Our Blog offers great information on Life Insurance, Final Expense Insurance and retirements topics
|Posted on December 22, 2014 at 3:35 AM||comments (6)|
Overview of Gerber Guaranteed Issue Life Insurance Coverage
Gerber’s Guaranteed Issue Life insurance is specifically for those who are between the ages of 50 and 80, and who are unable to get approved for regular life insurance coverage. Policy holders can choose a face amount ranging from between $5,000 up to $25,000.
The coverage that is offered through Gerber’s Guaranteed Issue Life Insurance is whole life insurance. This means that there is no expiration on the policy’s coverage, provided that the premium is paid.
These policies also include a cash value component that allows the policy holder to build up tax deferred savings within the policy. This cash can be accessed via a loan or withdrawal if needed. It is important to note, however, that any unpaid balance of the cash value will be deducted from the death benefit if the insured dies and a cash value balance remains.
The death benefit that is received by the beneficiary is not subject to Federal income tax. This means that your beneficiary will be able to use the entire amount of the death benefit to pay final expenses, pay off debt, or use for any other need that they see fit.
Additional Policy Advantages
In addition to the death benefit and tax deferred cash value build up, the Gerber Guaranteed Issue Life insurance policy offers additional advantages to policy holders as well. These include the following:
Guaranteed Coverage – With Gerber’s Guaranteed Issue Life Insurance policy, as long as you are a U.S. citizen or a permanent legal resident who is between age 50 and 80, you cannot be turned down for coverage – regardless of your health. Because of this, Gerber makes the application process easy. There are no medical exams required and no health questions to answer. Once the policy is in force, it cannot be cancelled by the insurance company. Only the policy owner has the option to do so.
No Premium Increases – These policies are also easy to budget for. This is because the premiums never increase – guaranteed. This can be a real advantage to someone who is living on a fixed income, or even for those who simply want to keep costs down for the long term.
Graded Death Benefits – Should the insured pass away during the first two policy years for any reason other than an accident, the policy’s beneficiary will be paid all premiums, plus 10% interest. This is among the highest from all life insurance companies. Should, however, death occur due to an accident, the full amount of the policy’s death benefit will be paid. After two years, if the insured dies for any reason, the full face amount of the policy will be paid out to the policy’s beneficiary.
On top of the policy’s benefits, the plan is also backed by a quality and trusted company. Gerber Life Insurance Company – a financially separate affiliate of the Gerber Products Company – has provided life insurance for over 40 years. The company is considered to be financially strong, and has been given the rating of A (Excellent) from A.M. Best based on its financial stability, management skill, and integrity.
How to Obtain This Additional Necessary Life Insurance Protection
Life is filled with the unexpected. Unfortunately, this can oftentimes come at a price. The good news is that Gerber’s Guaranteed Issue Life Insurance policy can help to cover many of the additional unexpected expenses that come along during a difficult time.
|Posted on April 6, 2013 at 11:55 PM||comments (0)|
After working in Life Insurance Sales for almost 10 years , I have noticed that many of us have a number of bad habits we need to give up if we want to improve our results. Here are eight of them:
Giving up these habits can be tough. After all, they’re habits, and habits develop gradually over time. They sneak up on you and take root almost without your noticing. However, if you want to achieve better results and increase your sales, you need to work steadily and diligently at giving up your bad habits.
Article originaly published by Kelly Robertson from Senior Market Advisor Magazine, March 13th 2013 and it has been modified for insurance sales
|Posted on November 15, 2012 at 11:15 AM||comments (1)|
What is Senior Life Insurance?
Senior Life Insurance is whole life insurance that is mostly purchased by seniors to cover the costs of funeral expenses, and other final expenses when they die. This type of life insurance is still commonly known as final expense life insurance or burial insurance, but “senior life insurance” is a more pleasant term to hear. A typical senior life insurance policy is from $10,000 to $20,000 of insurance protection. Smaller coverage amounts are also used to cover a lower cost cremation service.Consider a senior life insurance plan as a mini whole lifeinsurance policy with a specific purpose – covering final expenses. Therefore this type of insurance has the same benefits of a whole life insurance policy 1) can keep the insurance your whole life 2) your policy builds cash value 3) you canborrow against the cash value if you need to if the cash value is large enoughand 4) the death benefit is paid out toyour beneficiary tax-free.
