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 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.

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 insurers include the guaranteed insurability option as standard in their policies.

Take advantage of our fee-free, FCA registered broker service today to compare quotes and save money on your life insurance.

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

Ultimately, it’s important to ensure that your family are suitably protected now and, in the future, (when life throws us some curveballs).

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 who’ll be happy to help.

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.

How much life insurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.

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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.

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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.

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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.

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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.

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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.

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Your total cover estimate

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Let us find your best quote.

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.

See the table below which displays the list of life-changing events, and which insurer offers which option:

AIG L&G Aviva LV= Royal London Zurich Vitality
Adoption of a child Yes Yes Yes Yes Yes Yes Yes
Birth of a child Yes Yes Yes Yes Yes Yes Yes
Becoming a legal guardian of a child No No No No No No No
Marriage/Civil Partnership Yes Yes Yes Yes Yes Yes Yes
Increase in mortgage or loan Yes Yes Yes Yes Yes Yes Yes
Rental increase No Yes No Yes No No No
Change of employer/promotion/salary increase No Yes Yes Yes Yes Yes No
Loss of cover through change of employer No No No No No No No
Loss of cover due to retirement No No No No No No No
Increase in IHT liability No No Yes No No No Yes

Source: www.sib.org.uk

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 on your behalf to help find the right policy for you.

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
AIG 54 50% £150,000 £75,000
L&G 54 50% £200,000 N/A
Aviva 54 100% £200,000 N/A
LV= 54 50% £200,000 £150,000
Royal London N/A N/A N/A N/A
Zurich 54 Up to 100% Up to £200,000 N/A
Vitality 54 50% £150,000 £150,000


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
AIG 54 100% £150,000 89 100% £250,000 £5,000,000
L&G 54 Up to 50% Up to £200,000 64 50% £100,000 £100,000
Aviva 64 100% £200,000 69 100% £200,000 £1,000,000
LV= N/A N/A N/A N/A N/A N/A N/A
Royal London 54 50% £200,000 69 100% £200,000 £200,000
Zurich 54 100% £200,000 69 100% £200,000 Equivalent to the increase in IHT liability
Vitality 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.

For example, AIG allows an increase of up to £5 million or 100% of the original sum assured or the increase in liability (whichever is the lesser of these).

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, for example with AIG whole of life cover, 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 polices 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.

All policies arranged through us include the guaranteed insurability option as standard for applicants eligible for this benefit.

The next step is to compare multiple quotes to secure the best possible deal (life insurance starting from just 20p-a-day).

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

Get in touch with our dedicated, FCA regulated team to get started.

Sources:

https://www.sib.org.uk/news-insight/news/articles/when-can-life-cover-be-increased-without-underwriting/90052

https://www.legalandgeneral.com

https://www.zurichintermediary.co.uk

https://www.lv.com

https://www.aviva.co.uk

https://www.royallondon.com

https://www.aiglife.co.uk

https://www.vitality.co.uk

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