Just like Final Expense Life Insurance, Guaranteed Life Insurance is a product designed for individuals aged 50 to 80 who cannot medically qualify for traditional life insurance. Generally, the primary purpose to purchase this type of coverage is to cover an individual’s final expense when the pass away.
By doing so, the policyholder will have peace of mind knowing that their final expenses like funeral and burial expenses will not be left for surviving loved ones and close friends to pay out of pocket.
Insurance companies that offer final expense insurance (and there are many of them), almost always use whole life insurance since the coverage will last for a lifetime, the payments remain level, and the policy will build cash value over time. Final expense is generally available for applicants between the ages of 50 and 85 and provides a death benefit between $5,000 and $35,000.
Once again, different companies have different products so be sure and check with your independent agent who will generally represent most of the companies that offer guaranteed issue life insurance.
Additionally. guaranteed life insurance and final expense life insurance generally come in three types of policies that differ in how the death benefit is paid to the beneficiary:
- Level Benefit – A level benefit policy is generally offered to applicants who medically qualify for a Final Expense policy because any health issues they have falls within the liberalized medical guidelines of the insurance company. This means that the insurance company will pay the full death benefit if the insured dies from natural or accidental causes from day one. Certainly, this is the best of the three options available because the rates are lower and there is no modification placed on the death benefit.
- Graded Death Benefit – A final expense policy that contains a graded death benefit generally will generally pay a percentage of the full death benefit over the first two or three years and then the full death benefit thereafter. The graded benefit typically will only come into play if the insured dies from natural causes. A typical example would be if the insured dies during the first year, the beneficiary would receive 25% of the death benefit, if death occurs during the second year, the beneficiary would receive 50% of the death benefit, death during the 3rd year would be paid out at 75%, and then 100% thereafter
- Guaranteed Issue – Insurers that offer guaranteed issue (guaranteed acceptance) policies typically place a two or three-year waiting period for death from natural causes. If the insured dies within the waiting period, the beneficiary will generally receive the sum of all premiums paid into the policy plus an additional 10%. After the waiting period expires, the beneficiary is entitled to the full death benefit. However, death from accidental causes is not subject to the waiting period and is paid 100% from the first day of coverage.
How are the Premiums Impacted by each type of Final Expense Policy?
With most insurance companies that offer final expense whole life insurance, Level Benefit will be the cheapest, then Graded Benefit will cost a little more, and then Guaranteed issue will be the most expensive.
Here is an example of insurance quotes for a $10,000 policy for a male non-smoker for each type of policy:
