Understanding guaranteed purchase options & guaranteed insurability options

As you gear up to buy life insurance, you may be asked if you want to add a “guaranteed purchase option” or “guaranteed insurability option” to your policy. This is essentially a question about whether the amount of insurance you’re buying today is the same amount that you’re going to need later on.

Insurability can change over time and people who qualify for life insurance early in life may not qualify later due to changes in their age, health or lifestyle. Companies that sell life insurance created guaranteed purchase options and guaranteed insurability (also known as guaranteed increase) options to help prepare for this risk. These options help guarantee your future insurability—no matter what happens in life.

Both a guaranteed purchase option (GPO) and guaranteed increase/insurability option (GIO) may help you increase the coverage of your life insurance policy without proof of insurability (such as a medical exam). The two terms are similar, but typically have one notable difference:

• A GPO allows you to purchase a new life insurance policy without a medical exam.
• A GIO allows you to increase the coverage of your existing life insurance policy without a medical exam.

Some organizations do not differentiate between these terms and may allow you to purchase or increase coverage from both a GPO and GIO. Read the details of the contract or speak with your life insurance representative to learn what is true for your policy. 

You may be able to add one of these guarantees to your life insurance contract when you first sign up. Requirements vary by organization. (For example, at Thrivent, GPO and GIO are only available at issue for ages 0-17.) There is typically a cost to add this benefit and limits to how much you can increase coverage at one time. Your contract will have a schedule of future dates when you will be given the option to change your coverage. The opportunity to buy a new policy or increase coverage usually happens in repeating cycles, such as once every few years or on specific birthdays. For example, you might have 10 opportunities in a lifetime to increase the maximum payout of your life insurance at death by up to $100,000 each time—for a cumulative total of $1 million.

You also may be able to buy a new policy or increase coverage following a major life event. A few examples of life events include getting married, having a child or buying a first home. Using your GPO or GIO early may cause the date of your next increase or purchase option to happen early as well.

Behind the scenes, this rider works by keeping you in the same health class you were placed in when you first bought coverage. You’ll stay in the same health class, even as you age and experience health, lifestyle or other changes that would otherwise impact eligibility.

A group of people who may wish to consider a GPO or GIO are families with a history of health issues. Grandparents, aunts, uncles, and parents may decide to buy life insurance for a child who has a risk of developing health issues later in life. With a GPO or GIO, if a child’s health changes later, they will still be able to add life insurance coverage. For example, at Thrivent, a GPO or GIO may allow you to add up to $1 million later without additional underwriting.

Ellis Hope and his mom, Lori Hope.

Real life example: Meet the Ellises

When Thrivent client Lori Hope of Sioux Falls, South Dakota, bought children's life insurance for her son, Ellis, he was a typical teenager nearing his 16th birthday. Eight months later, Ellis was diagnosed with Hodgkin's lymphoma. At that point, the children’s life insurance contract took on new significance. Without it, Ellis may have found it hard to purchase life insurance in the future, due to his health history. But with the contract in place, Ellis—now 21 and cured of Hodgkin's—can maintain or increase coverage later in life (as long as premiums are paid), without having to provide evidence of insurability.

Learn more about children's life insurance

Your insurance company typically contacts you when it’s time to decide whether to increase or buy more coverage. You also can contact them directly if you’ve had a life event to start the process. Life events can include getting married, having a child or buying a first home.

Choosing to increase or buy more coverage will typically increase what you pay for life insurance. This updated cost may reflect your current age and the increased payout available to your heirs when you die. Your insurer may have a limit for how many times you can increase or change coverage throughout your life. There is often a maximum age to use the GPO or GIO.

Life insurance isn't one-size-fits-all. Talk to a financial advisor about your life insurance options so you can make a choice that fits your goals.