With the vast number of baby boomers now aging into the senior insurance marketplace, final expense whole life insurance is more popular than ever before.
And seniors have now discovered that even with some health issues, they can qualify for graded benefit whole life insurance.
When we think about final expense insurance, certainly we’re considering those inevitable funeral and burial expenses that we’ll pass to surviving loved ones if we don’t have life insurance to cover the costs.
Final expense insurance, also referred to as burial insurance or funeral insurance, has become a huge market that is supported by seniors, and the size of the market is evidenced by continuous television advertising in virtually every market.
What is Final Expense Insurance?
Final expense insurance is not a type of life insurance but rather a purpose for life insurance. In the majority cases, final expense insurance coverage is built on whole life insurance since it is permanent and will not cancel as long as the premiums are paid.
Although some insurance companies offer final expense insurance using term life insurance, we feel that using whole life insurance that is permanent and guaranteed is a much better solution.
Most of the insurance companies that offer final expense insurance have broad underwriting guidelines because the product is marketed to seniors and seniors may not always be in the best of health.
Moreover, these final expense companies typically offer two or three types of final expense and burial insurance policies to accommodate seniors who present with serious or even multiple health issues.
If the applicant cannot medically qualify for level benefit coverage (lowest rates and no waiting period) they will likely qualify for graded benefit whole life insurance.
If they are still unable to qualify for graded benefit coverage, then they will be offered a guaranteed acceptance policy since no medical conditions are considered to qualify for coverage. Think of guaranteed issue burial insurance as a policy of last resort.
What is Graded Benefit Whole Life Insurance and how does it Work?
When we talk about “benefit” in this article, we are referring to the death benefit that will be paid to the designated beneficiary when you die.
What life insurance companies will do in order to have the ability to insure unhealthy applicants and still make a profit on the policy, is to offer a whole life policy with higher rates and a waiting period in which the death benefit is graded if the insured dies from natural causes during the waiting period.
In almost every case, the full death benefit will be paid to the beneficiary (minus outstanding loans) from day one if the insured dies from accidental causes.
Also, it’s important to note that with any final expense insurance policy, no medical exam is required by the insurance company.
How will I know if I qualify for Level Benefit Whole Life Insurance?
Every insurance company that offers final expense insurance uses a medical questionnaire to determine if the applicant will qualify for coverage.
And, since the company doesn’t require a life insurance medical exam, they will check your answers to the health questions against a report they get (with your permission) from the Medical Information Bureau (MIB). They will also order a prescription drug check from a national database.
Here is a list of YES or NO qualifying medical questions that must be answered truthfully and signed by the applicant. This can be done online, over the phone, or in-person with an agent.
We refer to the medical questions as “knock out” questions and they are generally presented in two parts.
If you answer “yes” to any question in the first part, you will not qualify for level benefit (no waiting period) coverage.
Here are the typical questions you’ll find in Part 1:
|ARE YOU CURRENTLY:|
|Bedridden or confined to any kind of nursing facility, or require home health care?|
|Need help with activities of daily life such as bathing, eating, taking medicine, toileting, dressing, getting in or out of a chair or bed, or control of your bladder or having bowel problems?|
|Do you need an electric scooter, wheelchair, or oxygen equipment other than a CPAP device?|
|HAVE YOU HAD OR BEEN DIAGNOSED OR TREATED FOR:|
|Alzheimer’s, dementia, mental incapacity, congestive heart failure, metastatic cancer, a reoccurrence of previous cancer, sickle cell anemia, Lou Gehrig’s disease, paraplegia, quadriplegia, down’s syndrome, MDS or Huntington’s disease?|
|AIDS, HIV, or AIDS-related complex?|
|Advised to receive bone marrow, tissue, or organ transplant?|
|Diabetic coma, insulin shock, dialysis, or diabetes-related amputation?|
|Terminal condition and expected to die within 12 months?|
|IN THE LAST 12 MONTHS HAVE YOU BEEN:|
|Advised to have any surgery, diagnostic test, hospitalization, treatment, or other procedure that hasn’t been completed or the results are unknown?|
|Had a heart surgery or been diagnosed with heart disease?|
|IN THE LAST 2 YEARS HAVE YOU BEEN:|
|Been diagnosed with, treated, or been advised to seek treatment for any form of cancer other than basal and squamous cell cancer?|
A “YES” answer to any of the above questions will disqualify the applicant from purchasing level benefit whole life insurance which offers the best rates and first-day coverage.