Senior life insurance has gotten very popular since the widespread use of term life insurance. It used to be that young families would buy a large whole life insurance policy to cover their needs and then they kept it in force until they died. Whole life insurance was much cheaper at this time and so it was used in this way. Since the introduction of term life insurance,families have started buying term life insurance in their younger days to cover children, college expenses, mortgage, and other large expenses. Once the caregivers are older and their term policies have ended, they find a small Senior life insurance policy to cover their current needs. This is a muchbetter way to use life insurance because you are changing your life insuranc eas your needs change, so you are never over-insured, and it is less expensive.
Cost of Burial
Most advertising you see on television from insurance companies like Colonial Penn and AARP or print materials will suggest the price of $6000 for the average cost of a funeral. The averagecost of a funeral, however, when all things are said and done is more like $10,000. This is because the price given in ads and sometimes from the funeral director does not include some hidden fees. The total cost of an average funeral can be broken down into 3 parts: the funeral director fees, the cemetery services, and the headstone. $6000 may cover the funeral director but between the cemetery and the headstone you may be looking at another $4000 dollars.
Prepaid Burial Plans and Senior Life Insurance
There are advantages and disadvantages of using PrepaidBurial Plans over Senior Life Insurance in order to pay for your final expenses. A prepaid burial plan ensures that your wishes will be specificallylaid out on how you want your burial service to proceed. This allows your lovedones to be free of having to plan your service while they are grieving.However, if your burial plan is not fully paid for when you die, or the cost ofservices increased significantly there may be some overages that your lovedones would still have to pay. Also, if you move your burial plan may not betransferable. The cost of canceling your prepaid plan could be up to one thirdof the funeral service cost. A Senior life insurance policy can cover your final expensecosts from day one and gives you the flexibility you need for the changes inlife. It is important with a life insurance policy that you let your loved onesknow in your will what your wishes are concerning final wishes.
How much does Senior life insurance cost?
Senior life insurance can be very affordable. Of course, theyounger and healthier you are when you decide to purchase a policy the less youare going to pay. The cost of buying a Senior life insurance policy is lessthan getting a regular whole life insurance policy and selecting a low death benefitamount. To get a Senior life insurance quote click here.
Do I have to qualify?
The short answer is yes. With all life insurance plans thereis always some level of qualification necessary to be issued a life insurancepolicy. With Senior life insurance you have the option to select a simplifiedissue Senior life insurance policy or a guaranteed issue Senior life insurancepolicy. Simplified issue Senior life insurance policies ask just a few medicalquestions to determine whether or not you will qualify and there is noparamedical (blood and urine)to be done. Guaranteed Issue Senior life insurance policies ask even less medical questions (usually 3 or 4) to determine if you qualify for a life insurance policy.If you are very healthy and take very little to nomedications, and you want to save money, your best choice would be to select a policy with paramedical underwriting. The more the insurance company is comfortable about your health outlook the lower your premiums are going to be.
This is the reason is important to buy Senior life Insurance from a Final Expense broker like www.burialinsurancerate.com You can compare prices with over 20 companies and find the best rate for your age and health!
If you don't want the hassle of going through medical underwriting or you may have a few health issues you feel the insurance company may pay attention to, your best bet may be a simplified issue life insurance policy. Just answer a few questions and the insurance company will take your answers, do a little searching on your medical history, and then give you ananswer “yes” or “no”, usually within 24 to 36 hours.Guaranteed issue is an option when there are major concerns about your health situation so the less questions the better. Usually, there are 4 questions to answer in the paperwork, and the insurance company againwill make a determination on whether you qualify or not based on your answersand medical history.
|Posted on November 8, 2012 at 5:40 AM||comments (3)|
I’ve been hearing a lot of rumblings recently about life insurance and annuity carriers implementing price increases or halting sales of certain products.From articles about many annuity products increasing costs and/or decreasing benefits in order to remain viable to countless product update notifications from life insurance carriers, it’s clear we are in the midst of a significant price and benefit adjustment cycle. While it’s bad news for consumers and the producers who sell these products to them, it seems like a necessary adjustment thanks to the continued low interest rate environment. Standing pat is unrealistic for the carriers, who continue to have trouble making money on the interest side of the equation as rates remain anemic. That leaves their options to increasing costs, decreasing benefits or exiting the market.
Guaranteed universal life products have experienced some of the most significant rate increases in the past couple of years as interest rates have remained low. Some carriers are temporarily suspending their Guaranteed UL products altogether.
How AG 38 Will Impact Your Book of Business
There is a firestorm of activity at the insurance carrier level that will undoubtedly have a substantial impact on your clients.
