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Guaranteed life insurance is a special type of insurance that accepts all the people that apply for the policy. People are not asked medical questions or required to take physical exams. This type of insurance has to be issued by the life insurance carrier if a person pays the premiums. Usually the insurance company simply asks the person his age and gender. In comparison, usually life insurance providers require people to fill a questionnaire with multiple questions about the health of the person. In more serious cases, a nurse is sent to the home of the applicant for the medical exam. As a result, guaranteed insurability can be seen as a compelling option for those people that cannot get a cheap life insurance because of bad medical history, smoking or drinking habits, dangerous hobbies, occupations and older age. Since this policy usually offers that the amount of cover will not be decreased and premiums will not be increased, people often purchase this option without profound consideration and evaluation of the advantages and disadvantages. Although, most life insurance carriers that offer guaranteed life insurance do not reveal clients the downside of this insurance alternative, after a thorough analysis it is easy to highlight three main disadvantages: high prices of premiums, long deferred period and small amount of cover.
However, after a more careful consideration it can be noticed that this guaranteed life insurance must have strong reasons for such enticing conditions it offers. First of all, premiums for guaranteed life insurance are very high. Sometimes the premiums can be up to 5 times higher than for regular life insurance. The price of the premiums is high because the company does not have any information about the person only his age and gender. As a result, a company pools the risk of all people and as a result a person is likely to pay higher risk premiums than he would have to pay if risk premium was determined individually. Some people may accept these higher premiums because they were not able to find life insurance cover elsewhere. However, it is advised for people to do a further research and ask more life insurance companies for life insurance. Because life insurance is run by actuaries, the risk is interpreted differently by various life insurance providers. As a result, one life insurance carrier can reject a person who has diabetes whereas other will accept this person.
Another reason is that most life insurance providers that offer guaranteed life insurance secure themselves from very high losses by issuing a rule that a person will not get a death benefit in the first two years if his death is caused by other circumstance than accident. The dependents will be refunded with the premiums that were paid to the insurance carrier until the death. However, the bigger part of people buying guaranteed life insurance option is those that have serious medical problems. As a result, people have to be aware that they are taking huge risk during the first years of life insurance. This rule is called a limited period benefit. What is more guaranteed life insurance usually does not offer big life insurance covers.
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The covers usually are only up to £15,000. The sum is so small because of the high risk the insurance company takes. As a result, guaranteed life insurance is usually used to cover the expenses related to funeral. Taking into consideration that the cost of serious illnesses can be very high, this sum may be not substantial enough to compensate the dependents for medical and other expenses related to illness and death.
What is more, some life insurance providers offer the conditions of life insurance that can be very confusing. For example, some companies sell life insurance measured not by pounds but by units. Others include a lot of exclusions in the contract and write this down in a small print. Since the bigger part of customers of these life insurance carriers are older people, insurance companies take advantage that not all of them read the contract carefully.
Guaranteed life insurance should be considered as the last option. It is advisable to consult as many regular life insurance carriers as possible and see if acceptance is possible. Visiting a doctor and consulting a GP is advisable. If other life insurance providers do not agree to accept a person to a regular life insurance program, than guaranteed life insurance can be purchased. However, even if a person decided to buy guaranteed life cover it is advisable to spend some time shopping around. Different life insurance providers offer different prices of the premiums and different condition. As a result, it is wise to spend some time searching the market or visit whole market life insurance broker.