Seniors who are shopping for burial insurance are usually pretty certain about what they want to purchase. They normally want a policy that will:
- Provide first-day coverage
- Provide insurance coverage for a lifetime
- Provide level premiums that will never go up
- Build cash value over time that they can access if needed
- Have a premium payment that fits their budget
Regretfully, not every company that provides burial insurance (also referred to as final expense or funeral insurance) makes it clear that there is a waiting period before the coverage for death due to natural causes actually kicks in. We are in no way implying that there is misrepresentation going on, but with three types of burial insurance policies available, the applicant should always be certain about the product they are purchasing.
What is Burial Insurance with No Waiting Period
Burial insurance that has no waiting period is typically a whole life insurance policy that provides payment of the full death benefit beginning on the day the policy is issued whether the insured's death is the result of natural causes or an accident. In the insurance industry, this is referred to as Level Benefit insurance coverage.
Unfortunately, not every senior will qualify for level benefit insurance coverage because they do not medically qualify. Even though companies that offer burial insurance do not typically require a medical exam, there are many health questions on the life insurance application that if answered “yes” could disqualify you from buying coverage.
There are many life insurance companies that specialize in selling life insurance to seniors who have liberal underwriting guidelines. In most cases, these companies will accept an applicant who has diabetes, COPD, Hepatitis C which are fairly common maladies that many seniors suffer with. Having one of these maladies will probably not disqualify the applicant from coverage, but having more than one will. When an applicant has multiple health issues, they will generally be offered burial insurance that has a waiting period of two or three years before the company will pay the full death benefit to the beneficiary.
Burial Insurance Policies that Do Have a Waiting Period
Most insurance companies that offer burial insurance for seniors have two or three different types of policies which allows them to insure virtually an applicant needing coverage:
- Level Benefit Burial Insurance – The level benefit burial insurance policy is like a traditional whole life insurance policy. If you qualify for coverage, you are covered from the first day the policy is issued and there is no waiting period before the company will pay the full benefit whether death is the result of natural causes or accidental causes.
- Graded Benefit Burial Insurance – The graded benefit burial insurance policy was designed for applicants who do not qualify for level benefit burial insurance. Although the policyholder is covered from the first day, a portion of the death benefit is paid out over two or three years which is considered a waiting period. Here’s an example:
Fred purchases a graded benefit burial insurance policy with a $10,000 death benefit because he did not qualify for a level benefit policy. If Fred dies from natural causes in the first year, the insurance company will pay out 25% of the death benefit or $2,500 to Fred's beneficiary. If Fred dies from natural causes in the second year, the insurance company will pay 50% of the death benefit to his beneficiary or $5,000. If Fred dies in the third year from natural causes, Fred's beneficiary would receive 75% of the death benefit or $7,500. In the fourth year and thereafter, Fred's beneficiary would receive the full death benefit whether Fred died from natural causes or from accidental causes. So, based on this, Fred has a three-year waiting period before his policy would pay the full death benefit if he died from natural causes.
- Guaranteed Issue (guaranteed acceptance) Burial Insurance – The guaranteed issue policy should be considered a last resort for seniors looking to by burial insurance. This policy can be issued to virtually any living person because the insurance company will not take the applicant's health status into consideration. In fact, there are usually no health questions on the insurance application. Instead of first-day coverage or a graded benefit, a guaranteed issue policy will have a two or three-year waiting period where if the insured dies from natural causes, the death benefit will equal the sum of the premiums paid plus an additional percentage of 5 to 10%. Here is an example of a guaranteed issue claim payment if the insured dies from natural causes during the waiting period:
Jane purchased a guaranteed issue burial policy because she could not qualify for a level benefit or graded benefit policy due to multiple serious health issues and her monthly premium is $60 per month. The company Jane is insured with has a two-year waiting period before they will pay the full death benefit if Jane should die as a result of natural causes. Fourteen months later Jane dies at a result of lung cancer. Because the policy has a 2-year waiting period, Jane’s beneficiary would receive $924. This amount was calculated by multiplying the $60 per month payment times 14 payments and then adding 10% to that amount.
It's also important to note that if Jane died a result of an accident, the insurance company would pay the full death benefit (no waiting period for accidental death). Additionally, the rates for guaranteed issue burial insurance are typically much higher than a level benefit or graded benefit policy.
There is good news about Burial Insurance with No Waiting Period
It’s important for seniors to never opt for a graded benefit or guaranteed issue burial insurance without first attempting to qualify for level benefit burial insurance. Regrettably, many do because they make the mistake of buying insurance from a TV commercial rather than talking to an independent insurance agent who represents many highly-rated insurance companies that offer burial insurance for seniors.
Always, contact an experienced and reputable independent insurance agency first like Life Policy Shopper and see if one of their insurance professionals can find a company that is willing to offer you a burial insurance with no waiting period before you accept a waiting period and have to pay higher insurance rates.