Anthony Martin, owner and CEO of Choice Mutual, authored today’s guest blog post on “Three Myths About Burial Insurance.”
It’s almost impossible for any industry to be completely devoid of inaccuracies and misinformation. The internet only exacerbates this problem given how fast and far it enables the dissemination of half truths – particularly in the burial insurance market. The drawback of this misinformation is that it influences the end user, you, to make choices that are less than ideal.
So, let’s set the record straight on some pretty major misconceptions about burial and final expense insurance: the three biggest myths in this industry, why they are wrong, and what’s the truth. In the end, you’ll have correct information so you can make the best decisions for you and your family.
“Burial insurance policies won’t pay any benefits if you pass away during the first two years”
This is unquestionably the most prevalent myth about this type of insurance. The vast majority of websites or news articles online report that burial insurance policies won’t pay out a death benefit if the insured should die within the first 24 months.
This myth is wholly and utterly false.
The truth is, the vast majority of burial insurance policies sold today will absolutely pay out the death benefit if you should pass away during the first two years.
Please bear in mind, only burial insurance policies that have underwriting (health questions) will pay out benefits during the first two years. Market-wide, the bulk of final expense insurance sold in the U.S. has underwriting. Because there are hundreds of life insurance companies competing in this marketplace, there is great underwriting diversity.
In the end, the average applicant likely has at least one or two insurance companies that will accept all their health issues, and offer them a full immediate death benefit. The only question is which one is it?
If you get any kind of offer for burial insurance through the mail, it’s almost certainly a very specific kind that will not pay out any benefits during the first two years. In most cases, you are being solicited a plan that has no health questions or medical checks of any kind. These are called Guaranteed Issue Life Insurance Policies.
Any Guaranteed Issue Policy, from any company, will not pay a death benefit during the first two years. Because there is no underwriting, the insurance companies impose the waiting period to protect themselves.
As long as you apply for a burial policy that has underwriting – and you are accepted – you can count on it paying out even if you pass away during the first two years.
“People with health issues won’t qualify”
Not nearly as common as Myth 1, this one is still quite widespread. Again, look at various websites or news articles about this kind of life insurance, and you will see this all over.
This myth is just a rumor that got picked up by one too many people. It’s a total fable that has no substantive truth whatsoever.
Truthfully, there are very few health issues that would mean a person simply won’t qualify for a burial policy. Even if you have a condition that is considered “uninsurable”, there are always guaranteed issue plans available. Granted these do cost a bit more and come with a waiting period. If you have AIDS, dementia, or cancer currently as examples, these kinds of policies are there for just those scenarios.
There are two big reasons why this myth persists.
First of all, the insurance companies that created these plans years ago understood their intended user base. They knew it would be seniors who are 50-85 that would ultimately being applying for them. What group of people typically has more health issues than the rest? That’s right, the senior population does.
The insurance companies fully realized and were aware that it’s only natural for a person to develop health challenges with age. It wouldn’t make any sense for them to create a product where their target audience couldn’t even qualify for it. Keeping this in mind, they designed the underwriting to be very liberal, so you could qualify for it in spite of the normal ailments that come with age.
Secondly, remember I said there is great underwriting diversity due to insurance companies competing with one another? The free market really comes through for the average burial insurance consumer. Competition is why there are so many major health conditions that are freely accepted by these final expense companies.
Think of it this way. Life insurance companies compete in two main ways. First is price, and second is underwriting. I won’t touch on price too much since they are all pretty close to one another for burial insurance. It’s typically in the underwriting where you see massive differences.
Here’s a basic illustration. Company A wants to compete with Company B. Let’s say that Company B does not accept applicants who have severe diabetes. For this reason, Company A designs their underwriting to accept applicants with severe diabetes. Company A now has an edge in the marketplace, and can capture lots of business that was never being serviced before.
This exact scenario has played out over and over during the last two decades. The net result: there are lots of final expense companies out there, and they all accept and decline tons of health issues. This is biggest reason why the average applicant can find one or two companies that will welcome them with open arms in spite of their health conditions.
