WHAT IS FINAL EXPENSE INSURANCE?
One of our goals is to help you feel at peace knowing you are well informed for end-of-life and prepared to make the best decisions possible to protect your assets, your family and your legacy ... So ... WHAT IS FINAL EXPENSE INSURANCE?
The reason people purchase Final Expense is for a death benefit, period. Everything else is secondary. Don't be fooled by anyone saying that Final Expense Life Insurance is great because it accumulates cash value. While that is indeed true, the cash value accumulated is far less than the benefit you start to approach age 100.
FINAL EXPENSE - WHAT IS IT?
- Final Expense Policies are WHOLE (PERMANENT) LIFE insurance for people over the age of 50
- A few companies have policies for ages 45+ (i.e. Mutual of Omaha)
- Lower face value (lower benefits) policies designed to cover end-of-life expenses
- Because they are for people over 50 and have lower benefits, final expense policies are designed to be affordable for any and all budgets
Other Final Expense Options
In some cases, usually for people between the ages of 45-60 and in some cases for healthy people up to the age of 69, there are some INCREDIBLY VALUABLE yet not well known options. The reason they are not well known is that most Final Expense agents and companies focus on selling products and not solutions.
If you are between the ages of 45-69 and are healthy, I can guarantee you have MUCH better options than a simple final expense policy. Below are the some of the other options;
- Participating Whole Life Policies that Pay Dividends and Interest
- 2o or 30 Year Term Final Expense ROP Policies
WHAT ARE THE DIFFERENCES FROM COMPANY TO COMPANY?
The differences between companies and policies are minimal. Below is a handy list of things that may vary from company-to-company and policy-to-policy.
- Benefit Amounts - Minimum benefits range from $2,000-5,000, maximum benefits range from $20,000-$40,000 depending on carrier.
- Accelerated Death Benefits - If diagnosed with a terminal illness, most companies and policies have built-in Accelerated Death Benefit Riders that will pay out 50% of benefit while still alive. 50% is the standard, but may vary from company to company.
- Riders (Add-Ons) will vary from company-to-company. Accidental Death Riders and Child Riders are common.
- Health Classifications will vary from company-to-company (see next section)
- Participating vs. Non-Participating - Participating is a fancy word meaning "dividend paying" or a "mutual company". In participating companies the policy holders are also shareholders, profits are distributed back to policy holders. The better the performance of the company, the more dividends and interest you earn (Foresters and Mass Mutual are examples.)
- Reputation, Reviews & Rating - Some homework or research is required
SIMPLIFIED, GRADED, MODIFIED, GUARANTEED ISSUE, NO 2 YEAR WAITING PERIOD?
- No 2 Year Waiting Period - NO HEALTH EXAMS, ONLY HEALTH QUESTIONS -Policies that will pay full benefits from day 1 (as opposed to graded/guaranteed). This is some times called Level or Simplified Issue for healthy people.
- Graded Policies - NO HEALTH EXAMS, ONLY HEALTH QUESTIONS - Policies for people with minor health issues (i.e. Diabetes with A1C's below > 7, heart attack > 2 years ago, etc.). Graded policies are more expensive and will have reduced benefits (or no benefits) for the first two years.
- Modified Policies -NO HEALTH EXAMS, ONLY HEALTH QUESTIONS - Policies for people with major health issues. Modified policies are more expensive than graded and will have reduced benefits (or no benefits) for the first two years. IF YOU GET A QUOTE FOR A MODIFIED POLICY, MAKE SURE TO READ THE FINE PRINT!
- Guaranteed Issue - NO HEALTH EXAMS, NO HEALTH QUESTIONS - Guaranteed issue simply means NO MEDICAL EXAM and NO MEDICAL QUESTIONNAIRE (Simplified, Graded and Modified all require a medical questionnaire). Guaranteed issue just requires you to provide name, age and a few other pieces of contact info then you are automatically issued you a policy. Cost will be much higher and benefits much lower, however for anyone that is uninsurable, this is their only option.
WHAT ARE THE MOST IMPORTANT FACTORS WHEN PEOPLE DECIDE ON A COMPANY/POLICY?
- RATE is the #1 reason - Click here for rates and info
- TRUST is the #2 reason - Trust in both the agent and the company
- CONVENIENCE (easy to understand and easy to apply for insurance) is the #3 reason!
- FIND THE RIGHT BALANCE - Try to find the best balance of lowest rate, trust and convenience. "Trust" can be a challenge, try searching reviews and ratings.
