Guaranteed issue life insurance policies are issued to applicants, regardless of their health condition. Oftentimes, the benefits that are paid out from a guaranteed issue policy are used for paying the insured's final expenses, such as funeral costs and / or unreimbursed medical bills.
A guaranteed issue life insurance policy may be either term or permanent. With a term policy, there is death benefit protection only, without any cash value or savings build up. These policies are issued for a set period of time, or "term."
With a permanent guaranteed issue policy, there is both life insurance protection, as well as cash value. The funds that are in the cash value component of the policy are allowed to grow tax-deferred. This means that there is no tax due each year on the gain, unless the money is withdrawn.
Because applicants for guaranteed issue life insurance are oftentimes considered to be more of a risk to the insurance company, the coverage on these plans is typically somewhat low. Given the increased risk to the insurer, the premium that is charged for guaranteed issue life insurance may also be higher than that of a comparable policy that is traditionally underwritten.
Likewise, the full amount of a guaranteed issue policy's death benefit may not be paid out to the beneficiary if the insured dies within the first two years of purchasing the coverage. If, however, the insured survives past this time limit, the full amount of the death benefit will be paid - and, as with other types of life insurance, these funds are received by the beneficiary free of income taxation.
It is important to note that guaranteed issue life insurance plans can differ - sometimes substantially - from one insurance carrier to another - as can the amount of premium that is charged.
Therefore, it is recommended that before you make a purchase, you compare your available alternatives through an independent insurance agent. In doing so, you may find that there is a policy that is better suited to your specific needs, as well as to your budget.