What is a Guaranteed Insurability Option?

I’ve seen ‘guaranteed insurability option’ on insurance policies when I’ve been looking around to get cover. What is guaranteed insurability and what does it mean?

Question asked by Mrs M Harrow

If you want to increase your Life Insurance or Income Protection benefit somewhere down the line, guaranteed insurability means that under certain circumstances you can increase your insurance payout without needing to provide any further medical evidence.

Is it Worth it to Look for a Policy with a Guaranteed Insurability Rider?

If your circumstances change in the future you may need to increase your insurance benefit to cover all of your responsibilities.

If you decide to have children or move home, your benefit might not cover all of the expenses that pile up over the years.

Having a guaranteed insurability option on your insurance policy makes it easier to adjust your cover when you need it. This is because you won’t have to go through the hassle of facing another stage of underwriting.

If you applied for a brand new insurance policy with the additional benefit that you require, you’d likely face higher premiums due to your increased age and the fact that your benefit is higher.

If your health has taken a downward turn, applying for a new policy to get more cover may even mean that you are refused cover altogether under the new medical underwriting.

Guaranteed insurability doesn’t require any additional medical underwriting for the increased benefit and the premiums on the original sum insured won’t change.

Premiums will rise slightly to reflect the higher benefit you’re insuring, but this will only apply to the ‘top up’ figure.

Offering guaranteed insurability is quite common among some of the top UK Life Insurance providers and Income Protection providers. For these reasons, it is a worthwhile benefit to keep an eye out for when looking at policies.

Most Common Terms of Guaranteed Insurability Benefit

The circumstances under which you can increase your cover under the guaranteed insurability rider are usually as follows:

  • Your mortgage has increased as a result of developing your property or purchasing a new home.
  • You get married or enter into a civil partnership. Your Guaranteed Insurability option also covers divorce and the dissolving of a civil partnership.
  • You have a child, you adopt a child, or become the legal guardian of a child.
  • Your salary is increased as the result of a promotion or a change in employer.

Most if not all insurers will give you a limit of up to 3 months after the event has taken place with which to request a change in your insurance cover.

The Limitations of Your Options

Some insurers will also put some limitations on your guaranteed insurability benefit. This includes limits on how frequently you can use this option and, sometimes, limitations on how long you will be able to use your guaranteed insurability option.

Some insurers, for example, will put an age restriction on this benefit and after you reach a certain age you will need to submit new medical information each time you want to increase your cover.

You also might not have access to this benefit if you accept an insurance policy with non-standard terms. This is usually more common with Income Protection than Life Insurance, but you should be aware of this and make sure that you fully understand the terms before you apply.

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