Here are just some of the serious health conditions where the final expense market will still approve a client for level rates with no waiting period. Please note, if no time reference is given, then it means time is not a factor.
- Heart Attacks 1 Year <
- Full On Strokes 1 Year <
- Diabetes Regardless Of The A1C Levels
- Diabetic Complications Like Neuropathy, Nephropathy, Or Retinopathy
- Blood Thinners
- COPD Or Emphysema
- Home Health Care
- All Types Of Arthritis
- Cholesterol Issues
- High Blood Pressure (even with multiple medications)
- Parkinson’s Disease
- Liver Cirrhosis
- Chronic Kidney Disease (no dialysis)
- Multiple Sclerosis
- Non Cancerous Tumors
- Irregular Heart Beat
- Mental Health Issues: Depression, Anxiety, Bi Polar, Schizophrenia, Etc
- Mini Strokes (TIA Attack)
- Cancer 2 Years <
- Cancer More Than Once
- Angina 1 Year <
- Heart Or Circulatory Surgery 1 Year <
- The List Goes On…
“Find the best burial policy by looking for a company that has a good financial rating and is well known”
Nearly all financial experts online, usually without experience in this market, will at some point discuss how you can find the best final expense policy. The formula they give is almost identical. It usually consists of telling you to identify insurance companies that are well known (i.e. ones that spend a lot on advertising), and have strong financial ratings.
That’s it. Your advice stops there. While this is a good start, this information alone is nowhere near sufficient if you truly are looking for the best policy. This “equation” is only half of the puzzle.
If you go by that criteria alone, you would think companies like AARP, Metlife, Colonial Penn, or Globe Life would have your best plan. In truth, not a single one of those companies has the best plan for anyone. There are multiple other insurance companies that easily offer much better plans than all of them. The caveat is, these other insurance companies don’t advertise on a mass scale.
Without the other half, you will lose out big time. To understand the last half of the puzzle, let’s clearly define what constitutes “the best burial insurance”
The best burial insurance is simply the one, from whichever reputable company, that costs the least and covers you the soonest.
Once you take that into account, your objective becomes much more defined and helpful. In the end, you want to pay the least, be protected as soon as possible, and have your coverage through a reliable financially stable company. If you found a policy that fit that description, you win the game.
The only question is, how do you find that kind of a policy?
To do that, you need a work with an independent agency, and let them find it for you. The lowest cost life insurance is sold through agents and agencies. You won’t be able to buy it directly from the insurer. Even if you call the insurer directly, they would refer you to an agent or agency licensed to sell their insurance.
Only an independent agency can represent multiple insurance companies. When you speak with an independent agent, you are essentially speaking to 2-70 life insurance companies. Their job is to pull quotes from all the insurance companies they represent to find which one is going to give you the best deal.
Are you one that likes to shop around before you buy? If so, working with an independent agency is doing just that. The only difference is, they do all the work for you.
Remember, just because you have not seen an insurance company on TV or in a magazine does not mean they are not trustworthy. There is about a 98% chance that your best burial insurance policy will come from an insurance company you have never heard of.
When you deal with independent agents and agencies, they will have access to lots of carriers that are unfamiliar to you. Of course, you should check out their financial rating and how long they have been in business. Almost every life insurance company today has really strong financials, given how regulated and proficient the life insurance business is. It would be a major chore for you to find a life insurer that doesn’t.
Once you find an agency to consider working with, find out how many companies they represent. If it’s less than 10, you probably want to look elsewhere. Remember, lots of choices for you means you will surely get the best deal. If an agency only has a few companies to choose from, you are very likely missing out on the best policy for you and your family.
About the Author
Anthony Martin is owner and CEO of Choice Mutual, which he founded in 2013. Choice Mutual is an independent agency that specializes in burial and final expense insurance.
His three fundamental trade principals are:
- Give each customer respectful service by employing a truly hassle-free consultive sales approach centered around education and advisement.
- Give each customer truly impartial service by helping them acquire their burial insurance policy from whichever insurance company suits them best.
- Give each customer the opportunity to buy on their terms and at their own pace.