Life Insurance for the Elderly

Final expense insurance is one of the fastest growing segments of life insurance sales.   Boomers that bought term with the advice to invest the difference between the term premium and a premium for a permanent plan of insurance  have seen their term policies end.  They’re invested retirement accounts have probably not grown nearly as much as they had hoped.  Therefore, they are worried that their adult children may have to bear the burden of paying for their final expenses.  

The elderly are now being invited by affinity groups  and insurance carriers to appply for “final” or “last” expense  insurance to provide the money needed for burial and associated costs.   And, to make this an unbeatable deal, this exercise typically requires little or no underwriting and premiums will never increase, regardless of change in health.

But, let’s look a little closer at this “unbeatable deal”. 

• Because it is issued with little or no underwriting, the cost-per-thousand of coverage is  high due to adverse selection.  
• The applicant may not be able to afford as much coverage as they really need due to the high-cost-per-thousand of coverage.
• The highest coverage is usually capped at between $15,000 – $50,000
• If the plan creates a cash value and the policy owner takes loans against the policy without paying them back, the amount of unpaid loans will be subtracted from the death benefit, reducing the original buying power of the policy’s coverage.
• Most carriers reserve the right to fully underwrite the applicant if there are doubts about how long a person might live.  If the applicant is determined to be near death, they will be declined for coverage.
• Due to demand, there has been some innovation in providing lower-cost final expense coverage.  The latest offering is a term insurance policy with higher face amounts, usually capped at $100,000, but there tends to be more health questions on the application and at least simplified underwriting might be required depending on how those questions are answered.  Declines are possible.  The coverage may end at age 100.
• True ‘guaranteed-issue” final expense life insurance is usually only found as part of a funeral home package of benefits that includes all aspects of the burial ceremony.

If the applicant is not in good health and does not want to – or can’t – go through regular underwriting for whatever reason, final expense insurance may be the only way to go.    Designs In Life has several, financially strong carriers that provide quality plans of final expense insurance. 

So, how can you help your clients before they believe that final expense insurance is their only option?

1. Make life insurance review a regular part of your practice. Look for level term plans that are going to end or become prohibitively expensive within the next 10 years.  If they are not over the maximum age, conversion (all or in part) to a permanent plan of insurance may be possible.

2. In that review, remind your clients that when they leave employment or retire, they may not be able to convert or carry over any life insurance coverage made available at low- or no-cost by their employer.

3. Make sure you know  the total death benefit from all permanent life insurance policies.  Explore the options of those policies.  They may provide ample coverage by being converted to “reduced paid-up life” contracts, requiring no further premium payments.  (Reduced paid-up life insurance, however, is typically quite low in death benefit, so this may not provide all that is needed.)

4. Inquire about your client’s general health and get a feel for what their current medical condition is. If possible, get a list of their prescription medications, dosages, frequency of administration, and what each medicine is for.

5. If your client seems to be in pretty good shape, be ready to talk about life insurance that will last until they die at a coverage level with which they can be comfortable. 

6. Remind them that life insurance is the ONLY financial vehicle that provides an income-tax free lump sum of money at death. And, that the cash from the policy will be available within around 10 working days from the day the carrier receives official documentation of death.

If they are willing to go through full underwriting, they can save hundreds – even thousands – of dollars over expensive final or last expense insurance.   Be prepared to demonstrate the savings you have provided to them upon delivery of their “final” insurance policy.  After all, they will surely want to share this information with their friends and provide you with referrals.