Guaranteed Insurability Option Explained

Q: Increasing life insurance (what’s the difference?)

There are several differences between increasing life insurance and guaranteed insurability. First of all, increasing life insurance is a type of policy, whereas the guaranteed insurability option is an additional policy benefit. When you opt for increasing life insurance, you agree that the sum assured (pay-out amount) will increase each year by a fixed amount during the term of the policy. Premiums will also increase, usually on an annual basis, in line with the increased sum assured. The purpose of increasing life insurance is to protect the policy’s value against the rate of inflation. Whereas, the purpose of the guaranteed insurability option is to ensure that the sum assured of your policy is still meeting your needs following a life-changing event.

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Guaranteed insurability option

What is guaranteed insurability option?

A guaranteed insurability option (GIO) may be included in your life insurance policy as an additional benefit.

It simply means that you’re able to increase the sum assured (pay out amount) of your existing policy, to suit a change in your circumstances.

Some reasons you may wish to increase your protection, using the guaranteed insurability option, include:

Your mortgage has changed
Your family has grown
Your marital/civil partnership status has changed
Your salary has increased

If you choose to use the guaranteed insurability option, then you can increase your cover without having to provide any further medical information.

This provides a hassle-free alternative to taking out a new policy, which would require new underwriting (and may result in higher premiums).

Help protect your family and home from just 20p-a-day^† with life insurance arranged through Reassured.

We’ve many years of experience helping people from all walks of life, secure the cover they need at an affordable price.

We can also tell you which of the insurers we work with include the guaranteed insurability option as standard in their policies.

Take advantage of our fee-free broker service today to compare quotes and see if we can help you save money on your life insurance.

Ultimately, it’s important to ensure that your family are adequately protected now and in the future, should the unexpected happen.

This makes the guaranteed insurability option a benefit worth looking out for when searching for life cover.

If you’re looking to arrange protection for your family today, get in touch with our award-winning team to compare our best quotes.

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Guaranteed insurability option life insurance

Some life insurance policies include a guaranteed insurability option as standard, or simply, the option to increase your cover if your needs change.

Insurers may also call this benefit ‘guaranteed increase option’, ‘special events option’ or ‘life change benefit’.

Guaranteed insurability is one of several additional policy options (or benefits) offered by insurers, amongst premium waivers and indexation benefit.

These can all get a little confusing, (especially as additional policy options and the terms of these differ between insurers).

However, guaranteed insurability stands out somewhat because you can take advantage of this option at any point during the term of the policy (if you’re eligible).

Waiver of premium

Allows you to take a break from premium payments if you become incapacitated and unable to work due to an illness or injury.

Indexation benefit

Protects the value of your policy by increasing the sum assured each year in line with the Average Weekly Earnings measure or Retail Prices Index (RPI).

Whereas, other options (such as waiver of premium) must be chosen from the start of the policy, at an additional cost calculated into your monthly premium.

Continue reading as we explore the main features of the guaranteed insurability option for you in this article.

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When you can use the guaranteed insurability option

The specific circumstances in which you can increase your life cover using the guaranteed insurability option will be outlined in your existing policy.

Generally, the insurer provides a list of certain life events or life changes that would qualify for an increase in your protection.

The table below shows some insurers we work with and the list of life-changing events they offer with their standard cover:

Information taken from each providers website and correct as at 06/12/2024

You’d need to provide appropriate evidence to the insurer of the life-changing event, within a specified time limit.

For example, with Zurich, you must apply for the guaranteed insurability option and provide the evidence they need, within 90 days of the life-changing event occurring.

Legal & General give you a much longer time limit, up to 6 months.

At Reassured, we can compare quotes from major life insurance providers to see if we can help you find your perfect policy.

Increasing your life insurance

Generally, it’s possible to increase your life cover on more than one occasion, up to the maximum increase as specified by the insurer.

The maximum amount you can increase by sometimes depends on the life-changing event.