Actuarial Guideline 38 (aka AG 38) was originally created in2003, and enforces reserve requirements on universal life insurance products employing secondary guarantees. In response to regulators’ concerns regarding reserve calculations for recent product designs, AG 38 will be revised on January 1, 2013. The reserve requirement could increase as much as two to seven times the current level for carriers with a sizable existing book of shadow account based ULSG business.
As a result, some carriers are pulling their guaranteed ULproducts from the market; others are limiting the amount of 1035 exchange and lump sum value that will be accepted. And almost all carriers are going through MULTIPLE price increases between now and the end of the year.
As an insurance professional, you must be aware of these changes and take advantage of the many opportunities to help clients find the right insurance products with the least rate increases. Here are some examples of carriers making changes:
NOVEMBER 7, 2012 - Due to the upcoming change to AG 38, Protective will discontinue new sales of its Secure-T, Centennial G II, Centennial G II Plus, ModLife, OneStep Life universal life products, as well as reprice Protective Survivor UL (6/12), effective December 31, 2012. Inforce policies remain unchanged.
Protective will release information on the new products it will introduce to address the revised guidelines in the near future.
Applications signed and received by December 31 will be accepted for the current products. Policies issued in 2013 will result in a choice for the applicant: Accept a policy backdated to December 28, 2012 by paying back premiums and signing a customer acknowledgment form to receive the old products; Switch to one of the new competitive products that will be available beginning January 1, 2013. All policies issued under the current product plans must be placed and in force by February 28, 2013.
NOVEMBER 7, 2012 - Due to the revised AG 38, effective January 1, 2013, United of Omaha will adjust products to remain compliant with the guidelines. Information on the rates for applications dated in 2013 will be available in the coming weeks.
Of the four products in the GUL Solutions portfolio, the survivorship product will not be ready for sale on January 1, 2013. United of Omaha anticipates the GUL Survivor product will be AG 38 compliant and available for sale beginning again in February 2013. The GUL, GUL Plus and GULE 2013 policy forms will be ready for sale on January 1, 2013.
Applications for GUL, GUL Plus, GUL Survivor and GUL Express must be signed by December 31 to be eligible for the old rates. Applications for GUL, GUL Plus and GUL Express signed by January 1, 2013 or later will receive new rates.
GUL, GUL Plus, GUL Survivor, and GUL Express applications signed December 31, 2012 or earlier must be received in the Home Office by January 7, 2013 to be eligible for old rates.
If GUL, GUL Plus, GUL Survivor and GUL Express apps signed December 31, 2012 or earlier are still pending by April 1, 2013, the policyowner will be contacted to determine whether processing should continue for old rates.
If a policy eligible for old rates is approved by Underwriting in 2013, the issue date of the policy will be backdated to December 28, 2012. All back premiums will need to be collected.
ULOCTOBER 23, 2012 - Effective October 22, Genworth launched its new traditional term product, Colony Term 10, 15, and 20, to replace Colony Term UL, except in New York. It will also reprice and expand its GenGuard UL product on November 12.
The new GenGuard UL will combine features from Colony LifeLong UL and GenGuard UL into one comprehensive product, offering up to lifetime benefit coverage to age 121 for single, short and level-pay planned premiums. It will also serve as the new conversion product, replacing Lifetime Protector SG II in all states except New York effective December 7.
Additionally, Genworth removed Colony Term UL NY from the marketplace as of October 22, and will remove GenGuard SUL, GenGuard SUL NY and GenGuard UL NY as of November 12.
Applications received for Colony Term UL after November 9 will be processed as Colony Term and require an amendment on delivery. Applications received after November 9 for GenGuard UL old rates will be processed as with the new rates. Any applications received for Colony LifeLong UL after this date will also require an amendment on delivery.
OCTOBER 17, 2012 - ING has announced that will suspend sales of all fixed and indexed universal life products that offer a no-lapse guarantee.
Affected Products:ING Universal Life-Guaranteed Death Benefit (ING UL-GDB)ING Universal Life-Guaranteed Death Benefit NY (ING UL-GDB NY)ING Survivorship Universal Life-Guaranteed Death Benefit (ING SUL-GDB)ING Survivorship Universal Life-Guaranteed Death Benefit NY (ING SUL-GDB NY)ING Indexed Universal Life-Guaranteed Death Benefit (ING IUL-GDB)ING Indexed Universal Life-Guaranteed Death Benefit NY (ING IUL-GDB NY)
November 2 is the deadline for home office to receive formal applications for the above products. This deadline alos applies to applications that were previously submitted as informals; are for term conversions to the product; were previously closed; or will be owner by trusts that are not yet established.December 13 is the deadline for receiving all administrative and underwriting requirements in home office, including NY Reg 60 (November 16 is the deadline for receiving applications for NY Reg 60).
