Many people try to prepare their loved ones financially for their eventual passing. One way to help cover expenses for your loved ones is through final expense insurance. Final expense insurance, also called burial or funeral insurance, is a type of insurance meant to cover costs associated with the end of your life, like funeral costs or medical debt. There are multiple types of policies and plan types. Some of them require a waiting period, 24 months after you purchase the policy — in which your family will not receive the death benefit if you pass away. Fortunately, there are ways to get around this waiting period. Learn more below.
Waiting Periods in Policies
There are multiple types of final expense insurance plans. Each plan targets a different population with a different level of risk and offers them pricing and a death benefit payment plan based on that risk. People who are the healthiest are deemed the lowest risk and therefore are most likely to receive their death payment in full, even if they pass within the first two years of purchasing the plan. Less healthy people are eligible for different plans depending on their health. They are all subject to a 24-month waiting period.
- Level
- Applicant Health: Excellent
- When You Are Eligible for Benefits: Immediately after death
- Cost of Plan: Low
- Graded
- Applicant Health: Minor Health Problems
- When You Are Eligible for Benefits: 2-year waiting period
- Cost of Plan: Medium
- Modified
- Applicant Health: Serious Health Problems
- When You Are Eligible for Benefits: 2-year waiting period
- Cost of Plan: High
- Guaranteed Issue
- Applicant Health: Non-specific, but generally the most serious problems
- When You Are Eligible for Benefits: 2-year waiting period
- Cost of Plan: Very High
Burial insurance plans are generally more lenient than whole life insurance plans when designating someone as high-risk or ineligible for a specific plan. Certain types of conditions sound very serious. However, because burial plans are so lenient, they only necessitate a partial waiting period. Conditions that qualify for a partial waiting period include:
- Heart failure
- Cancer within the past 24 months
- Current oxygen use
- Alcohol or drug use disorder treatment within the past 24 months
- Amputation as a result of diabetes
On the other hand, certain conditions are so serious that you will automatically be subject to one of the plans with a waiting period. These conditions include:
- Active cancer
- Other terminal illness/hospice care
- Current placement in a nursing home or skilled nursing facility
- Transplant recipient
- Dialysis recipient
- HIV/AIDS
- Dementia
- Heart attack within the last 12 months
- Cardiac surgery within the last 12 months
- Stroke within the last 12 months
- Vascular surgery within the last 12 months
- Chest pain within the last 12 months
- Diabetic ketoacidosis or diabetic coma within the last 24 month
These conditions are so severe that insurance companies believe you are too high risk, and you must be subject to the waiting period.
The waiting periods are essential to understand because if you pass away within that 24-month window, your family may not receive the death benefit.
Why You Have to Wait
Clients are subject to the waiting period related to their risk. While they provide an important service, insurance companies are businesses first. For insurance companies to ensure they make money while accepting people with worse health, they have to control how much money they lose paying out to riskier people. Not paying the death benefit in full to people who are more at risk to die sooner guarantees that they’ll save money when they would have otherwise lost money. Unfortunately for the consumer and their family, this means the policyholders’ loved ones don’t get the financial assistance they had expected.
How to Avoid Waiting Periods
Fortunately, there are a few ways to avoid waiting periods. The obvious first way is to purchase a plan that has no waiting period. However, some people believe that they are ineligible for plans that don’t require a waiting period. They think they’re only eligible for graded, modified, or guaranteed issue plans. However, depending on the plan, they may qualify for a level plan with no waiting period. Depending on which conditions you have and how you answer the health questionnaire when applying to final expense insurance plans, you may have a different outcome than the outright decline of your application. Instead, the company may make you pay a higher premium and then let you have full immediate coverage. This allows the insurance company to reclaim some of its money that it may lose by accepting you as a higher risk.
Understanding the nuances of the application highlights how important it is to get an agent. Getting an agent who knows the market in your area is crucial, as they can help you avoid waiting periods so that your family is covered immediately.
Waiting periods may seem like an unnecessary burden for many people just trying to [protect their loved ones after they are gone. While they introduce an uncertain consequence into your family’s financial futures, they are necessary for the insurance companies to survive while accepting so much risk. Fortunately, there are some ways to avoid waiting periods. You can choose a plan that does not have a waiting period, submit an application and agree to pay a higher monthly premium for no waiting period, or use an agent to help you pick the best plan you can qualify for.
Senior Life Services Can Help
To learn more about which plans are best for you, contact us at Senior Life Services today!