Here are the typical Part 2 Questions:
|HAVE YOU EVER BEEN DIAGNOSED WITH, TREATED FOR, OR BEEN ADVISED TO GET TREATED FOR:|
|COPD, emphysema, chronic lung disease, or sarcoidosis?|
|Diabetes prior to age 50?|
|Diabetic complications such as neuropathy, retinopathy, nephropathy, or peripheral vascular disease?|
|IN THE LAST 48 MONTHS HAVE YOU BEEN DIAGNOSED WITH, TREATED FOR, OR BEEN ADVISED TO GET TREATMENT FOR:|
|Cancer (except basal or squamous cell)?|
|Chronic kidney disease, scleroderma, or lupus?|
|Bipolar disorder, schizophrenia, multiple sclerosis, or Parkinson’s?|
|IN THE PAST 24 MONTHS HAVE YOU BEEN DIAGNOSED WITH, TREATED FOR, OR BEEN ADVISED TO GET TREATMENT FOR:|
|Valvular heart disease with surgical repair, coronary artery disease (events such as blockages or stent procedures), irregular heart rhythm, heart attack, artery bypass surgery, angioplasty, stroke or mini-stroke?|
|IN THE PAST 24 MONTHS HAVE YOU:|
|Awaiting trial or been convicted of a felony?|
|Been treated for drug or alcohol abuse, been convicted more than once of driving recklessly or DUI, or used illegal drugs or abused or improperly used prescription drugs?|
|Been confined to a hospital for a nervous or mental disorder?|
|IN THE PAST 12 MONTHS HAVE YOU:|
|Experienced unintended or unexplained weight loss greater than 10 pounds, consulted with a doctor for a chronic cough, fatigue, or gastrointestinal bleeding?|
A “YES” answer in Part 2 will not disqualify an applicant from purchasing Graded Benefit Whole Life Insurance.
Although almost every life insurance company asks the same questions listed above, some companies have different “look-back” time periods than others.
For example, Company A might begin the question with “within the last 36 months” where others might begin the question with “within the last 24 months.”
This is when Graded Benefit Whole Life Insurance can save the day.
What’s the Price Difference Between Level Benefit and Graded Benefit Whole Life Insurance?
Before we discuss pricing, it’s essentially important to understand how a Graded Benefit final expense policy works. Yes, the prices are different and we’ll illustrate that below but the most important thing is the term “Graded Benefit.”
Although companies vary on how they pay claims under a graded benefit policy, most of them offer the same type of claim payment if the insured dies from natural causes in the first two years of the policy.
If the insured dies from natural causes in year one, the beneficiary would receive 70% of the full death benefit stated in the policy.
If the insured dies in the second year, the beneficiary would receive 70% of the full death benefit stated in the policy.
If the insured dies from natural causes in the year or later, the beneficiary would receive 100% of the death benefit.
If, however, the insured died as a result of an accident, the beneficiary would receive the full death benefit from the first day of coverage.
Here are the actual rates for a $15,000 Final Expense Policy for a male and female non-smoker for level benefit and graded benefit whole life insurance:
Age Male Non-Smoker
50 $43.45 $61.28 $36.04 $44.94
55 $52.87 $71.93 $39.96 $55.58
60 $64.04 $82.57 $47.70 $68.33
65 $81.60 $98.76 $59.91 $80.33
70 $107.65 $127.40 $78.26 $103.72
75 $147.91 $164.89 $107.01 $142.85
80 $207.99 $216.16 $146.45 $179.73
The Bottom Line
If you are between the ages of 50 and 85-years old and finding it difficult to qualify for level benefit final expense insurance, ask your agent about graded benefit whole life insurance.
In many cases, seniors who have issues getting a level benefit policy will easily qualify for a graded benefit policy with rates that are still very affordable.