All policies must be placed by December 31, including 1035 exchanges and NY Reg 60 cases. At least the Minimum Monthly Premium must be paid on 1035 exchanges by December 31, even if 1035 monies have not been received. Thereafter, at least the Minimum Monthly Premium must continue to be paid to keep the policy inforce until 1035 monies are received. All 1035 monies received will be addd to minimum premiums already paid. No previously paid premiums will be refunded.
Applications, requirements or premiums received after these deadlines will require an amended application and appropriate paperwork for a product currently offered by the ING family of companies.
THE CHANGES THAT ARE BEING IMPLEMENTED ARE TOO MANY TO BE LISTED HERE. CLICK HERE TO SEE A SUMMARY REPORT.IT IS ALSO ADVISABLE TO CONTACT THE CARRIERS YOU REPRESENT AND EDUCATE YOUR SELF ON THESE CHANGES. WE ANTICIPATE MORE CHANGES TO OTHER PRODUCT LINES IN THE NEAR FUTURE AS CARRIERS ADJUST THEIR RESERVE REQUIREMENTS DICTATED BY AG38. - Actuarial Guidlenies 38
Courtesy of Premierbrokerage.com
|Posted on November 6, 2012 at 7:35 AM||comments (1)|
MetLife, Walmart and an iconic beagle with droopy ears have forged a partnership to sell life insurance to bargain-hunting shoppers. The New York-based insurer now offers a prepaid life insurance policy in about 200 Walmart stores in Georgia and South Carolina. Packaging and promotional materials for the one-year policies, which start at $69 for $10,000 in death benefits for people ages 18 to 44, feature the puckish image of Snoopy, the "Peanuts" canine created by Charles Schulz.
The big-box chain store, headquartered in Bentonville, Ark., and recognized as the world's biggest retailer, follows in the steps of Costco, which began offering health insurance in nine states last April. Costco hooked up with Aetna in its insurance deal.
Walmart's clout attracted the insurer
Shane Winn, a MetLife spokesperson, said the joint venture with Walmart will provide the largest U.S. life insurer in the U.S. with access to the retailer's broad consumer base."With 84 percent of Americans having shopped there in the past year, Walmart provides the type of reach and scale that MetLife seeks, so we can bring this product to the widest possible audience," said Winn.Winn described the partnership as "a pilot program" with no immediate plans to offer policies beyond South Carolina and Georgia. But if sales are good in those states, he noted, it would make good business sense for MetLife to consider marketing to other regions.
The policies vary according to age and how much coverage you want. People aged 60 to 65 pay $429 a year for $25,000 worth of coverage, while those 18 to 44 can get a one-year, $10,000 policy for $69.So how does the process work? Walmart shoppers buy cards equal to the policy's cost. From there, they'd call MetLife, which would ask questions about their health and, if approved, activate the policy. Those who don't qualify can get a refund at Walmart, Winn says.
New life insurance trend: cutting out the middle-man (The Agent)
MetLife has made it clear since its earnings report in May that it wants to cut expenses by $600 million by 2016. One of the ways to do this is to focus more on direct sales -- like selling insurance on the web or at Walmart. Direct sales of life insurance could climb to 13 percent of the nationwide life insurance market in 2016, up from the 8 percent in 2010, according to a company presentation following the report.
But Winn stressed that the Walmart partnership is not about cost cutting; it's more about finding an untapped revenue stream in a new market.Sarah Spencer, a Walmart spokesperson, told Bloomberg news that this is the first time the retailer has sold insurance. She added that Walmart is trying to expand its financial services offerings and that it's too early to judge customers' response to MetLife's products.
courtesy of: www.insurance.com
|Posted on October 22, 2012 at 10:00 PM||comments (0)|
Several Variable Annuities Carriers Exit Biz
Several well-known life insurance carriers are making a surprise exit from the variable annuities business, while others are drastically scaling back their exposure or evaluating their participation in 2012.
The combination of a volatile stock market and a prolonged low-interest-rate environment has made it both difficult and expensive for life insurers to hedge variable annuities with living benefits, according to a Dec. 18 article byInvestment News. As a result, many insurers are opting to limit their exposure to those hedging costs by exiting, or scaling back, their VA business, the article says.
