When we are over 50 life insurance advertising takes on a whole new twist designed to make you believe that possibly, just possibly, you can’t qualify for insurance that requires an exam.
Or maybe they are just trying to make us believe that a life insurance exam is a big deal. Maybe time consuming? Maybe invasive in some way? Maybe it’s expensive? When you’re hearing that “no exam” life insurance is the way to go from household name companies like New York Life, AARP, Globe Life, Colonial Penn Life and Lincoln Heritage Life, well, it makes a person wonder why such notables would be so persistent in their push for no exams.
Let’s just dig to the bottom of this because if you’re an adult child looking for life insurance for a parent or if you’re my age and you’re on a senior life insurance hunt, there are some realities that need to be known before you pull the trigger. Here are 5 things to consider when looking at final expense life insurance or senior life insurance.
1. No exam doesn’t mean you are guaranteed to get life insurance. With no exam life insurance you still answer medical questions and generally speaking a yes answer to anything leads to a decline. Traditional life insurance isn’t that way because they have an exam and are willing to order medical records. Yes answers to health questions shouldn’t lead to an automatic decline.
2. Most final expense or burial insurance companies will offer a guaranteed issue life insurance. And they will give you the coverage no questions asked. Most companies offer very modest amounts at very high prices and there is no death benefit in the first two or three years. They will tout the whole life cash value aspect. It is not a plus at our age. No magic here. The cash value comes out of your pocket.
3. Far more people than you would think will qualify for a standard or better rate with a traditional exam and application. The exam is at no cost and can be done in their office or your home at your convenience. The difference is huge. Globe Life offers you a 5 year term insurance plan and the first month will only cost $1. If you are 70 and want $50,000 of life insurance it will cost $183.99 a month. Every 5 years the price will increase. At age 75 it is $259.49. If you qualify for a standard rate with a traditional exam and application, the fourth best rate class, at age 70 you can lock in a guaranteed level rate for life of $167.32.
4. Most of the big final expense companies offer 5 or 7 year term insurance. The price keeps going up at the end of each term and is usually not guaranteed, so you can’t count on what it will increase to. Most of them end their term product at age 80, about the time most folks want to feel comfortable about what they have. With Globe or AARP if you don’t convert to a whole life policy at age 80 your insurance will end at age 85. By the way, Globe’s price at age 80, $379.99 a month. If you convert the term insurance to a permanent policy it will be close to $500 a month with AARP.
5. Along with no exam these companies like to sell “no waiting period”. Well, there is no waiting period with any insurance except for guaranteed issue life insurance. What they are trying to allude to is the fact that traditional life insurance has a 2 year contestability period. It doesn’t mean they won’t pay. As long as you told the truth on the application forget about that two years. Companies like these perpetuate the myth that insurance companies will try anything to get out of paying claims. The opposite is true. Traditional life insurance companies go the extra mile to pay every valid claim filed simply because it’s bad business to be know as a company that doesn’t pay.
Bottom line. The big boys in the senior life insurance market are, and I don’t say this lightly, a scam. They want to scare you into believing that final expense life insurance needs to be done without an exam. Obviously if you are over 50 life insurance companies would like you to believe that traditional coverage is hard to get. I think it ought to be against the law to subtly mislead us old folks.