Guaranteed Life Insurance: Who It’s for and How It Works

How late is too late to think about purchasing a life insurance policy? Often, people feel like they’ve waited too long – they’re too old to be insurable or they aren’t as healthy as they once were. Does this mean that qualifying for life insurance is no longer possible?

The fact is, that there are different types of life insurance tailored to meet the unique needs of Canadians. Guaranteed life insurance is designed for people who might have difficulty in qualifying for traditional types of coverage. Guaranteed life insurance plans also offer some of the same benefits as traditional life insurance: a death benefit to help cover final expenses, financial assistance for our loved ones, and peace of mind.

This article explains how guaranteed life insurance works, who can benefit from this kind of coverage, and why it might be the right type of life insurance plan for you.

Key takeaways

• Guaranteed life insurance policies do not require a medical exam or a health questionnaire and typically approval is guaranteed.

• This type of coverage is whole life coverage and does not come with term limits.

• The death benefit payout from a guaranteed life insurance plan can be used to cover end of life expenses, pay off debts, fund funeral costs, or leave a small legacy to a loved one.

• Guaranteed life insurance is an ideal option for coverage if you are older or have a chronic or pre-existing health condition.

• While more accessible, guaranteed life insurance charge higher premiums and offer lower death benefit payouts compared to traditional life insurance.

What is guaranteed life insurance?

With a guaranteed life insurance plan, you won’t be asked to undergo a medical exam or fill out a health questionnaire. As long as you meet the insurers’ eligibility requirements, approval is guaranteed, making this type of policy a great choice for people who are older or those with certain health conditions. It’s coverage that’s accessible to many Canadians – even individuals who’ve applied for other types of life insurance and been denied.

Guaranteed life insurance plans like RBC Guaranteed Acceptance Life Insurance, are whole life insurance plans, providing coverage up until the time of your death. Unlike term life insurance, coverage does not expire at a certain term limit. Because guaranteed life insurance doesn’t impose the same health restrictions that other plans do, the death benefit payout is lower compared to other types of policies, and the monthly or annual premiums are typically higher.

How does guaranteed life insurance work?

Guaranteed life insurance works the same way that many other types of whole life insurance policies do – it offers a death benefit payout to your beneficiaries when you die. That money can be used to cover end-of-life medical costs, pay for funeral and burial expenses, or support your loved ones’ financial needs. 

Because medical underwriting isn’t a requirement for coverage, guaranteed life insurance policies charge higher premiums than other types of life insurance plans. Coverage limits are also lower, ranging from a minimum of $5,000 to a maximum of $50,000. RBC’s Guaranteed Acceptance Life Insurance offers a maximum of $40,000 in coverage.

During the first few years of policy ownership your benefits may be limited. Some insurance providers will pay a reduced or graded death benefit if you die within this period, while others will refund the premiums you’ve paid into the plan, beginning from the start of the policy up until the time of your death. An exception to this rule is if the policy holder were to die in an accident before their 85th birthday. In this case, providers like RBC Insurance would pay the accidental death benefit. The particular coverage you choose will list any exceptions or limitations in the coverage, so it’s important to understand the terms of conditions.

Who is guaranteed life insurance for?

If you’re someone who wants life insurance but is worried that you’ve waited too long to apply or have some health concerns that would make you ineligible for coverage, a guaranteed life insurance plan could be the right solution for your needs. Guaranteed life insurance is ideal for: 

People with pre-existing health conditions

Maybe you’ve already applied for traditional whole life insurance and have had your application rejected due to a pre-existing health condition like cancer, diabetes, heart disease, epilepsy, or anxiety and depression. These common health conditions are seen as risks for insurance providers. While pre-existing health conditions don’t always make you ineligible for coverage, they could require you to submit additional documentation to prove that your health condition is being treated or successfully managed.

In some cases, chronic or pre-existing health issues can stand in the way of purchasing traditional types of life insurance. Guaranteed life insurance, however, is the exception since it doesn’t require any medical information from an insurance company.

Older adults

Seniors can benefit from guaranteed life insurance coverage because approval for coverage is available for those up to 75 or even 80 years of age, depending on your insurance provider’s eligibility requirements. This makes it a viable option for older adults who want to make sure that their funeral or end of life medical costs are covered.

People with no dependants

The death benefit payouts provided by guaranteed life insurance plans can provide sufficient coverage for people without financial dependents. The payout could then be used to cover any outstanding financial debts or leave a small legacy to a loved one.

People looking to cover final expenses

A traditional funeral and burial in Canada costs between $5,000 and $15,000. Many older Canadians worry about leaving their loved ones with this financial burden. The death benefit payout from your guaranteed life insurance plan can be used to cover these costs and other end-of-life expenses, lessening the financial strain on the people you love and providing you with the security that comes with knowing your final costs will be covered.

