Let’s recap. All insurance policies must be underwritten, either fully, partially, or not at all. We know that final expense insurance is partially underwritten, also meaning the policy is simplified issue.
Within simplified issue insurance, there are benefit plans. Benefit plans determine if and when the designated beneficiary becomes eligible to receive the death benefit of the insurance policy based on when the insured dies after the policyowner is issued the insurance policy. The benefit plans also determine the premium based on your health risk classification by the insurance company.
In general, if the insured has poor to good health, there is normally a 2-year waiting period before the policyowner becomes eligible to receive the death benefit of the insurance policy that would be paid out to the designated beneficiary after the insured’s death. However, if the insured has excellent health, the death benefit is available immediately. Furthermore, the worse the health condition of the insured, the higher the premium will be.
There are four types of benefit plans with final expense insurance: level, graded, modified, and guaranteed issue. The level benefit plan has the lowest premium and the guaranteed issue benefit plan has the highest premium, respectively. The level benefit plan requires excellent health, graded benefit plan requires good health, modified benefit plan requires fair health, and guaranteed issue benefit plan requires poor health, based on our health risk classifications. Lastly, the level benefit plan has immediate death benefit eligibility while the graded, modified, and guaranteed issue benefit plans normally have a 2-year waiting period for death benefit eligibility.
Insurance companies are not created equally. An insurance company that offers final expense insurance will normally only offer a level and graded benefit plan. Modified benefit plans are rare and guaranteed issued benefit plans are normally a specialization of an insurance company much like final expense insurance is to our company.