Category: Life Insurance Blog
Final Expense Life Insurance versus Guaranteed Issue Whole Life
August 7, 2017 Richard Reich
Life insurance is certainly a necessary. If you have financial commitments that could come to be a problem when you pass away, you should be protected. But often that’s much easier said than done. For senior citizens, final expense life insurance or guaranteed issue life insurance are strategies to get a reasonably inexpensive whole life insurance policy to cover ordinary obligations. Here you can learn the differences and similarities of Final Expense Life Insurance versus Guaranteed Issue Whole Life.
Final expense and guaranteed issue life insurance provide a common purpose, but there are differences that anybody thinking about applying for them ought to be aware of.
Final Expense Insurance versus Guaranteed Issue Life Insurance
Final expense insurance and guaranteed issue insurance are very similar in many ways, and can also be used interchangeably, but there are a couple of key variations that you should know about.
Both final expense life insurance and guaranteed issue life insurance are more liberal than other forms of life insurance as far as who is eligible for them. When it comes to term insurance – which lasts a specific length of time – your overall health and age significantly affect your rates, and you may actually get outright denied (although rare). Neither of these two are that stringent about your health ratings.
Final expense insurance will require you to respond to a few questions about your overall health, but that’s really about it. There isn’t the same type of in-depth analysis that comes with a term life insurance policy, which makes it a form of simplified issue life insurance. Guaranteed issue life insurance will take it a step further; with the exception of a handful of “knockout” situations (like if you already have a terminal illness), if you pay your monthly premiums, you are covered.
Since you’re not receiving tailored rates dependent on your particular health status, both final expense and guaranteed issue life insurance are substantially more expensive than term insurance and offer less coverage. In essence, they are end-of-life insurance policies mainly catering to seniors and less-healthy individuals. They are both very useful as burial insurance – offering enough insurance coverage to deal with funeral costs, but not much else.
If you have medical issues that block you from getting reasonably competitive rates with term insurance, you could opt for one of these other insurance types that do not look at your overall health quite as closely, but you will end up paying the price tag for that privilege. Nevertheless, some insurance coverage is better than no insurance coverage.
The differences between final expense life insurance and guaranteed issue insurance are in the details of the policy.
The first is precisely what we outlined above: Final expense insurance will take your health into consideration somewhat, while guaranteed issue insurance does not. The insurance coverage amount you receive with guaranteed issue insurance will depend on your age and sex.
That brings us to an additional difference. Guaranteed issue life insurance is distinctive in that the payment rate remains the same at a fixed “unit price,” but the insurance coverage amount differs:
When we ran quotes at Foresters, we found that a 60-year-old man from The state of California could get a death benefit of $1,214 for only $9.95 per month. A 75-year-old man, on the other hand, would only get a death benefit of $560. You can purchase multiple units of coverage to get a larger death benefit.
Final expense life insurance offers more insurance coverage than guaranteed issue; while guaranteed issue typically caps out at about a $20,000 death benefit, you can normally get up to $35,000 with final expense life insurance. In comparison to term insurance, you will still be paying a lot for that $35,000 benefit, but depending upon on what you will need it for (i.e., how much you want to cover regarding funeral costs) final expense insurance may be a far better fit than guaranteed issue life insurance.
Lastly, final expense insurance typically has more underwriting guidelines for who qualifies. It’s designed for end-of-life expense coverage, so it’s restricted as to how old you can to be to apply, and when it expires. State Farm’s final expense insurance policy is only available for individuals aged 50-80, and it normally expires when the policyholder turns 100. Guaranteed issue insurance doesn’t have these restrictions.
Consider Term Insurance First
If you can buy traditional term life insurance, it’s virtually always your best option. It’s intended to expire after a specific time period, so if you can eliminate any debts that may pass to surviving loved ones by the time you’re a senior, it’s the more affordable method to get the most life insurance coverage when compared to other options.
When you submit an application for term life insurance, there’s a premium that is associated with your health. You’ll answer a very few straight forward questions about your overall health when you apply, have a telephone interview to go over your health status, and go through a paramedic exam so the underwriter can get a better awareness of your current health and possible future health issues.
You may want to consider applying for a kind of term life insurance policy with accelerated underwriting where you can skip some of the above-mentioned steps, but the insurance company will use third-party sources to create a health profile of you. They’re obtaining virtually the same information but in a different manner.
All of this takes place during the underwriting process. The underwriter will use all of this kind of information to assign you a classification, ranging from Preferred Plus to Substandard. This is essentially a way of measuring how risky you are to insure. The better your rating – the better condition you’re in – the lower your premiums, and vice versa.
It’s important to understand that the insurance product and the vetting procedure make it much less expensive than final expense or guaranteed issue whole life insurance.
Final Expense and Guaranteed Issue Life Insurance Should be Your Choice of Last Resort
Even if you are a senior citizen or have got health challenges that you think may possibly disqualify you for a term life insurance policy, it should nevertheless be the first step in your search for affordable life insurance. You’d be pleasantly surprised at how flexible insurers can be; health problems like diabetes and cancer, which were major hurdles a few years ago, can still get very competitive ratings. And taking into consideration the cost of final expense and guaranteed issue life insurance, elderly applicants may nevertheless find it more cost-effective to purchase a term policy. You’re most likely to get a higher death benefit or lower premiums, or possibly both.