11/06/2019
Key factors used in calculating the cost of insurance.
When it comes to pricing out the cost of Final Expense Life Insurance, the current state of your health is really not as relevant because the majority of life insurance companies that cater to the final expense market have 3 plan options available to each client depending on what answers are provided by the client regarding their current health status:
1. Simplified Issue: Good health, no overnight stays in the hospital within the past 12 months and doesn’t use to***co. Client would receive 1st day coverage with no waiting period.
2. Graded Plans: If a client is in moderate health but may have one or more health symptoms like COPD for example or they use to***co, then they likely will qualify for a graded plan. Under the terms of a graded benefit plan as an example, should the client pass away within the first policy year, then their beneficiary would receive 30% of the actual death benefit plus a return of all their premium payments. If the client were to pass away in year 2, then the insurance company would pay 70% of the actual death benefit plus a return of all premium payments made by the policy owner to the beneficiary. This applies to death by natural causes. If death is caused from the result of an accident, then the insurance company would pay 100% of the actual death benefit with no waiting period. Starting year 3, the full benefits of the policy are in effect and will never be modified or graded for the life of the policy.
3. Modified Plans or Guaranteed Issue: This may be the only option if you have one or more serious health issues because there are NO Health Questions on the application, meaning regardless of a person’s health condition they can qualify for a Guaranteed Issue or Modified Benefit Plan. The rate will be more expensive because they are accepting a higher risk client, and there is usually a 24 month waiting period where if death is a result of natural causes, other than by accident, then the insurance company will return all premium payments made by the policy holder, plus interest to the beneficiary. Starting year 3, the client would be entitled to the full benefits of the plan selected.
Once accepted into any of the 3 plans, the client never has to worry about the following:
• Permanent coverage for life, meaning your policy can never be cancelled as long as you make your premium payments. (not Term Insurance)
• Rate Lock- your rate is locked in at today’s dollar for the life of the policy and can never be increased.
• Living Benefits - If you had a qualifying event like cancer, or suffered a heart attack, stroke, or kidney failure as an example, then you would be able to access upwards of 70% of the death benefit while you are still living. There is usually no additional cost for this benefit, and the funds can be used to pay bills or used for any purpose the client desires, as there are no restriction on what the money can be used for. Whatever dollar amount the client withdraws will be deducted from the actual death benefit when the client passes.
