Do you have parents, grandparents, aunts or uncles who need assistance purchasing burial insurance? We will explain the process of getting burial insurance for elderly family members. and how you help them get coverage in two easy steps. Let's begin at the beginning...
What is burial insurance?
Burial insurance is coverage that you use to pay for your final expenses. This can include the cost of a funeral, burial, cremation, and any other bills left unpaid.
You can get a policy that pays the funeral parlor directly. However, we don't think that's in your best interest. You (actually your beneficiary) should be in charge of how the money is spent. It gives you more freedom to handle expenses as you see fit.
The kind of burial insurance we suggest is also know as final expense life insurance. These policies offer permanent coverage, meaning that as long as you pay your premiums in a timely manner they will last as long as you live. (Obviously, a term life insurance policy would not be a good choice for final expenses because if you outlive the level term period you wouldn't have any coverage at an affordable price!) Final expense policies are structured so that the premium and the death benefit stay level for your lifetime. These policies have a relatively small face amount, somewhere between $2,000 up to $50,000. (Not all carriers go that high, some only go up to $35,000).
Final expense coverage will amass cash value. It is recommended that you don't borrow out any cash. If you do, you will change the guarantees and the premium may increase.
There are policies that do require a paramedical exam, blood test, urine test, medical records, and more, however these begin at a minimum of $25,000 and are discussed elsewhere. These are guaranteed universal life insurance policies for seniors. These policies can often take 6-8 weeks to obtain.
Today we will discuss final expense policies that do not require any medical exam.The applicant answers a number of health questions. Hopefully all answers are "no" (No, I do not have that condition). Based on the answers you can be accepted for a level benefit, graded benefit and sometimes a modified benefit (every company is slightly different). The carriers will review a prescription database to confirm your answers. They may also order a Medical Information Bureau (MIB) report. This will detail any medical issues found when you applied for other insurance coverage.
Level benefit- This means that the coverage begins as soon as you put the policy in force. There is no waiting period. If the insured passes away shortly after the policy goes in force, the beneficiary will receive the full face amount of the policy. These may be purchased up to age 90 (in most states).
Graded benefit- The coverage is phased in over time. This can work in two ways. Either a percentage of the face amount is paid in year one, and the full amount in year two, or a percentage in years one and two and the full amount in year three. Another option is that the beneficiary receives all premiums paid plus interest, usually about 10% is paid. We prefer the companies that offer a two year grade, so full face amount is paid in year two.
Modified benefit- Only a few companies have this option and it is a three year grade. Premiums plus interest are paid in the first three years. There may be other options available to the applicant that only have a two year wait and we would certainly explore these.
If you cannot qualify for this type of final expense coverage, guaranteed issue policies are available up to age 85 in most states. The maximum coverage offered is $25,000, although some ages can only obtain $10,000. These policies offer only accidental death coverage for the first two years. After that the policy will pay for a loss for any reason. During those first two years, if the insured passes from a medical condition, the beneficiary will receive all premiums paid plus interest. There are no medical requirements for this type of coverage. Every applicant will be approved. (If your family member has a diagnosis of Alzheimer's or dementia, the only coverage they will be able to obtain is a guaranteed issue policy.
One thing to consider when helping your family member buy life insurance is that it's important to understand their medical issues so you can apply for a policy where they can get approved. Every company asks their medical questions slightly differently. For example, one company will approve you with a pacemaker and another won't. The more prepared you are, the easier the process will be.
Final expense insurance is easy to purchase. The applications are short, and approval is usually within a few days. Sometimes it can be as quick as the day after you apply. Again, these are whole life policies that will last your lifetime.
We suggest you talk with an independent agent who specializes in burial life insurance for elderly applicants. They will know the most about these types of coverage. They should be able to direct you to a company where your relative can get an approval.
You must be certain to give your agent all of the information about your family member. Telling the truth is really important. During the first two years of a policy, the insurance company has the right to investigate if the insured dies. If the insured was fraudulent on the application, the insurance company will contest the claim and will not have to pay. Therefore, completing the application honestly is best.
Once you have found your agent, you can discuss how much coverage your loved one wants, needs and/or can afford. Your agent can give you quotes based on the amount of coverage you want or the amount you want to pay. Your agent will have access to many more carriers than you can find yourself on line, so don't go it alone!
Applying for coverage is the next step. It's really an easy process as the application is short. There are some decisions to be made. Who will be the owner of the policy? If you are paying for the coverage, you will probably want to be the owner. If so, your information will be required and you will also sign the application. Any changes made to the policy must be done by the owner. If you want to lower the amount of coverage, for instance, the owner will have to sign the paperwork. Premiums usually are paid by automatic bank draft which allows the carrier to deduct the payment on a set date every month from your checking or savings account.
Depending on the company, the application may be able to be signed electronically. This is the fastest and easiest if your family member has access to a computer. If not, you can always complete a paper application. Most companies then require that the proposed insured have an interview on a recorded line where they are asked the questions on the application. After that is complete, the insurance company will check the databases and make a decision to approve, approve at a graded level, decline or postpone.
If your loved one is approved, the first monthly premium will be drafted according to your instructions. Once that occurs, the policy is in force and your family member is covered according to the terms of the policy.
If your family member is approved at a graded level, before accepting the policy, we would make sure another carrier would not accept them at the best level (where coverage starts on day 1). If we find another carrier, we would apply again. If not, we would explain the difference in the coverage so that you and your loved one understand the limitations and when full payment would be made.
If your love one is declined, we will find out why and see if a different carrier would approve. If so, another application would be done and the process restarted with the new company. If not, the only option is to apply for guaranteed issue life insurance.
The good news is that in most cases there are options for final expense coverage even in cases with serious health issues.
The Bottom Line
The good news is that getting burial insurance for your elderly loved one is not as difficult as you might have thought. Step one- find yourself an agent specializing in seniors (all types of coverage for seniors). Step two- let them do the hard work to find you the best deal available for your family member.