The pros and cons of guaranteed life insurance

Guaranteed life insurance offers both advantages and disadvantages that should be considered before choosing a coverage plan.

Pros

You won’t need to have a medical exam: Your approval isn’t based on your health status, even if you have a chronic or pre-existing illness.

The application process is simple and straightforward: You should be approved quickly and won’t be required to complete extensive paperwork.

Financial security: You won’t have to worry about your family bearing the financial burden of the cost of a funeral – your final expenses will be covered. 

Guaranteed acceptance: Even if you don’t qualify for other types of life insurance, guaranteed life insurance offers you protection and peace of mind.

Your premiums are fixed: You won’t have to worry about the cost of your plan increasing as you get older or experience any health issues. 

Cons

You’ll pay higher premiums: Guaranteed life insurance plans result in more expensive premiums because of the lack of medical underwriting and health information provided by the policy holder.

Coverage is limited: Your death benefit payout is usually lower than the amount you’d receive with a traditional life insurance policy. It may not be the best option for people with dependents or significant financial obligations.

The death benefit is graded: During the first few years of coverage there will be a waiting period during which time your beneficiary would not receive the full death benefit if you were to pass away.

It’s not the best choice for young, healthy individuals: Younger people who are in good health will likely find more affordable options that offer a greater degree of coverage in other types of life insurance products. Purchasing a guaranteed life insurance policy when you’re young and healthy may result in you paying more into your plan than the death benefit pays out.

How to choose the right guaranteed life insurance for you

If you’ve decided that guaranteed life insurance is the best option for you, your next step is to choose a specific plan. Here’s what to consider before signing on:

Carefully evaluate your needs and goals: What kind of end-of-life expenses are you anticipating? Do you want your death benefit to cover your burial costs, to pay off outstanding debts, or to act as a small legacy for your beneficiary?

Look at several different policies: Compare different premium rates and coverage limits across policies and factor in the terms outlined in the graded death benefit.

Read the fine print: Make sure that you understand the details of your policy’s exclusions and limitations.

Get advice from an insurance professional: An accredited insurance broker is your best source of information on which policy serves your coverage needs and meets your financial goals.

Alternatives to guaranteed life insurance

Age and health status don’t always preclude individuals from being approved for other types of life insurance coverage or end of life financial planning. Here are three alternatives to consider:

Simplified life insurance

Available as both whole life insurance and term life insurance, simplified life insurance will ask applicants to complete a short health questionnaire but doesn’t require a medical exam. Compared to guaranteed life insurance, premium payments are typically lower, while coverage is more generous. One example is RBC Simplified® Term Life Insurance, which also offers an accidental death benefit payout. 

Group life insurance

Employers may offer group life insurance without the need for you to undergo a medical exam. These plans typically feature death benefit payouts that are significantly higher than the ones offered by guaranteed life insurance (though you may still need or want supplemental coverage based on your financial obligations). Be aware that this kind of coverage is frequently tied to your employment status. When you change jobs or retire, coverage can end. 

Prepaid funeral plans

Instead of investing in a life insurance policy to cover the costs of a cremation or burial, you might choose to purchase a prepaid service directly from a funeral home so that your final expenses are already taken care of and your end-of-life arrangements are decided upon in advance.

Is guaranteed life insurance right for you?

Guaranteed life insurance is a good option for obtaining coverage if you’re older or have pre-existing or chronic health issues. It’s ideal for those who have been denied coverage in the past due to health or age limitations. While premiums are typically higher and the death benefit payout lower, it still offers the security of knowing that your final expenses will be covered, leaving your loved ones free from the financial stress that can accompany end-of-life costs. It’s important to take a close look at your needs and goals before choosing any insurance plan. A trusted insurance advisor can help to make sure you’re well informed and able to make the best decision.

FAQs about guaranteed life insurance

How much does guaranteed life insurance cost?

Guaranteed life insurance is more expensive than traditional life insurance policies. Your premiums will be higher and linked to the amount of coverage you decide on. Premiums are determined based on age, your assigned sex or gender at birth, and whether you smoke.

Can I get guaranteed life insurance with a pre-existing condition?

Yes. There are no medical exams or health questionnaires required. Guaranteed life insurance is a good choice for those with chronic or pre-existing health conditions.

What happens if I stop paying my premiums?

If you don’t pay your monthly or annual premiums your insurance policy may be cancelled.

Can I increase my coverage amount later on?

Many insurance providers will allow you to add coverage at any time – up to the maximum amount their specific plans offer. Speak to your insurance provider to understand the details about increased coverage laid out in your preferred plan.

Share This Article