In 2011, two big VA players – Genworth Financial and Sun Life Financial – announced that they would be leaving the variable annuities market. Others like Jackson National Life Insurance Co., MetLife Inc. and Prudential Financial are making plans to eliminate living benefits and limit investment options.
In addition, John Hancock Life Insurance Co. announced in November that it planned to withdraw an array of annuity products, including variable annuities, as well as limit distribution of existing products to only a small number of broker/dealers.
A variable annuity is a contract between you and an insurance company whereby the insurer agrees to make periodic payments to you beginning either immediately or at some future date. In return, you agree to purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments.
In general, variable annuities are designed to be long-term investments to meet retirement and other long-range goals. They are not suitable for meeting short-term goals because substantial taxes and insurance company charges if money is withdrawn early. Variable annuities also involve certain investment risks.
Increasingly, variable annuities have become the focus of a growing number of legal disputes and investor complaints. Earlier this year, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) awarded a Texas man and the estate of his deceased wife $1.7 million, after finding that an independent contractor, Paul Davis of Raymond James Financial Services, sold life insurance and variable annuity products that were inappropriate investments given the couple’s age and risk tolerance.
According to FINRA’s ruling, Davis sold the couple’s $3.8 million portfolio (which had been heavily invested in municipal bonds) in favor of life insurance and annuity products. He then invested in one annuity after another from 2002-2006, causing the Texas couple substantial financial penalties.
|Posted on September 28, 2012 at 8:00 PM||comments (0)|
Definition: Life insurance on a key employee, partner or proprietor on whom the continued successful operation of a business depends. The business is the beneficiary under the policy.
Key person insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business--the ones whose absence would sink the company. You definitely need to consider key person insurance on those people.
Here's how key person insurance works: A company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff. The reason this coverage is important is because the death of a key person in a small company can cause the immediate death of that company. The purpose of key person insurance is to help the company survive the blow of losing the person who makes the business work.
The company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner. In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy.
If the company is a sole proprietorship and employs just you and no other employees or has no other people who depend on it, then key person insurance isn't as necessary. You'll notice we didn't mention your family--don't confuse key person insurance with personal life insurance. If you have a spouse and/or children who depend on your income, then you should have personal life insurance for that purpose.
How do you determine who needs this insurance? Look at your business and think about who is irreplaceable in the short term. In many small businesses, it's the owner who holds the company together--he may keep the books, manage the employees, handle the key customers and so on. If that person is gone, the business pretty much stops.
How much key person insurance do you need? That depends on your business, but in general, you should get as much as you can afford. Shop around and get rates from several different agents; most life insurance agents will sell you a key person policy. Be sure to ask for term insurance--many agents will push whole or variable life, which have much higher premiums and commissions but are unnecessary for a key man policy. Ask for quotes on $100,000, $250,000, $500,000, $750,000 and $1 million, and compare the costs of each. Then think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet. Buy a policy that fits into your budget and will address your short-term cash needs in case of
Insuring the employee with Indexed Universal Life Insurance.
It’s simple. The business purchases a policy on the key employee’s life, pays the premiums, and is the beneficiary of the policy. If the key employee dies while the policy is still in force, the company receives the death benefit proceeds to help cover financial losses resulting from the employee’s death.
These financial losses could include:
• Loss of managerial skill and experience • A decrease in sales • An adverse effect on production
• A restriction on credit to the company • Expense of recruiting and training a replacement
The accumulated cash value of the Indexed Universal insurance policy can also be used while the key employee is still alive. If, for example, the employee becomes disabled, is terminated, or leaves the company voluntarily, the owner of the policy (the business) could use the cash value to help with the financial impact of the situation. Placing a dollar value on a key employee’s worth to a company can be difficult. There are many things to consider, like the employee’s current salary, net business profits directly attributed to the key employee, and the employee’s future value to the company. Your North American agent can help you estimate how much life insurance is right for your company’s particular needs.
|Posted on September 1, 2012 at 1:20 AM||comments (0)|
Income riders have become one of the most popular benefits ever to be added to fixed deferred annuities. Members of the National Association for Fixed Annuities (NAFA) report that more than 50 percent of people who purchase fixed deferred annuities also choose to add an income rider. These income riders are also known as guaranteed lifetime withdrawal benefits (GLWB) or guaranteed lifetime income benefits (GLIB).
