As we get older, many of us begin to think about how our family will pay for our final expenses. We don't want to leave them with a funeral bill and any outstanding debts we may have. That's when we decide it's time to find out about final expense life insurance. This type of life insurance is designed for seniors (and others) who wish to purchase a relatively small amount of coverage. As with many products designed with seniors in mind, and life insurance is no different, beware of the small print. (I'll discuss this later in more detail.)Typically coverage amounts start at as little as $2,000 and go up to a maximum of $40,000. The primary difference between final expense and fully underwritten insurance is ease of purchase. Final expense policies have some questions to be answered either yes or no. Assuming the applicant can answer all questions negatively, and the drug database check corresponds to the answers, then approval is speedy and very easy. In addition, many seniors would prefer not to have blood and urine samples taken, which is necessary for fully underwritten policies.
Today it is possible to purchase life insurance coverage through age 89, although choices become quite limited as the age of applicant increases.
All final expense policies are not the same. For example, an applicant with a pacemaker installed will be a "standard" risk with some carriers and not others. These "other" carriers will usually give the applicant a "graded benefit" which means that the full death benefit will not be paid out until the policy is either 2 or 3 years old.
If you progressed this far you may be thinking that simple coverage like this is not so simple after all, and you'd be right. Many factors enter into underwriting, and that's why you are better off speaking with an independent agent as opposed to someone who represents only 1 carrier. Imagine trying to do this on your own? Don't even try, because you won't be able to find all of the companies an independent agent can check. As with any purchase, one size fits all usually doesn't!
Independent agents can search for coverage that works for your situation.
1. What's the Best Kind of Final Expense Insurance?
The best kind of insurance is the one you can put in force (that means you can qualify for the coverage)! That will be determined by many factors including....
- How much insurance do you want?
- Which kind of insurance can you qualify for based on your health?
- Do you need to, and if so are you willing to take a medical exam and give blood and urine?
There are 3 kinds of final expense insurance:
- Universal Life Insurance Policies - Requires a physical and full underwriting. Face amounts start at $25,000 and go up from there. Some companies start at $100,000. This type of coverage is likely to be the least expensive, however, it requires the most information and can take as long as six to eight weeks to complete because your medical records will probably be reviewed.
- Whole Life Final Expense Insurance Policies- No physical is required. These policies have simplified underwriting guidelines, meaning you have to be able to answer "no" to a number of health questions. For less than $25,000 of coverage, this is your least expensive option if you can qualify. These policies will often have you covered in less than a week.
- Guaranteed Issue Life Insurance Policies- There is no underwriting at all, and every applicant is accepted. The price is more expensive than the prior two options because they do not consider any medical information for approval. These policies are quick to put in force. In the event of death from illness during the first two policy years, the insurance company refunds all premiums paid plus interest. After this 2 year period the policy works as any other, and pays out the entire death benefit. In the event that an insured dies within this two year period from an accident and not a health issue, the entire benefit is paid out.
A word of caution....
As with many products that are geared towards seniors, there is plenty of room for what is not said in the interview process.
- Make sure you understand what the policy does and doesn't cover.
- Be sure you know how long the coverage lasts.
- There are some well know carriers whose coverage seems like a great deal, but the small prints says the policy ends at age 80.
- You will also find some companies promoting a $1 premium for the first month. I cannot stress too much that the "devil can be in the details" when buying such coverage through the mail.
Another issue that can pop up is the tendency for all of us (including seniors) to choose brand names based on nothing other than a comfort level that may or may not be earned.
- As an example, a client recently called after receiving an offer through the mail from one such brand name that caters to those over 50. He wanted to know why he paying more.
- Upon examination of the offer, I was able to point out that there would be 3 price changes (increases) from this carrier during the level premium period of his current policy, thereby making his current policy a much better deal.
- We hear what we want to hear! We make assumptions about the coverage. Ask questions! Be sure you know what you are buying!
This is why it's important to find an agent you trust. As with any purchase, check with those whose opinions you trust for a referral. If you are not comfortable with that method, you can always look on the internet for an agent that has independently verified references.
Once you're comfortable you have found an agent you want to work with...
- Go to the internet site for the Insurance Department in your state.
- Most states will allow consumers to check the record of anyone licensed to do sell insurance.
- Once an agent is licensed in his or her resident state, they are able to purchase a non-resident license for other states as well so you can check more than one state if you want.
- The website will let you know if they have any complaints.
- Also check Yelp and Google Plus for reviews.
- Remember, its' not the physical distance between you and your agent that matters. It's the quality of the advice and service that you are looking for.
2. What Do I Need to Know to Get Started?
Once you decide you want to get coverage, the first question will be how much? If you aren't certain, you can discuss it with your agent. Partly it depends on what you are trying to accomplish by getting coverage. Here are some of the more common reasons why you may need coverage...
- Funeral expenses
- Outstanding debts
- Mortgage protection
- Protect a spouse
- Protect a special needs child or grandchild
- There are as many reasons as there are people! Whatever your reason is, once you have this protection in place, you and your family will be more secure.
Another important decision is what type of coverage will be best for you. Again, this will depend on why you want the coverage. Your agent can help here too.
Another key concern is the cost. How much are you comfortable spending on insurance? All of these together will help your agent show you options to satisfy your goals.
The most important thing you need to know is- who to call to get all the assistance you need!
3.How Can I Find the Best Coverage for Me or My Family Member?
Occasionally you can find a quote engine on line where you can get a final expense life insurance price. However, the quote engine can only consider what you tell it...which is not enough information to get a good quote.
An independent life insurance agent can help you find the policy that will work best for you.
Your agent will...
- Discuss your reasons for needing coverage.
- Help you determine how much coverage you need if you aren't certain what is appropriate in your situation.
- Learn a little bit about your health from you to help decide which type of policy will be best for you.
- Give you quotes after searching a database with many insurance companies to ensure that you are getting the best value.
The 3 Secrets
- Secret 1- Did you know that every company has slightly different underwriting guidelines? That means you may be accepted by one company and declined by another. You may also find that benefits may be better with a lower cost policy. Remember, companies brand their names so you will choose them, and be comfortable with them. This does not always translate to the best policy. My experience is that financial strength is important. Make sure you ask for the insurance company's AM Best rating. If at all possible stay with carriers that are rated A++, A+ or A. Lower rated carriers may have financial concerns in this low interest rate environment.
- Secret 2- Your agent should generally know which company(s) will be most favorable based on your situation (build, current health, health history, etc.). As we mentioned, you can be a yes with one carrier and a no with another. Based on what they know about you, your agent will find your best options.
- Secret 3- Sometimes your application won't be approved. Your agent will now have more information to help you find the right carrier. We have an underwriter we can talk to who helps us with difficult or declined cases. One decline doesn't necessarily mean you can't get the coverage you need. Talk to your expert- your agent!
The Bottom Line
If you are looking for final expense life insurance, you can definitely get coverage. Which type of coverage depends on your situation. Talk to your independent life insurance agent to get the most options for coverage. Ask questions. If you are unclear about what you are purchasing, make sure to speak with an agent you trust to help you. Never feel you are wasting an agent's time- there are no stupid questions. Our job is to get you the best coverage.