BURIAL INSURANCE VS. WHOLE LIFE INSURANCE: WHAT IS THE DIFFERENCE?

Written by Boston Life Group

Have you been denied for your life insurance due to your prescription history? if so read below..

If you got denied for life insurance because of your prescription history, it is typically because of the lack of preparedness from the life insurance agent or the applicant. The insurance applicant is to blame usually because of inaccuracies or dishonesty, while the insurance agent is typically to blame because of the lack of experience and/or the lack of resources.  Read below to find out why exactly you got denied life insurance policy. Also, read our guide on how to fix it.


BURIAL INSURANCE SHARE THE SAME PROPERTIES AS WHOLE LIFE INSURANCE

Burial Insurance is essentially a type of Whole life insurance.  It shares the same properties. All Burial Insurance products are whole life insurance but whole life products are not necessarily  burial insurance.

Whole LIfe insurance is essentially a permanent life insurance policy that is active for your whole life as long as you pay the premium required.  Unlike other types of life insurance, Whole life insurance has a cash reserve known as the “cash value” that accumulates as you pay your premium throughout the years.  This cash value is also present in Burial Insurance though it’s not as prominent as it is in larger traditional whole life policies. 

As with most life insurance products, whole life insurance pays you your full death benefit once you pass away.  Burial Insurance essentially does the same though there are types of Burial Insurance policies that only pays a portion of your death benefit depending on the timing of death benefit.


THE MAJOR DIFFERENCES BETWEEN BURIAL & WHOLE LIFE INSURANCE

Now that we have gone what both types of policies have in common, let’s explain how they differ.  

1. LOWER DEATH BENEFIT: $35,000 & UNDER

Traditional whole life insurance products can range from $50,000 up to millions of dollars in Death Benefit.  However since Burial Insurance is aimed at Seniors who are looking for a small death benefit, most plans start at $5000 and go up to $35,000.  The target market for Burial Insurance are typically seniors with not much in savings who typically lived on a fixed income. Therefore, the premiums need to be affordable.  The easiest way to make sure a permanent life insurance plan is affordable is to offer low death benefit amount. This in turns make it accessible to folks on the lower income bracket.

There are a few companies who offer higher death benefit, but those are few and far in between.  Besides because of the aggressive underwriting of Burial Insurance, it doesn't make sense at higher death benefits, the costs is just too expensive.  The only application for a high death benefit Burial Insurance is when one is not healthy enough to qualify for a traditional whole life policy.  

2. NO MEDICAL EXAM & EASY UNDERWRITING


Burial Insurance is probably the easiest type of life insurance policy to qualify for.  As I explain earlier, Burial Insurance is somewhat a marketing term. The key is to aim this product at a target market.  This market is for the most part lower income seniors on a fixed income. Age range typically goes from 50-85. This age range is where Life insurance companies see applicants with the most health issues. So the Insurance companies decided to make it easier to qualify for.  Since the death benefits are lower than traditional policies, they take on less risk and they also get to charge more per $1000, since the premiums are designed to be typically less than $100. 

Burial Insurance applications typically runs you through a series of YES/NO health questions.  For the most part, if your answer is No to these questions, you will qualify for the given product.  Of course, the companies still run a script check and check the Medical Information Bureau to verify that your answers are truthful.  However, because the underwriting is quicker and easier, it costs them less to process the applications.

On the other hand, a traditional whole life insurance will often require a medical exam and a much longer multiple page application.  The underwriting process usually takes 4-8 weeks. Depending on your medical history, they may require you a note from your doctor which can add to the underwriting lead time

3. ADDITIONAL DEATH BENEFIT OPTIONS: GRADED bENEFIT & gUARANTEED ISSUE LIFE INSURANCE

 

4. MORE HEALTH CONDITIONS GET APPROVED FOR BURIAL INSURANCE


As mentioned earlier, the underwriting process is a lot easier for Burial Insurance.  Because the death benefit is lower than traditional whole life, insurance companies take more risk with underwriting.  In turn, many health conditions that would likely be a decline with Whole Life, can be accepted even at standard rates. 

Here are examples of pre-existing conditions that we at Boston Life Group have been able to get approved at standard rates for our clients.

History of Cancer:  Though current cancer will only get approved for a guaranteed issue policy, If an applicant has a history of cancer, they may qualify for Burial Insurance as long as they have been in remission for an extended period of time.  We have many options that will allow standard coverage 2 years after Remission

Heart Attack/Stroke:  Similar to cancer, the insurance companies want to make sure you recover from Heart attack and stroke.  Most will issue coverage 2 years after heart attack or stroke as long as you don’t have any additional heart complications.  We currently have a company that will issue standard coverage 1 year after heart attack. 


5. you did not take your medications

Lastly one of the most common reasons people don't  get approved for life insurance is because they do not take their prescribed medications.  

If you’re applying for a “No Exam” Life insurance policy, this is probably not the reason why you got declined.  Otherwise, when applying for a fully underwritten life insurance policy, it important to know that there is always the chance of the insurance company requesting a statement from your doctor.

Your doctor is the obligated to accurately describe your compliance with his instructions.  Even if your doctor never brings it up, he knows whether or not you’re taking your medications just by checking how often you refill your prescription.  

