Insurance policies are not static documents. These are products that will change over time as consumer demand modifies the needs of a buyer. whole life insurance comes in various forms, and a consumer may browse through them to see what is going to provide the best coverage. One type is modified whole life insurance. It might be what you need, and then it might not be at all.
Why Bother with Final Expense Insurance?
Folks might roll their eyes and wonder why bother with yet another life insurance policy. Final expense life insurance is more critical than many understand, and it is a part of sensible financial planning.
Final expense life insurance deals with the death of the insured and the cost of the final internment. That can be expensive when the expense for a casket, burial plot, and other charges are factored into the overall invoice. The estate is going to pick up the tab, and that means the final benefit will be minus the burial costs. We want to point out that the estate cannot be closed until those final expenses are resolved. If you want your beneficiaries to receive as much as possible of what you leave behind, you can think of final expense insurance as protecting the value of your estate. A modified whole life insurance policy could be that for you,
The Definition of Modified Whole Life Insurance
Modified Whole Life Insurance has features you would find in a standard whole life insurance product and a few things you would notice in a term life insurance policy. One major trait of a modified whole life insurance is that there is a waiting period of 2 to 3 years. If an insured dies within that waiting period, the only amount that the beneficiaries will receive might be a return of all paid premium plus interest on a non-accidental death. The waiting period does stand out, but this policy does have significant features found in a whole life insurance policy.
- The premiums stay the same and will not increase as the years progress
- There is no expiration date on the policy. You can be 90 years old and still be covered
- The coverage will never decrease over time. That is important because there are insurance products where the amount of coverage will decrease as a person gets older.
- There is a cash value attached to the coverage. You could borrow on that cash balance
Modified whole life insurance has the waiting period found in term or guaranteed acceptance insurance policies. It is combined with some of the best features of whole life insurance coverage. The modified whole life version is often marketed as a final expense insurance policy. It is one of the insurance options available to you if you are looking for burial insurance.
There Are Advantages with Modified Whole Life Insurance
Modified whole life insurance does not have the restrictive medical underwriting of other products. This is extremely helpful to anybody who has a severe health condition. You cannot borrow on a term insurance policy, but that is a benefit of any whole life product and it is possible with a modified product.
A term final expense insurance policy might expire before you do It can happen. While the expiration age is 90 years old for many insurance companies, some have 80 years old as the end date for coverage. If that should occur, a modified whole life insurance policy may be the best coverage for you.
Cash value is an advantage that should receive mention. Final expense insurance is a part of financial planning, and a modified life insurance policy adds to the quality of an overall financial strategy.
A senior citizen might need cash in the event of an emergency. The cash value of the modified life insurance policy is an asset that can be borrowed on in times of trouble. What is nice about the cash value is that it is not interest sensitive. Indeed, the amount grows every time a payment is made. The policy insured receives will include a table that explains the growth of the cash value over time.
A few factors determine cash value:
- The insurance company that provides the coverage
- The amount of insurance that is purchased
- The monthly premium payment
We admit that the size of cash value is not going to be that large. However, this is a small cushion that an older person might need at some time and borrowing against the balance is not difficult.
The Not So Good News About Modified Whole Life Insurance
Unfortunately, there is a dark side to the modified whole life insurance product. The demerits center on the waiting period and the cost.
The 2 to 3-year waiting period is an incredibly long time. A 3-year waiting period is not worth bothering with, in our opinion. Anyone who has a serious health condition and buys a modified whole life insurance policy is paying for something that might not provide the full benefit.
This type of insurance, by the way, is not cheap. You will be spending a sizable premium for the coverage if you are going to receive it. The reason is the risk that an insured brings to the table. The insurance company would rather have somebody who is going to be paying a premium for many years to come. The risk that this person may die in a few years, perhaps immediately after the waiting period has expired, induces the insurance company to charge a higher premium to cover any loss. If you are a person who is in good health and will most likely make it past any knockout questions in an insurance questionnaire, the modified whole life insurance policy might cost more than another product that rewards your physical condition.
Doing Sensible Shopping
We believe that you can get a better deal by doing some sensible shopping for final expense insurance. Getting the best coverage means taking a somber look at the coverage provisions. The conditions surrounding the death benefit, and whether your beneficiaries get the full benefit, need to be looked at.