For example, for a mortgage increase, some insurers won’t allow you to increase the new cover amount to more than the increase of the mortgage.

The table below shows the maximum age limit to use GIO and maximum increase for each insurer (for term-based cover).

Maximum age limit	Maximum percentage increase of the original sum assured	Maximum monetary increase during the policy	Maximum monetary increase per event
54	100%	£200,000	N/A
54	100%	£200,000	N/A
54	50%	£200,000	£150,000
54	Up to 100%	Up to £200,000	N/A
54	50%	£150,000	£150,000

Sources listed below

Essentially, the amount you can increase your cover by must be less than the maximum monetary amount.

For example, if the sum assured of your existing policy with Aviva is £600,000, then the maximum amount you can increase to is £800,000.

Or, if the sum assured of your existing policy with Aviva is £100,000, then the maximum amount you can increase to is £200,000.

Whole life policy with guaranteed insurability option

With a whole of life policy, you may need to increase your sum assured to meet an increase in inheritance tax (IHT) liability.

In this case, the maximum amount you can increase to is usually higher than for other life-changing events.

The table below shows the maximum age limit and maximum increase for each insurer for whole of life cover.

Also shown is the maximum age limit to use GIO and maximum increase for each insurer if the reason for the increase is due to an increase inheritance tax (IHT) liability.

Maximum age limit	Maximum percentage increase of the original sum assured	Maximum monetary increase during the policy	Maximum age limit (if increase is due to increase in IHT liability)	Maximum percentage increase due to increase in IHT liability	Maximum monetary increase due to increase in IHT liability	Maximum monetary increase due to change in government IHT legislation
54	Up to 100%	Up to £200,000	69	100%	£200,000	£200,000
64	100%	£200,000	84	100%	£1,000,000	£1,000,000
N/A	N/A	N/A	N/A	N/A	N/A	N/A
54	100%	£200,000	69	100%	Equivalent to the increase in IHT liability	Equivalent to the increase in IHT liability
54	50%	£150,000	69	50%	£50,000	Equivalent to the increase in IHT liability

If the increase in sum assured is due to the Government announcing a change in IHT legislation, then the maximum increase amount and the maximum age is significantly higher.

How your new premium is calculated

When using the guaranteed insurability option, you won’t need to answer any further medical questions to secure the higher level of cover.

Your new premium is calculated based on:

Your age
The new cover amount
The length of the term

Although other factors, such as your smoking status, may also be considered.

Insurers alleviate some of the risk to them by implementing a maximum age limit, which tends to be 54 years.

Though on some occasions, the age limit is 49 or 54, depending on what the life insurance was originally taken out to cover.

Some policy types allow you to use the guaranteed insurability option much later in life, depending on the life-changing event (and the insurer).

For example, a whole of life policy with Zurich allows you to increase the sum assured to cover inheritance tax liability up until the age of 69.

When guaranteed insurability is not an option

Not all policies include guaranteed insurability (or the option to increase your cover).

Usually, your existing policy must be accepted on standard terms (which means you pay a standard premium rate).

Some instances where the benefit is likely to be excluded or restricted may be:

You have another policy with the insurer that includes guaranteed insurability, and you’ve already increased the level of cover to the maximum, or below the maximum amount on this policy
You’ve been diagnosed with a terminal illness
You have a medical condition which was taken into account when taking out the existing policy (and you pay a higher premium due to this)
A waiver of premium or payment protection benefit is in place
Your age when taking out the policy was over than the maximum age limit
There are outstanding premium payments

Though it’s important to note that there may be other exclusions or restrictions not listed here.

Your eligibility for this benefit is determined by the insurer and your individual circumstances.

Guaranteed insurability option critical illness cover

The guaranteed insurability option may still apply to critical illness cover when it is either a separate policy or as part of your life cover.

To increase your life insurance with critical illness cover (as one policy), usually means that the increase would be applied equally to both the critical illness cover amount and the life cover amount.

To increase your critical illness protection as a separate policy, not all life-changing events will qualify.

