For more information, see our full cost guide to determine how much life insurance may cost for you.
Guaranteed issue life insurance
Guaranteed issue life insurance takes the concept of simplified issue life insurance – forgoing the health exam – and takes it a step further in that you don’t have to answer any questions about your health, either. As long as you can pay the premium, the insurer will cover you, needing only your age, sex, and state of residence.
That makes it appealing for older people, whose declining health makes it prohibitively expensive to get coverage with another insurance types.
Guaranteed issue life insurance is useful for elderly applicants, but others can likely get more life insurance coverage at a lower cost with a different policy type.
Just like with simplified issue life insurance, the lack of insight into your health conditions that a medical exam and interview would provide means that you’re going to be paying more for coverage. In order to cover the costs of an average funeral, you’d have to pay more than $200 a month for around $10,000 of coverage.
For more information, see our full guide on guaranteed issue life insurance.
Final expense insurance
Still looking for a way to cover funeral costs if you passed on guaranteed issue life insurance? You’re in luck, because there’s a life insurance policy that’s specifically for that purpose.
Final expense insurance is a unique type of policy. It covers the cost of anything associated with your death, whether its medical costs, a funeral, or cremation – whatever your literal final expenses are. It’s usually only issued to people of a certain age and the policy is valid up to a certain age.
Like other permanent life insurance policies, there’s a cash value that can grow over time. Final expense insurance is a simplified issue policy in most cases, but if you don’t pass the health questionnaire you’ll be placed in a guaranteed issue policy instead.
Final expense insurance is usually attractive to older people who don’t have other life insurance coverage (maybe they outgrew their term life policy) and don’t have enough savings to pay for their own funeral, which can cost upwards of $8,000.Coverage is usually for small amounts, from $5,000 to $25,000, to cover those expenses. It’s good if you don’t have another way to pay for your funeral and don’t want to burden your family with the costs.
However, it has the same drawbacks as guaranteed issue life insurance: higher life insurance premiums for relatively low coverage amount. If you or your family are able to pay for a funeral through other means, that’s your best bet.
For more information, see our full guide on final expense insurance.
Group life insurance policies
Group life insurance is an employee benefit provided by some employers. It isn’t technically a life insurance type, but it’s important to know how it’s different from privately purchased term life.
Group life insurance is most commonly term (although it can be whole). The real reason we bring it up, though, is that most people think their employer life insurance is enough, when in most cases it isn’t.
Make no mistake: if your employer is offering life insurance at no extra cost to you, it’s a great benefit. By all means, get insured. But if you need life insurance to protect your family, employer-provided coverage may not be sufficient.
Employer life insurance provides fairly low coverage, usually only one to two years’ worth of salary, when you could need $500,000 or more in coverage in order to meet your financial obligations.
If you want to go for more, it’s likely to be more expensive than buying your own policy if you’re a person in relatively good health.
In short, don’t automatically pass up group life insurance, but don’t automatically dismiss other options, either. Make sure it fits your needs and see how you can work it into your private coverage.
Which life insurance policy type is right for me?
Term life insurance policies are usually the best solution for most people who need life insurance. They’re usually the most affordable, they’re simple to understand, and they provide the straightforward protection that most people shopping for a policy at an insurance company are looking for.
But that doesn’t mean that other life insurance policy types are wrong for everyone. Some people tout the benefits of permanent life insurance policies are that they’re like “forced savings” for people, like a mortgage. Many people struggle to adequately save for retirement, and a permanent policy provides separate cash accumulation for something they’d be paying for anyway (their life insurance policy).
Simplified issue and guaranteed issue life insurance are options for people who might not be able to benefit from the paramedical exam portion of the application process. Final expense insurance is available for elderly consumers who don’t want to burden their family with burial costs.
In the end, you should speak to a licensed independent broker or agent or a financial advisor to determine which policy is right for you. Knowing the pros and cons of your choices will make you an informed consumer so you’ll be able to better understand the options you’re presented – and make the right choice for your family.