The first income riders were introduced on variable annuity products in 2003, and became available on fixed and fixed indexed annuity products a few years later. Income riders provide consumers with a guaranteed income for life (similar to what annuitization provides), but without having to give up access to remaining principal -- a feature that caused many consumers to shy away from annuitization in the first place. By purchasing an income rider on a fixed rather than a variable annuity, the consumer benefits from the income rider while also being protected from investment risk.An income rider on a fixed or fixed indexed annuity allows a retiree to build a secure retirement income. The issuing insurance carrier guarantees the payout provided by the income rider for the life of the annuity owner, as well as bearing all of the investment and longevity risk on the guaranteed payout -- which means that the consumer is completely protected from these risks. Some annuity carriers even provide for the income to substantially increase in case the annuity owner is confined to a nursing home, further sheltering the annuity owner from risk. In addition, the annuity owner retains access to the annuity's remaining value and continues to reap the benefits of interest credits to the annuity's value.
How income riders work
Again, a guaranteed lifetime income or withdrawal benefit is typically optional on a fixed annuity, and is added to the annuity by a rider. Whereas the annuity has an accumulation value to determine the death benefit or annuitization, the rider also adds a second value: the income value. The accumulation value works just as it always does on a fixed annuity. The annuity owner's premium earns additional interest that is declared and guaranteed in advance or guaranteed through a calculation of the performance of an index (or indices), while at all times promising a minimum guaranteed interest. The unique benefit of a fixed indexed annuity (FIA) is that it has a built-in inflation hedge because additional interest is calculated based on a formula tied to the designated index (e.g., S&P 500).
With income riders, the income value is completely separate from the accumulation value. It typically grows at a fixed rate of interest, and when the retiree elects to start taking lifetime withdrawals, a payout factor is applied to the income value to determine the guaranteed annual withdrawal. If the accumulation value is higher than the income value when the policyholder decides to withdraw the income, then the accumulation value is used in the payout calculation instead. Once the amount of guaranteed withdrawal is calculated, the retiree may withdraw that amount from the annuity every year for life.
While taking these withdrawals, the retiree is provided with two very valuable guarantees.
Although the annual withdrawals are deducted from the accumulation value, the additional interest (declared or indexed) continues to be credited to the accumulation value, and the retiree retains access to the remaining accumulation value at all times.Even if the annual withdrawals ultimately deplete the accumulation value, the issuing carrier must continue making the annual payments as long as the retiree lives.
|Posted on May 28, 2012 at 10:55 PM||comments (0)|
After you die you won’t have to worry about your unpaid bills.But somebody will. Let’s face it: Dying is expensive. The average funeralcosts $6,500, according to the National Funeral Directors Association, andthat doesn’t include cemetery expenses and other items that can push thebill above $10,000. In addition, the average American owes nearly $9,846 in credit card and other debt, according to the Federal Reserve.And that doesn’t include what’s due on your home mortgage. Throw in probate costs,taxes and other legal and estate matters, and it all adds up to a financial burden that could take years to pay off. Final expense life insurance can relieve your family of that concern, allowing them to mourn and to tie up loose ends without worrying about where the money will come from.
"Having final expense insurance helps ensure that your death won't result in financial hardship for those you love"
Understanding the Basics
Final expense insurance is a life insurance policy written for a specific purpose: To cover your funeral costsand other short-term debts you leave behind. Most policies are available in face amounts typically rangingfrom several thousands of dollars up to a maximum of $50,000 or $75,000 – much less than a standardlife insurance policy. That’s because these policies are only intended to cover final expenses and not longerrange expenses like ongoing livingcosts or college or retirement funding.If you’re trying to determine whether final expense insurance is right for you, here are some key features and considerations to keep in mind:
• Permanent Coverage: With very few exceptions, final expense insurance is whole life insurance, a form of permanent life insurance.Unlike term insurance, which only pays a death benefit if you die during the “term” of the policy, usually 10 or 20 years, a whole life policy remains in effect as long as you continue to pay your premiums
• Level Premiums and Benefits: With whole life insurance, the premiums and the deathbenefit are guaranteed to remain the same foras long as you keep the policy in effect.
• Cash Values: A whole life policy also comes with guaranteed cash values that grow over time on a tax-deferred basis. If necessary, you can access your cash account for a variety of purposes – if you’re in a tight financial spot, for example, or if you need the money for an important purchase or to supplement your retirement income. This is known as a policy loan. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit.
• Simple Application Process: The process of applying for a final expense policy is very streamlined. Premiums are mostly dependent on your age at the time of purchase. Typically, there is no medical exam or long questionnaire. Usually you’re just required to answer some medical questions. This is called Simplified Underwriting, and it’s a nice option to have if you’re a little older or not in great health. If you're concerned that you may be uninsurable, you should consider a “Guaranteed Issue” policy. With this type of policy, if you can answer “no” to a few simple health questions, you will be issued the policy.Of course, the downside to simplified underwriting is that the cost is usually higher than what you would pay for a fully underwritten life insurance policy where the questions are more extensive and a medical exam is generally required.