The reason the insurance company cares is two fold.  The obvious reason is if you’re not taking your medication, your condition is likely to worsen overtime which might lead to more chronic illness and potentially a premature death.  Secondly, again it shows the company that you are serious about improving your health.

BURIAL INSURANCE IS ALSO KNOWN AS FINAL EXPENSE


The above scenarios are quite common reasons why people get denied for life insurance.  But if you have a questionable prescription history, we do have some solutions that have worked quite well for our clients. Here are 5 solutions that may help you reverse your denial.. 


1. WORK WITH AN AGENT WHO UNDERSTANDS UNDERWRITING

If you have a preexisting condition you should definitely always work with a life insurance agent understands the underwriting process.   a life insurance who focuses underwriting will familiarize himself with the insurance company’s “underwriting guide”. In many case, the guide states specifically how they view the most common medical conditions.  

If your agent is not familiar with the underwriting guide, it could potentially cost you 100’s of dollars.  It could even get you denied for life insurance.

A resourceful agent also understands the importance of having a strong working relationship with the insurance underwriters.

Let’s face it no agent can accurately predict every outcome of an insurance application.  Some situations are tough to call. However the savvy agent knows to present a better case to the underwriter.

An example is to draft a letter on your behalf, highlighting your good habits and your dedication to healthy lifestyle.  This can go a long way on improving a potential decline to an approval.

2. WORK WITH AN INDEPENDENT AGENT

Now the second way to fix a denial of a  life insurance application is to work with an agent who is truly independent.

If you have suffer from a pre-existing medical condition, you should work with someone who has the ability to present your case to multiple companies.

Each insurance company has its own niche.  The insurance company who’s lenient with people with prostate cancer is not necessarily the go-to company for someone with a history of heart attack.

This is why your agent needs to be familiar with the underwriting guides from multiple life insurance companies.  It benefits you when your life insurance agent has options. More options mean better odds for approval and at the very least more affordable premiums.

3. BE UPFRONT AND HONEST WITH YOUR AGENT...

We understand divulging all your personal medical history can be quite frightening. But keep in mind that  your insurance agent is your last line of the fence in front of the life insurance company. He/She is supposed to go to bat for you.   Experienced Insurance agents see a tough medical conditions as a challenge. 

Simply put, we can’t present the best case to the underwriter, if we’re not truly honest up front.  As previously mentioned in this article, underwriters get skeptical when someone withholds information.  This comes off as if you’re trying to hide something.

We have seen many clients get declined just because the insurance company found out about a condition or medication after the fact.  if the same clients were to divulge this information upfront, the outcome would have been different.

Lastly as insurance agents we can go to bat for you by setting up a pre-emptive strike on your behalf this means if we have a condition that we know will be tough to underwrite,f we have the options of  drafting a letter to the underwriters, letting them know upfront about your condition and also explain why you have made it your lifestyle to become healthier.

4. tAKE YOUR HEALTH SERIOUSLY 

Of course the insurance company doesn’t think you can cure any disease by improving your health.  However they appreciate the people who put forth the effort and discipline. They want you to take care of what you can control.  Visit your doctor as scheduled, follow his instruction, take your meds etc…

They also know that some health conditions can improve.  There may not be a cure for your condition, but there is usually a  way to stabilize it. You could do this by way of taking some sort of medication or living a healthier lifestyle.  This is why life insurance companies take a “wait and see” approach. These cases below will illustrate what we mean…

For example a 65 year old with a recent heart attack, most likely won’t be eligible for a level benefit life insurance policy.  However, after 2 years of stabilization, they should be able to obtain a small life insurance policy worth up to $50,000. For higher death benefit amounts, they would have to wait even longer.

We received a call this time last year from a young woman who was hospitalized due to Crohn’s disease.  She was actually at the hospital when she called us. Since this is a recent occurrence, no insurance company will taker her.  They want to make sure that she makes it out somewhat healthy and has no re-occurence. In this case, some companies are wiling to offer her a policy after one year of her condition being normal. She will only qualify for substandard rate.  By this time next year, she can re-apply for even a better rate, provided she stays healthy.

BURIAL VS FINAL EXPENSE VS PRE-NEED INSURANCE

Final Expense is essentially just another term for Burial Insurance.  There is no difference between the two but Final Expense is a term mostly used by professionals in the insurance industry.  Companies and Insurance agents prefer to use Final Expense because it denotes that it’s not just about covering your burial expenses.  It’s also a great tool to cover your outstanding debts and even leave a little something extra for your family. 

When you get a pamphlet in the mail advertising or promoting Final Expense Insurance, keep in mind that it’s a small life insurance policy aimed at Seniors to cover their funerals and other “final expenses”.  This is the exact same definition of Burial Insurance.

Unlike Final Expense, Pre Need Burial Insurance is a type of life insurance that is only sold through Funeral Homes.  The Death Benefit goes directly to the funeral home but not your beneficiary.  The purpose of this plan is for the applicant to determine exactly what type of burial they want.  They also get to pre-pay in advance and lock in today's rates as opposed to the inflated price of the future.  

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