Why is the minimum age for guaranteed issue life insurance start at age 40? What is the logic behind this?

Question

Why is there anti-selection involved for age <40 on guaranteed issue plans?

Answer 1

Most of the plans I have seen have no age requirement other than you could no longer be your parent&#039;s dependent.

It isn&#039;t very good coverage, but I suppose if you only want accident insurance and can&#039;t otherwise get coverage, it is something.

Answer 2

You are probably referring to those policies that you have either seen on TV or have received an offer in the mail.  They are trying to lure in people who might have health problems.  The cost is extremely high and restrictions, such as age limits, are placed there by regulators to keep people who usually qualify for much better rates from applying.  

If you are younger than 40 and still need &quot;guaranteed issue&quot; insurance, there are plans available.  Just check with a life insurance broker.  They can take care of you.

Answer 3

I&#039;m not an actuary, but I would think that because of the adverse risk these plans naturally accept, the life expectancy is reduced by x%.  If you are older and already closer to your average claim age, having your life expectancy reduced by x% is not as significant as someone who is younger and further away from their average claim age.

In other words, x% might be only 10 years for someone in their 50&#039;s, whereas x% represents 25 years for someone in their 20&#039;s.

Forgive the cold nature of this response.  I can&#039;t tell if this is homework or if you are young and think a guar issue policy is your only chance at coverage.