Life insurance after a major health problem: Modified Whole Life

Final Expense Options
Individuals, mostly seniors, looking for final expense coverage have four choices.  Their desirability is in descending order:

  1. fully underwritten Guaranteed Universal Life (GUL)
  2. simplified issue whole life
  3. modified benefit whole life
  4. guaranteed issue whole life,  also called graded death benefit whole life

Regrettably, profit and volume driven marketers, including AARP, not acting in their client’s best interest, skip over option #1 to concentrate on the easier to write and faster to place options #2, #3 and #4.

Look for
Option # 1, Guaranteed Universal Life starting at $25,000 in coverage is very cost effective coverage.  Full and immediate benefit. Fully underwritten, it requires a blood tests and carriers usually review 5 years of medical records.   Applications take on average 6 weeks and require from the agent and brokerage good old fashioned time and expense, and have a lower placement ratio.  That’s why certain marketing organizations, including direct mail, phone and mail solicitations, don’t want to get bogged down doing them, even though it’s in the client’s best interest.

Plan B
Option #2, Simplified Issue Whole Life, is full and immediate benefit, comes into play for affordability, smaller policies $3,000 to $8,000.  Also the underwriting is less strict, no blood test or medical records, usually only MIB * check and prescription drug check, and helps with coverage if a serious condition occurred two or more years ago.   Remember a $25,000 Guaranteed Universal Life cost about as much as a $10,000 whole life, so make sure to consider option # 1 before settling on option # 2.  See here ages 60 to 69 whole life quotes.  See here ages 70 to 70 whole life quotes.

Option #3   Suitable for those who have had a major health problem but having occurred  over two years ago.

Option # 4    No health questions.  Basically, all one needs is be cognitively and physically able to sign the application.

Modified Benefit Whole Life
The beneficiary receives a percentage of the death benefit in the first few coverage years.  The percentage rises and generally by the 4th year there is a full benefit.


Guaranteed Issue Whole Life
  also called  Graded Benefit Whole Life
No health questions.  Coverage is characterized by a waiting period for the full life insurance benefit.   The waiting period is typically 2 or 3 years.  If the insured dies during this waiting period, the beneficiary receives a return of premium plus interest, typically 5% or 10%.  After the waiting period, it’s the full death benefit.   The application question are limited, and coverage is not available only if the individual has a terminal condition or bedridden.

This doesn’t sounds bad, if you’ve had recently something like cancer or a heart attack and really need coverage. What’s the catch?  Well, Modified Whole Life is relatively expensive.  One of the best ways to judge this coverage is to divide premiums into the death benefit to see at what point cumulative premiums exceeds death benefit.  For example with Liberty Bankers Life a 71 year old female.

$99.88 monthly for $10,000  Face Amount  – Modified Whole Life

Years 1 – 3  benefit equals return of premium plus 10%
Year 4  death benefit 100%
Year 5  death benefit 105%
Year 6  and thereafter 110% benefit

In this example, Year 6 and thereafter a 110% of face amount is an $11,000 death benefit.    Annual premium is $1,198.56   ($99.88 x 12)

$11,000 / $1,198.55 =  9.2 years.     Thus, cumulative premiums exceed the death benefit after a little over 9 years.

Whether or not this is a good value depends on the individual’s health condition and life expectancy.  In the example above: will this 71 year old live into her 80’s?  If she does, the owner ends up paying more in premiums than receiving in benefit.

Please contact me for a free and confidential quote.

Licensed agent: Sean Drummey
phone: (910) 328-0447
Email: spdrummey@gmail.com

(* MIB  Medical Information Board,  checks prior life insurance applications)

Revised: 8/22/14

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Turning 70

About to turn 70?  Just turned 70?  70 is a very good milestone to finalize life insurance planning.


Current policy owners

Term policy holders:  Health not what it used to be?  Many term policies allow conversion to permanent to age 70, and the definition of age 70 usually is nearest attained age, meaning up to age 70 1/2.   There is no health evaluation for conversion.  Any agent can help on conversion.   Please contact me for details.

Permanent policy holders:  is it really permanent?  Do not assume your coverage will last a lifetime.  Most permanent policies sold over the last 30 years are universal life (UL), not whole life.  UL’s are tricky depending on their structure and cash value.  A great many will lapse for insufficient cash value.  Conduct a policy review to evaluate how long your policy is projected to last.  Request an in force illustration from your carrier.  It may be a better deal to replace your current coverage by transferring the cash value into a new plan that has lifetime guarantees.   Regardless, keep in mind cash value can be used to offset your premium payments.   This may be an appropriate strategy depending on the amount of cash value, and is often the best way to wind down the policy for those in failing  health.

 

New coverage       Available at most health levels.  You’d be surprised.

The best is called guaranteed universal life.   Premiums and coverage are locked in for life, to age 121,  with a lapse protection guarantee.   Click here for age 70 quotes for $25,000 to $5,000,000 in coverage, or refer the right hand side of my website for quotes.


Final Expenses   (Burial Insurance)   $3,000  to  $25,000

Guaranteed universal life.    There are also small whole life plans.

