance lies in the process of application.
With Simplified Issue Life Insurance, as part of the application process, you are required to answer a series of medical questions. Based on your answers, the life insurance company determines your eligibility for the policy. However, no medical test is needed.
On the contrary, Guaranteed Issue Life Insurance does not require any medical questions nor any medical examination. This means that regardless of your health condition, you are guaranteed approval for a policy.
Cost and Coverage
Guaranteed Issue life insurance policies are usually costlier in comparison to Simplified Issue policies. The reason being, insurance companies take on a greater risk by offering policies with no medical questions or exams, thus claim payments are guaranteed.
The coverage of these policies also tends to differ. Simplified Issue policies often have higher coverage limits than Guaranteed Issue counterparts, which usually offer only a modest coverage amount.
Waiting Period
In the case of a Guaranteed Issue life insurance policy, there is often a waiting period before full death benefits will be paid out. If the policyholder dies during this waiting period, the beneficiaries generally receive the amount of the premiums paid, plus interest.
Simplified Issue life policies may also impose a waiting period, but it is less common, and if policyholders die during this time, the beneficiaries usually receive the full death benefit.
Eligibility
Eligibility is another important factor where a distinction lies. Simplified Issue life insurance may not be an option for those with significant health issues. Applicants could be turned down depending on the answers to the health questions.
Guaranteed issue life insurance, by comparison, does not carry risk of rejection based on health status. The applicant cannot be turned down for health reasons because they are not required to disclose their health status.
Conclusion
A Simplified Issue life insurance policy could be a good choice for those who may not be in perfect health, but do not have a major illness or condition, and are looking for a higher coverage amount. Whereas a Guaranteed Issue life insurance policy could be the right choice for those who are in poor health and have been turned down for other types of life insurance, and are not as concerned about the coverage amount.
It’s always important to note that life insurance is inherently personal. What works for one person may not work for another. It’s essential to closely examine your needs, your budget, and your eligibility before making a decision.
Investing in a life insurance policy is a significant decision and necessitates a good understanding of your financial position, your family’s needs, and your health situation. Therefore, before making a decision, consider seeking professional advice to ensure you choose the insurance type that will best meet your needs.