Reasons you may be able to increase your critical illness cover alone, include:

Your mortgage has increased or you have a new mortgage
Your family has grown
Your marital/civil partnership status has changed

As mentioned, the terms of your guaranteed insurability option with critical illness (if available), will be outlined in your existing policy documents.

Joint life insurance with guaranteed insurability option

If you have a joint life insurance policy, then the guaranteed insurability option may still apply to you.

It’s just that both policyholders would need to meet the same criteria as described by the insurer for a single policyholder.

For example, the maximum age limit would apply to both policyholders at the time of the life-changing event.

Splitting a joint policy

In some cases, it’s possible to use the guaranteed insurability option to split a joint policy due to a separation, divorce or the end of a civil partnership.

The insurer would need to be made aware of this life-changing event within a specified time limit, with evidence, so that two separate policies can be arranged.

The new cover for each policy can be up to the original amount (100%) of the existing joint policy.

Though this depends on the insurer, and the type of policy, that offers this option.

Guaranteed insurability option rider

The term ‘guaranteed insurability option rider’ is used less frequently to describe this benefit, particularly in the UK.

A life insurance rider is just another way to describe an option or benefit that’s included in a policy.

Increasing life insurance (what’s the difference?)

There are several differences between increasing life insurance and guaranteed insurability.

First of all, increasing life insurance is a type of policy, whereas the guaranteed insurability option is an additional policy benefit.

When you opt for increasing life insurance, you agree that the sum assured (pay-out amount) will increase each year by a fixed amount during the term of the policy.

Premiums will also increase, usually on an annual basis, in line with the increased sum assured.

The purpose of increasing life insurance is to protect the policy’s value against the rate of inflation.

Whereas, the purpose of the guaranteed insurability option is to ensure that the sum assured of your policy is still meeting your needs following a life-changing event.

Compare life insurance quotes

Our award-winning life insurance broker service provides a fee-free service to help you find affordable life insurance suited to your family’s needs.

We can arrange policies that include the guaranteed insurability option for applicants eligible for this benefit.

The next step is to compare multiple quotes to secure the best possible deal we can offer from our panel of top UK insurers (life insurance starting from just 20p-a-day).

We can do this today, saving you time and money.

Get in touch with our dedicated UK team to get started.

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Sources:

Information taken from insurers websites is correct as of 06/12/2024

[1] https://www.legalandgeneral.com/media/adviser/protection/technical-information/qgi12849.pdf

[2] https://www.aviva.co.uk/adviser/documents/view/al50001c.pdf

[3] https://www.lv.com/-/life/media/pdfs-lvfs/life-insurance/policy-conditions/life-protection-policy-conditions.pdf

[4] https://www.vitality.co.uk/media-online/advisers/literature/life/personal-protection/policy-documents/personal-protection-plan-provisions.pdf

[5] https://www.zurichintermediary.co.uk/document-library

[6] https://cms.legalandgeneral.com/globalassets/adviser/files/protection/technical-information/lg2587.pdf

[7] https://static.aviva.io/content/dam/document-library/adviser/individualprotection/al50008c.pdf

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Adoption of a child
Birth of a child
Becoming a legal guardian of a child
Marriage / Civil Partnership
Divorce or dissolution of civil partnership
Increase in mortgage or loan
Rental increase
Change of employer / promotion / salary increase
Loss of cover through change of employer
Loss of cover due to retirement
Increase in IHT liability

Guaranteed insurability option (GIO)

Increase your policy pay out (without new underwriting)

What is guaranteed insurability option?

Guaranteed insurability option life insurance

Life insurance calculator

When you can use the guaranteed insurability option

Increasing your life insurance

Whole life policy with guaranteed insurability option

How your new premium is calculated

When guaranteed insurability is not an option

Guaranteed insurability option critical illness cover

Joint life insurance with guaranteed insurability option

Guaranteed insurability option rider

Increasing life insurance (what’s the difference?)

Compare life insurance quotes

Sources:

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