Sunday, December 09, 2007

Advantages and Disadvantages of Guaranteed Acceptance Life Insurance for Seniors

By Chris Simons

Buying life insurance when you are a senior used to be a hard thing to do, but now there are many companies that offer Guaranteed Acceptance Life Insurance to people who would not otherwise be able to buy life insurance due to their age, health or financial situation. With Guaranteed Acceptance Life Insurance there is no physical exam requirements or questions about the applicants health. These plans usually have a limited benefit period. If the death of the policyholder occurs in the first few years a reduced benefit is paid, or the insurance company returns the premiums already paid with the accumulated interest. This is how insurance companies are able to guarantee acceptance.


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There are a few disadvantages to guaranteed life insurance. Most of these types of policies are designed to provide only funeral expenses, so most do not sell policies with a benefit value of more than $15,000 to $20,000. The cost of guaranteed life insurance policies are also high, because the company has no other information but age and gender on which to base the premiums. These two disadvantages can make guaranteed life insurance very undesirable, especially since you can end up paying the insurance company more in premiums than the death benefit of the plan. That means that the insurance policy has a worse performance than a savings account. The National Association of Insurance Commissioners is actually looking into this problem to find out if anything should be done.

Guaranteed life insurance policies also have a feature called “Graded benefit period.” This protects the company from people signing up for insurance while on their deathbeds. This is done by writing into the policy that if the policyholder dies within a certain amount of time after the policy is taken out, the company only has to pay the premiums, plus the interest that that has accrued to the policyholder.

With all of these disadvantages in mind it is usually best to look for traditional insurance first, and take the physical exam and answer medical questions to find out if you can get insurance. If you can get traditional insurance you will most like pay much less for a greater amount of benefit than if you had bought guaranteed issue life insurance. If you have been turned away from every other policy because of health or age, guaranteed life insurance is a good option, but it should not be your first. Talk to a financial advisor and see if a savings or investment plan would be a better option.

Chris Simons is a prolific freelance writer. You are welcomed to visit http://life-insurance.cyberinformer.com/, for more information on Life Insurance.
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