Final Expense is a specific form of Whole Life Insurance, generally designed for individuals between the ages of 50 and 85. Final Expense Insurance is offered in “guaranteed issue” meaning no health questions; or “simplified issue” meaning there are health questions but there are very few “Have you ever?” questions on the application. Brief descriptions of each are listed below. The examples listed in these descriptions are examples only, actual benefits vary by individual polices, carriers, and the laws and regulations in each state.
Simplified Issue – Is generally the most affordable form of the final expense insurances. Simplified Issue policies offer first day coverage instead of having waiting periods like the guaranteed issue policies. Simplified Issue has health questions but because it is designed for the senior market, most of the health questions are asked in a window of time. (Example: In the last 12 months has “XYZ” happened? Or In the last 24 months has “ABC” happened?) Simplified Issue Policies are generally not offered through the mail or over the phone, because there can be confusion as to who qualifies for what coverage. Most people do qualify for the more affordable simplified issue polices.
Guaranteed Issue – Unlike the Simplified Issue, Guaranteed Issue does not have health questions and therefore everyone qualifies for these policies. But this ease of issue and qualification comes with some consequences as well. Because everyone qualifies no matter what their health condition; these policies are often much more than the cost of Simplified Issue; and have a 2 to 3 year “waiting period” as part of the policy. (Example: if the beneficiary passes from a health condition in the waiting period the carrier is only obligated to return the premiums paid (sometimes with interest))
Modified Issue – In some states, there are also policies called “modified” final expense policies. These policies offer more liberal health questions so those with more serious health conditions can still qualify but the policy will have limitations like the guaranteed issue. (Example:In the first year if the insured passes from a health condition, only the premiums paid by the insured will be paid out by the carrier, sometimes with interest. In the second policy year, if the insured passes from a health condition, half of the face value benefits will be paid. Finally, in the third policy year and thereafter, the full face value of benefits will be paid upon the death of the insured.) The price of these modified issue policies is generally and logically placed between the costs of a company’s simplified issue and guaranteed issue policies.
It is important to note that ALL Life insurance policies are subject to a 2 year “contestability period” for misrepresentations during the application process. This is not to be confused with the waiting periods of the Guaranteed Issue / Modified Issue Final Expense. The contestability period is why it is so important to have accurate information on each and every Life Insurance Policy.