 

Estate Planning   $25,000 to  $5,000,000

Guaranteed Universal Life.   Companies are very competitive and willing to write coverage for people in their 70’s.

 

Term life insurance is not a good choice.  Term is less expensive because you will probably outlive it.  If  you need term life insurance, to pay off a debt or other obligations, I strongly recommend Genworth’s Term UL, because it automatically converts over to Universal life insurance to age 105 at a fixed rate.

 

Image source:  Wikipedia Commons

Term vs. Permanent it’s all a matter of age

Should one choose term or permanent life insurance?   Granted every situation is different, but a general guideline is simple.  Go by the age you need to cover.

Term before retirement and permanent after retirement –  Term to replace a breadwinner’s lost income: permanent for final expenses or estate planning.

Term –   pre-retirement

  • 20’s:  30 year term
  • 30’s:  30 year term
  • 40’s:  20 or 25 year term
  • 50’s:  10 or 15 year term
  • 60’s:  10 year term

7 to 10 times annual salary is general rule of thumb. Most important: get something with affordable premiums.  If need be, drop back on the term length, rather than the face amount, for affordability.

If you have children, get term long enough to cover your youngest child past college age.  For example, if your youngest is 9,  a 15 year term.   9 + 15 =  age 24.    It used to be that age 22 was the benchmark year for college graduation, but since the 5 year plan is more the norm, so you may want stretch it out a bit more.

Permanent  –    post-retirement:  60’s, 70’s, 80’s, 90’s

Ideally, start a separate permanent policy in your 30’s, 40’s or 50’s.  If not, permanent is available into one’s 80’s.  If unhealthy, you can convert your term policy into permanent in your 60’s.

First choice: fully underwritten life insurance, which requires a blood test and medical records.  It’s less expensive, and you get more coverage.  There’s a big industry out there, including AARP, that misleads seniors into needlessly expensive no exam term and permanent. That coverage is only plan B if very unhealthy and for permanent only.  Don’t be fooled into no exam term.

North American currently has the best policy for final expenses, a $25,000 guaranteed universal life.

For estate planning purposes there are guaranteed universal life policies at whatever coverage level that suits your objectives.  The most choices are for coverage at $100,000 or more.  Please refer to my sample quotes by age.

Images: Wikimedia Commons

Guaranteed acceptance life insurance: your last choice

Don’t fall for mail order offers for guaranteed issue life insurance or guaranteed issue life insurance. Better options are out there. You can potentially save thousands on premium or get twice as much coverage with another carrier.

I received the other day a mail solicitation from United of Omaha Life Insurance Company for guaranteed acceptance life insurance.  This is also called guaranteed issue life insurance or graded benefit life insurance.  They say “You Cannot Be Turned Down.”  They offered coverage choices from $10,000 to $3,000.

Wait. This is last resort life insurance.  Don’t even consider this until you’re sure you can’t get something better. Just to give you an idea, a 65 year old woman, preferred non smoker rate, can get $25,000 of guaranteed universal life, fixed rate to age 110, with Genworth for less than $10,000 whole life with a 2 year waiting period with United of Omaha for graded benefit whole life insurance.

Take these steps when shopping for a small final expense life insurance policy.

#1 Choice     For excellent, good, average, or even poor health

Fully underwritten life insurance.   Full and immediate benefit.  Applications require a blood test and short paramedical exam.   Carriers generally request your medical records, all at no charge to you.  This way life underwriters can gage your risk classification and make you an offer for coverage.   This will save you lots money over a no physical exam policy.  Genworth and North American offer lifetime guaranteed permanent coverage, called no lapse universal life, starting at a $25,000 benefit, and multiple carriers, including Lincoln National and Aviva, offer coverage of $100,000 and more for seniors.   Unless you’re in really, really poor health, try this first.  There is no cost to you to apply, and the worst they can do is offer you a higher rate or turn you down.

 

Plan B:     2 years after any major health problem, or with multiple serious health problems

If your health is marginal, or you want a smaller less expensive policy than $25,000 with Genworth or North American, the next step is simplified issue whole life.   It has a full and immediate benefit.  There is no physical exam.  There are many, many carriers that want your business. Comparison quote with an independent broker.   AARP offers this type of product but ask yourself, since both AARP and New York Life draw a profit from the policy, won’t going to directly to one carrier be less expensive?   Here are some final expense simplified issue whole life carriers:

  • Liberty Bankers Life
  • Settlers Life
  • Transamerica
  • Foresters
  • Royal Neighbors
  • Columbian Life
  • Philadelphia American
  • American Continental

 

 

Plan C:    Major health problems but not terminal

Graded Benefit Life Insurance If your health is very poor, coverage is offered with a 2 or 3 year waiting period for full benefit.  More expensive

 

Plan D:     Terminal health, or nearly terminal health

Guaranteed Issue Life Insurance No medical questions.   Guaranteed approval.   2 or 3 year waiting period.  Most Expensive.

 

Please contact me for a free and confidential quote.

sean's profile picLicensed Agent:  Sean Drummey
phone:  (910) 328-0447
email:    spdrummey@gmail.com