• Two Types of Policies: There are two types of Final Expense policies. Immediate Full Benefit Policies are generally offered to people who have no serious immediate health concerns. The full value of these policies becomes available as a death benefit as soon as the policy is issued. Graded Benefit Policies areavailable for people who have health issues.These policies typically provide limitedbenefits during the first two or three years. If you were to die during that period, our beneficiaries would receive a percentage of the death benefit. If you live beyond that initialprovisional period, the policy would pay the full death benefit.
• Flexible Payment Options: Most companies give you the option of a single premium (anup-front, lump-sum payment) or multi-year payment plans (typically paying over 7,10 and 20 years)
Determining Your Needs
Because final expense insurance is for a specific set of needs, the amount of coverage that’s right for you depends on your own circumstances.You’ll need to think about what kind of funeral you want as well as estimate how much money will be needed to cover other final expenses such as probate, taxes, mortgage balances, car loans and other outstanding debts. The best way to do this is with the help of a qualified finl expense insurance professional who can walk you through a comprehensive needs analysis and help you choose the right amount and type of insurance.
|Posted on March 16, 2012 at 1:00 PM||comments (0)|
Here’s a typical kind of thank-you letter our office receives on a regular basis:
“Dear local final expense agent, we at Smith and Sons Funeral Home would like to thank you for providing a final expense policy to the Robinson family. Recently we conducted the services for their mother, and the family was most grateful to us. The real gratitude, however, goes to you. Thank you for making the funds available through a burial policy so that we could make her service truly memorable.”
Such notes of appreciation from funeral directors are common to those of us who sell final expense plans; the directors truly appreciate how we serve families with pre-planning and pre-funding plans. There are three major reasons why this is so, but first, let me give you a quick primer on final expense policies.
Because of the growth potential, many quality A-rated carriers nationwide have entered this exciting market. With the “graying of America” market (those 70–plus years old) and the tsunami wave coming of the baby boomers (those born 1946 to 1964), they see a huge potential for these small, low-risk “burial policies.” The policies range from $5,000 to $25,000 face amount on average, and involve easy underwriting with just a few major health questions and telephone verification; there are no applications, no home office specimen, no blood work, and no exams. The majority of policies are either approved or declined within seven days, and there are never any rated cases. Most plans are traditional whole life policies with guaranteed premiums and a guaranteed face amount with non-forfeiture options. For the 200 to 300 final expense policies I sell each year, I try to keep the premiums around $45 a month; this seems to fit into the budget of middle- and lower-class seniors much better and keeps my persistency high.
Most importantly, though, we need to recognize that these small policies are often the only life insurance that seniors have at time of death, and these funds enable the funeral industry to create lasting memories for the family to honor the life of a loved one.
Funeral directors appreciate final expense agents because:
1. They Will Get Paid
According to the National Center for Health Statistics, 2,415,000 confirmed deaths took place in 2007.1 Except for a very small fraction of deaths that are handled by county coroner departments, surviving spouses, children, grandchildren, siblings, parents, and domestic partners have to walk into a mortuary to make final arrangements. The funeral industry acknowledges that fewer than 30% of individuals who have passed away did any funeral pre-planning and/or pre-funding.2
Therefore, if a final expense or pre-need plan is in force, the family has less stress from the financial side and can spend more quality time in the grieving process, which is important for acceptance of a death. Also, the funeral home knows with the “Assignment Form,” signed by the beneficiary named on the policy, some or all of the funds from the burial plan will be directly forwarded to them from the insurance carrier.
Funeral directors appreciate this added protection that they will be paid, because from time to time, families try to avoid paying and expect a free funeral, often due to the smallest errors or indiscretions. Some I’ve experienced as a funeral director:
• The local paper made a mistake in the obituary when they named a surviving second cousin “Bobby Jen,” instead of “Bobby Jean.”
• The funeral director who made the arrangements was not at the viewing on a Sunday morning — another director was on duty. (If only the family knew that their favorite director was doing a removal from a residence in which another family asked for him, and most states require the deceased to be removed within hours of death.)
• The funeral director was not at his or her “military post” at the entrance of the funeral home to make sure any estranged family members were not allowed into the service. Funeral directing is a noble profession; we are entrusted to care and shelter the dead, comfort the living, and make a memorable service, but not to be “MPs”!