MY PROFESSIONAL RECOMMENDATIONS
- RECOMMENDATION #1, NO MAJOR HEALTH ISSUES - If someone put a gun to my head and asks; "What is the best company in terms of both lowest rate, most trusted and most convenient?", my recommendation would be Mutual of Omaha's Living Promise policy. For healthy people (smokers & non-smokers alike), Mutual of Omaha is #1) always in the top ~ 5 for lowest rates; #2) Strong ratings (AM Best A+, Moody's A1 and S&P A+), #3) Been doing business since 1908 (they have to be doing something right!!!) and #4) Have a very easy and fast application process.
- RECOMMENDATION #2, MINOR OR MAJOR HEALTH ISSUES - For anyone above 50 with minor or major health issues (smokers & non-smokers alike), I will share with you some consensus opinions from AGENTS; AIG is the go-to for many agents, Transamerica and Royal Neighbors are solid choices. My recommendation is GPM Government Personnel Mutual (see next point.)
- GENERAL RECOMMENDATION - Our personnel favorite is GPM (Government Personnel Mutual). Why? For 4 reasons; #1) Rates are highly competitive, for many ages and health classes they are #1 although GPM is (very) expensive for smokers; #2) Application is VERY easy; #3) For people with health issues, GPM offers agents (and clients) EASY and FAST risk assessments via phone and 100% confidence in understanding the best option(s); #4) GPM's history as a company is EXCELLENT (solid books and well managed).
HELPFUL HINTS - WHAT TO LOOK OUT FOR? HOW DO YOU KNOW TO TRUST AN AGENT?
These are VERY good questions. yet very challenging to answer! We are required to abide by a code of ethics, so we need to be careful what is put in writing here ... BUT ... here are some valuable things to know!
- Know the difference between "captive agents" (can only sell for one company) and "independent agents" (can sell for multiple companies). Example of captives are; State Farm, All State, AAA, Farm Bureau, Farmers, etc. Many (most) captives sell multiple lines, including Home and Auto although there are some captive life companies, i.e. Mass Mutual, Liberty Bankers Life, etc. Captives have a limited menu (one company, one policy) and are more expensive. The value you get for paying more is customer service (generally speaking) and since the menu is limited, captive policies are easy to understand. Captive agents are also VERY knowledgeable and highly trained on their products.
- Bundling - Insuring a car is a lot different than insuring a life. Life insurance is much more highly regulated than home and auto. Life insurance CAN NOT be discounted. Multi-policy discounts are legal and allowed, but once again there are VERY TIGHT regulations for this practice.
- ASK INDEPENDENTS FOR MULTIPLE OPTIONS - Be aware and careful of an independent agent that immediately favors one carrier or policy (RED FLAG: if an agent immediately gives quotes without asking you health or smoking questions). Independents sometimes have higher commissions or bonuses with specific carriers, giving the independent incentive to work in THEIR best interest and NOT yours. EXAMPLE: Americo is a GREAT company and has SUPERIOR rates for smokers, but non-smokers have better options. If an independent is aggressively pushing Americo to non-smokers and not providing options, this is NOT in your best interest.
- Beware of willingness or suggestion to falsify an application. I visited a client that was written as a non-smoker despite being a smoker, the writing agent probably used this to "close" a deal. Fraudulent applications will prevent death benefits from being paid.
- Most life insurance companies require premium payments via banking (checking or savings account) and will not accept debit cards, credit cards or cash.; #1), because; #1) It prevents lapses, #2) Less expensive for the carrier/company and #3) Most life insurance companies also provide annuities and IUL's, in which case the company must abide by the The Patriot Act (a preventative money laundering measure for terrorists and/or illegal dealers). Some companies will allow life insurance premiums be paid by credit, debit or cash or even SSI (Direct Express).
- WHOLE LIFE INSURANCE policies accumulate cash value over time. As we mentioned above, the cash value accumulation is secondary to the death benefit. The accumulated cash can be accessed while alive, as a lump cash surrender (cash out) or as an interest free loan. IMPORTANT -> Whole life policies (final expense policies) an be easily exchanged between carriers (companies). This is done through a 1035 exchange, a federally mandated and regulated exchange for transferring funds in life insurance and annuity policies. Cash accumulation is not THE reason to buy life insurance, but it's nice to know that if you find a better policy or a better premium that you can transfer cash, without a tax penalty, from one policy to another!
Final Words - Find an agent that you are comfortable with, an agent that tends to your needs. Always select an agent that is willing to work within your budget, the #1 reason people let their policy lapse is that the premiums are too expensive - STAY WITHIN YOUR MEANS AND MAKE SURE YOUR AGENT KNOWS THIS AS WELL!
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