If you have ever wondered how life insurance companies can issue policies without asking health questions or requiring a physical exam, we would like to explain how guaranteed issue policies work. They may seem great, or they may seem to good to be real. Either way, please take a few moments to learn how insurers can offer them to the public.
If insurers do not ask any health questions or ask you to take a physical, how can they take such a big risk. It seems like they would all go broke very fast as they paid out millions of dollars in benefits because they issued life insurance to very ill people. But we know this is not how insurers operate. They know how to make money!
You may have noticed that these guaranteed issue policies have small death benefits. They may top out at 10 or 20 thousand dollars. So one way that insurers protect themselves is by only selling small death benefit policies this way.
But if the insurers sell a lot of policies, even ten or twenty thousand dollars is risky. If they attract clients who are less healthy, they could still lose millions when they spread it out over all of their customers. They prevent this by having a waiting period on the policy. The beneficiary will not collect the whole death benefit if the insured person dies before this term is up.
You must understand that different companies will have different terms on their policies. Some insurers offer to give back the premiums if the insured person does not survive the waiting period. Some insurers may pay out a fraction of the policy. Some have a combination of these things.
You need to read the fine print to understand hw they work. Some have a graded death benefit. For example, a policy may refund premiums if the insured person does not survive the first year. After that, it may pay an increasing portion of the death benefit if the insured person does not survive year 1 and 2. After year 3, the beneficiaries can collect the whole amount. Keep in mind that this was an example, and it is not meant to illustrate any policy.
This may work out well for some families. Others will do better to answer some simple health questions so they can get an immediate death benfit. The important thing is to compare policies to find the best one for your family.
Quote and compare life insurance for seniors . We also have information about life insurance for older people.
Tags: Finance, guaranteed issue, insurance, insurance and our government, Life Insurance, senior life insurance, seniors