After confirming that the final expense policy is in force, past the contestable period (two years in most states), and not heavily borrowed against, most funeral homes will accept the insurance toward the cost of merchandise and services. A trend today is to charge a processing fee if accepting the insurance — usually a flat fee (i.e., $250) — while the funeral home waits up to three months to receive payment from the carriers.
2. Families Have More Choices
For example, if a final expense policy provides $10,000, and the national average price of a funeral today is $6,000, the family has options to buy additional merchandise and services.3 Today’s families are being very creative in memorializing their loved ones. Popular add-ons include dove release, video tributes, catering of food at the funeral home, bagpipers, harpists, and horse-drawn hearses to the cemetery. Some families have realized that if they will spend $25,000 or more on a wedding ceremony, and it can happen several times in a person’s lifetime, shouldn’t they outlay something extra to celebrate a life well lived? And this happens only once!
3. Final Expense vs. Pre-Need Insurance
If the family has pre-funded the funeral with insurance, most funeral directors prefer final expense over pre-need insurance. Pre-need life insurance is a creation of the funeral industry; it guarantees the consumer a pre-determined, fixed cost of the funeral, including the services rendered and goods selected (i.e., the casket). Built into the plan will be an “inflation factor,” so the theory is that as the funeral costs grow, the rider will offset future increases that the funeral home must pay for merchandise and services (transporting the dead, preparing, use of chapel, hearse, etc.). In addition, the pre-need buyer is assured he or she can go to that selected funeral home or within a network of funeral homes.
Many funeral homes provide pre-need insurance only if the consumer asks for it. They would rather deal in cash at the time of need, or pre-purchased final expense plans, because pre-need insurance presents several challenges to the funeral home owner:
Inflation Factor — Will the percentage in the pre-need contract keep current with the rising cost to the funeral home for merchandise? Most current plans don’t; it’s difficult for a pre-need carrier to set the factor accurately with the challenges in our current economy. Therefore, the funeral home may be losing money when the pre-need becomes an at-need case. With final expense policies, the benefit is a specific amount, say $7,000, and most reputable funeral directors will strive to make everything fit within those limits.
Selection of Merchandise — Most people who purchased a pre-need plan also selected a casket (unless choosing cremation, an option that 35% nationwide now select, according to www.cremationassociation.org). There are fewer casket companies today than there were 100 years ago, however, so there’s a good chance that the casket of choice will no longer be available. Then, some family members may become angry and conclude that the funeral home is trying to take advantage of them. With final expense plans, families select the casket at the time of death, often choosing a color that their loved one truly would have enjoyed. Some families may feel “cheated” if everything was pre-arranged — that they were out of the loop. They want to help make decisions and be involved, which helps with achieving closure.
Ownership Changes at the Funeral Home — There are about 22,000 funeral homes in America today, but as in any industry, they are subject to ownership changes, and businesses open, move, close, etc. Many new proprietors decide not to honor those pre-need contracts of the previous owner(s), and in most states this is legal. When a funeral home has picked up a deceased, and the grieving family comes in to finalize the details, they reveal that their loved one had a pre-need plan with that funeral home. Often they will be very upset when they are informed that because of new ownership, the contract is no longer accepted and the funeral home will obtain what cash value may exist from the policy, while the family will be responsible for current charges from the GPL (General Price List, a federally required list of the current prices for a funeral). At that time, the family may threaten to go to another funeral home, but the funeral industry knows that most won’t. There is even a maxim in the industry: “He who gets the body first, gets the business.”
These are just a few reasons why AARP does not recommend purchasing a pre-need insurance contract.
Instead, with a final expense plan, all involved are winners. The policyholder, who wants to ease the burden on loved ones, has peace of mind after making this purchase. The producer, by being compassionate and giving the right guidance, has provided the best life insurance one can have. The funeral director can provide more options for the family and create a truly unforgettable service that properly celebrates the life of the deceased. And the surviving family knows that their loved one was thinking of them, even after death!
Isn’t it time that you start getting thank-you notes from funeral directors?
Alan Benedict considers himself “just an old-fashioned agent and funeral director.” He has sold life insurance for more than 20 years, and began specializing in final expense plans exclusively 13 years ago. Mr. Benedict also holds a California funeral director license and has managed a funeral home in years past.
Footnotes:1. National Vital Statistics Report: Volume 56, Number 21, July 15, 2008.2. National Funeral Directors and Morticians Association.3. Ibid.