Frequently Asked Questions (FAQ)
About Guaranteed Issue Life Insurance
Q: WHAT IS GUARANTEED ISSUE LIFE INSURANCE?
Most guaranteed issue life insurance policies are issued with
no medical questions or doctors Exam. Also, preexisting conditions are
not considered. Most insurance companies offering Guaranteed
Issue
life policies only require basic information (i.e. name, address, date
of birth, Social Security number, beneficiary, gender, etc.)
Q: WHAT IS A GRADED BENEFIT?
Insurance companies offer several different benefits.
Generally, a graded benefit means that the money paid to the
beneficiary
at the time of death will not be the full benefit amount as specified
in
the policy. When a predetermined amount of time has passed the full
death benefit will be paid.
EXAMPLE. Company ABC will return all premiums,
plus interest, if death occurs within 24 months, from the issue
date. Company XYZ will return all premiums paid, plus interest,
if
death occurs in the first 36 months after the policy was issued. Some
companies will pay 30% of the death benefit in the first 12 months and
60% after 12 months, with the full benefit paid when death occurs after
24 months from the date of issue. Most insurance companies will
pay the full death benefit before the graded period has passed, if the
insured's death is due to an accident.
Q: WHAT HAPPENS IF DEATH OCCURS BEFORE THE GRADED PERIOD HAS
PASSED?
See above.
Q: WHAT HAPPENS IF DEATH IS CAUSED BY AN ACCIDENT DURING THE
GRADED PERIOD?
See above.
Q: HOW LONG WILL PREMIUM PAYMENTS NEED TO BE PAID?
Most guaranteed issue life insurance policies are known as
whole life policies. Premiums usually are paid during the life of
the insured. Some companies charge higher premiums, but only
require payments to be paid for 10 or 20 years. After paying the 10 or
20 years of premium payments the policy will remain in force with no
additional premium payments required.
Q: WHAT IF I DECIDE TO STOP PAYING MY PREMIUMS?
This depends on the insurance company. Some policies can
be converted to a reduced paid up policy after several years.
EXAMPLE: policy holder pays premiums on a $25,000
Benefit Life insurance contract for ten years, then decides to convert
to a paid up Reduced Benefit policy. The insurance company will
reduce the death benefit and require no additional premiums. Each
insurance company can offer a different reduced benefit amount. Ask
your
agent for specific information. If you happen to have a term life
insurance (usually offered by an employer, through your job) the death
benefits will end when you leave that employer, unless you have the
opportunity to convert your group policy to an individual policy, and
take it with you.
Q: DOES MY POLICY HAVE CASH VALUE?
Most whole life insurance policies will build cash
value. Guaranteed issue graded benefit whole life insurance
policies do not usually accumulate cash value until after several years
of premium payments.
Q: WHAT IF I DO NOT NAME A BENEFICIARY?
If you do not name a beneficiary, the insurance agent will
make the death benefit payable to your estate.
Q: WHAT HAPPENS IF MY BENEFICIARY DIES BEFORE ME?
Your insurance agent should ask you about a contingent
beneficiary. This would be the second in line to receive the death
benefit if the primary beneficiary should die prior to your
death.
If you do not name a contingent beneficiary, the death benefit will
usually be paid to your closest blood relative spouse, or to your
estate, if a death claim is made.
Q: IS THE DEATH BENEFIT TAXABLE TO MY BENEFICIARY?
In most cases, the death benefit is not taxable to your
beneficiary. But may be taxable if paid to your estate.
Q: CAN I STOP PAYING MY PREMIUMS AND KEEP PART OF MY COVERAGE?
In some cases, yes. This is called a reduced paid up benefit
option.
Q: WHAT IS THE CONTESTABLE PERIOD?
The contestable period, usually twenty-four to thirty months,
is the time stated in the life insurance policy in which the company
can
refuse to pay the death benefit. The reasons for nonpayment can
vary, but usually, have to do with suicide during the contestable
period, or false statements made on the application pertaining to the
insured's health or hazardous occupation.
Q: WHO CAN BE NAMED AS MY BENEFICIARY?
In the state of Florida, the beneficiary must show an
insurable interest. Example: spouse, children, any blood relative
or relative by marriage, any business associate, any co-mortgage holder
or any charity. Foundations, trusts and funeral homes may also be
named as beneficiary.
Q: ON WHOSE LIFE CAN I PURCHASE A LIFE INSURANCE POLICY?
You may purchase a life insurance policy on yourself. If
you purchase a life insurance policy on your spouse, business
associate,
or child over 15 years of age you must obtain the signed approval of
the
insured.
Q: WHAT IS THE DIFFERENCE BETWEEN A GUARANTEED ISSUE AND A
SIMPLIFIED ISSUE LIFE INSURANCE POLICY?
Simplified issue life insurance policies generally ask basic
health questions. The insurance company can require medical
history information from your doctor. Simplified issue policies are
"underwritten," this means the insurance company can refuse to issue
the
policy because of preexisting medical conditions, etc. Guaranteed
issue life insurance policy applications do not usually ask any health
questions or require any medical history or have any preexisting
condition requirements.
Q: HOW OLD MUST A PERSON BE TO PURCHASE A GUARANTEED ISSUE
LIFE INSURANCE POLICY?
This depends on the requirements of each insurance
company. 0 to 80 is common.
Q: WHAT IS A FINAL EXPENSE POLICY? WHO CAN BE THE
BENEFICIARY?
Usually final expense life insurance policies are issued to
persons who want to provide funds for their funeral and cemetery costs.
Funeral and cemetery costs can average between $500 and $5000, or more
depending on your choice of arrangements and their extravagance.
Some people choose a simple inexpensive memorial with the option of
providing funds for the benefit of loved ones or family. Some leave
funds to satisfy creditors, medical bills or taxes. You may
assign
the death benefit to a funeral provider, of your choice, to cover the
costs of a prearranged funeral.
Q: WHY WOULD I WANT TO BUY A FINAL EXPENSE LIFE INSURANCE
POLICY?
Many people find it easier to make advance arrangements in
order to spare their family or friends the task of dealing with funeral
directors, cemeteries, etc. Prearrangement removes the burden
from
the family and loved ones who are grieving, and may not want, or be
able
to make large financial decisions or answer important questions. Such
as, what would Joe or Mary have wanted us to do? What about the
memorial? A simple service, a religious service or maybe a basic
cremation?
Q: WHAT IS A VIATICAL?
The term viatical is not new. Life insurance policies
have been viaticated for many years. To viaticate a life
insurance
policy means that the owner (usually the insured) signs over the death
benefit to an investor, who intern pays the premiums, and is the new
owner and beneficiary of the life insurance policy. The investor
or new owner of the policy customarily pays the insured a lump sum at
the time the transfer is completed. Depending on the life
expectancy and health condition of the insured. This lump sum can be
10%
or as much as 80% or more of the policy death benefit. If you are
considering viaticating (selling) your life insurance policy, good
legal
advice is strongly suggested.
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