- Partial coverage. We mentioned that if a person dies during the waiting period, the full death benefit is not going paid. Various options are used depending on the insurance company. Insurance companies will only give back the premium of that has been paid to date and perhaps a percentage of interest on the amount. Other insurers are a little bit more generous.
- Coverage that is full and immediate. Partial coverage is based on the waiting period. The best you expect is some of the death benefits are paid out, depending on when during the waiting period the insured passes away. Full coverage means that the entire death benefit is awarded. The immediate factor mandates that even if a person dies within a few days of the policy being in force, that full benefit is there. Do not be surprised if a policy that is full and immediate might cost a little bit more.
Knockout questions must be considered whenever anyone goes looking for a life insurance policy. Depending on the insurance company, high blood pressure, depression, Parkinson’s Disease, and COPD can disqualify an applicant from coverage. However, there are still insurers who have lenient underwriting guidelines.
These are the providers who grant coverage conditions which other companies will refuse. An applicant could be denied one product but is still eligible for another. It all depends on the insurance company and its underwriting.
Finding the right insurance policy is not as easy as some marketing might suggest. It is a tough job when there are so many insurance companies out there, and each one has its own underwriting guidelines. You can easily find yourself wading through a lot of information that does not always make sense to you.
The smallest details can make the search harder. Answered in the affirmative to a knockout question can cause your application to be discarded or force you to accept a different product that charges a higher premium. You may be trying your best but not understanding insurance, a problem many consumers have, is undermining your efforts. It is why the smart shopper is going to seek the help of an independent insurance agent as he or she looks for the right coverage.
Independent Insurance Agents Are Valuable
We will go so far as to say those people are worth their weight in gold because of what they bring to the table. A captive insurance agent is somebody who works for one insurance company and none other. Insurance companies with captive agents are not necessarily bad; many have good AM Best ratings and are financially reliable. The challenge arises in that the captive agent cannot suggest any other product than what the insurance company offers. The buyer does not get the choice.
The independent agent is different. This person will represent several insurance companies and he or she is conversant in the underwriting guidelines. An independent agent works for the buyer. It is in the agent’s best interest to secure for the client the best coverage possible at the most reasonable price. Information the independent agent receives from the client will be the filters used to find various policies that fit the needs and budget.
What to Expect with Modified Whole Life Insurance
Shopping for a modified whole life insurance product with an independent agent is a partnership. Each party must trust the other and work together to find a good policy. A buyer must be willing to cooperate to get excellent results.
Age and place of residence are easy bits of information to share with an agent. Age will determine the monthly premium, and therefore it is always better to buy sooner than later. States have individual rules and regulations governing insurance, and some products are prohibited, while a state will mandate how much of a product can be sold within its jurisdiction.
The toughest questions an agent will ask centers on a person’s state of health.
People are sometimes afraid to discuss their physical condition. It is a sensitive issue, but it is a necessary one for an agent to explore. We have mentioned earlier that insurance companies might not cover certain health conditions. But, other companies will.
It all depends on the underwriting and a buyer may find some pleasant surprises. It is great to get protection from the first day, but it is possible to get an excellent policy that requires waiting. It could give a generous percentage of the death benefit if an individual dies a certain point in the waiting period (e.g., An insurance company may pay only 40% of the death benefit if a person passes away in the first year, but that portion could be as much as 80% in the second year. This is called a graded distribution).
Being straightforward with the agent allows that professional to do some diligent investigation into what insurance products are available. A modified whole life insurance policy might not be the best bargain, and there are other alternatives. A person working with an independent agent has a better chance of getting precisely the coverage required.
We are an Independent Insurance Agency that Wants to be of Service to You
We represent several reputable insurance companies, and we are successful in finding the right product for our clients. We take the information we are given, and we check the underwriting to see if our client qualifies for insurance, and what options are available.
Folks are a little bit nervous about face-to-face meetings during this pandemic time. You do not need to worry about that with us because we can take information over the phone. We can also correspond with you by email, making the process more convenient and comfortable for you. We want to remind you that we put your requirements ahead of any other consideration. It is more important to us to make sure you get what you need. Our success in the past tells us that we can help you find an insurance product that covers your final expenses adequately.
Nobody wants to think about death, but we are all going to face it. Having a final expense insurance policy is intelligent financial planning and shields at your estate from those last-minute expenses. Your loved ones will appreciate your consideration. If you are interested in what we can do for you, please feel free to contact us at your earliest convenience. We welcome the opportunity to help you get the right insurance policy.