Not all final expense plans are built the same way. Insurance companies offer a few different types of policies to accommodate people with varying health backgrounds. Understanding these options makes it easy to choose the right plan for your budget and medical history.
Let’s break down the three main types of final expense insurance available on the market today.
1. Level Benefit Policies (Simplified Issue)
This is the most common and ideal type of final expense insurance.
- How it works: You answer a few basic health questions on the application, but no medical exam is required.
- The Catch: If you are in reasonably good health, you qualify immediately.
- The Benefit: Your coverage is active from day one. If something happens to you the day after the policy starts, the full benefit is paid to your family. It also offers the lowest monthly premiums.
2. Graded Benefit Policies
If you have some minor or managed health issues (such as a recent cardiac event or chronic illness), a graded policy is often the next choice.
- How it works: Like the level plan, it requires answering health questions, but it is more lenient with past medical histories.
- The Benefit: The payout scales up over time. For example, if you pass away in year one, your family might get 30% of the benefit; in year two, 70%; and from year three onward, 100%. If death occurs due to an accident, the full 100% is usually paid out immediately regardless of the year.
3. Guaranteed Acceptance Policies (Guaranteed Issue)
This type of policy is designed for individuals with severe health conditions who cannot qualify for any other type of life insurance.
- How it works: There are zero health questions and no medical exams. Your acceptance is 100% guaranteed as long as you meet the age requirements.
- The Benefit: It provides a safety net for those who need it most. However, it typically comes with a strict 2-year waiting period (if you pass away from illness during the first two years, your family receives your premiums back plus interest) and has higher rates due to the risk.
Which One Should You Choose?
Always aim for a Level Benefit policy first to get the most value and immediate coverage. Work with an experienced agent who can review your health background and match you with a carrier that looks favorably on your specific medical history.