There are many different types of life insurance policies that fall under the umbrella of “whole life” insurance. The type of policy we are focusing on is called Final Expense Insurance – sometimes called funeral insurance or burial insurance. Essentially it is a smaller version of a typical permanent whole life insurance policy. What makes this policy unique are a few key factors, including qualification, cost, and death benefit.
The first is Simplified Issue Insurance, sometimes called Simplified Whole Life Insurance. This option is available to those not eligible for other life insurance policies because of certain health conditions. The primary appeal of this policy is that it does not require a medical exam, making it easier to acquire. This makes it possible for individuals to get a policy that helps their loved ones deal with final expenses even with certain pre-existing conditions.
It’s important to note that while a medical exam is not required, there are health-related questions that must be answered to get a Simplified Issue policy. Approval is not guaranteed.
The application process is shorter, and coverage is more immediate, but the benefits are considerably smaller, typically capped at $50,000. Those interested in Simplified Issue Insurance should also know that this policy is not as customizable as other policies.
The second type of Final Expense Insurance is called Guaranteed Issue Life Insurance. This option is typically chosen by older individuals who deal with serious or even terminal illnesses. While not every single individual who applies for Guaranteed Issue Insurance will be approved, it has an extremely high approval rating, making it ideal for those who struggle to qualify for other types of insurance.
No medical exam or health-related questions are required, but an application must be completed. The likelihood of approval and the permanent nature of this policy is certainly attractive, but there are limitations to this insurance option. The main restriction is the actual death benefit which caps lower than most policies, usually around $25,000.
In some cases, Guaranteed Issue Insurance offers graded policy benefits. This means that the premiums must be paid for two full years before the beneficiary is eligible to receive the full benefit amount. In this instance, if the policyholder passes away before the two-year requirement, the full premium amount plus 10% will be reimbursed to their loved one upon passing.
Because this type of insurance is typically used as a last resort by much older individuals who need guaranteed approval without a medical questionnaire, it should not come as a surprise that this is also a slightly more costly insurance option than Simplified Issue. However, it does provide loved ones with some means to cover bills and other end-of-life expenses, which many find valuable and comforting.
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