Life insurance is the best way to provide financial security for your loved ones after you’re gone. However, while term and whole life insurance are the most common options, a third alternative is burial insurance.
In this article, we’re going to look at the basics of burial insurance, specifically about the waiting period involved. In many cases, policyholders have to wait two years before the plan will pay 100-percent of the benefits.
Ideally, though, you can get full coverage immediately. We’ll discuss how you might be able to get burial insurance with no waiting period.
What is Burial Insurance?
Depending on the company you choose, this type of life insurance can go by a variety of names. End of life insurance, final expense insurance – they’re all the same thing. As the name suggests, this coverage is designed to help cover the costs of your burial and funeral.
Because of this, there are some unique components to keep in mind when shopping for a policy. Here is a quick breakdown of how burial insurance works.
With term or whole insurance, you can get coverage up to the millions if you like. With burial insurance, however, the plan will typically cap off at $25,000 or $40,000.
The maximum will depend on both the insurance company and your age. The older you are, the less money your beneficiaries can receive.
No Medical Exam
One of the primary reasons to get burial insurance is that you don’t have to submit to a medical exam. However, as we’ll get into later, you do have to answer a variety of health questions. If you’re in excellent health and below 65, you should be able to get great rates.
If you buy burial insurance at a relatively young age (i.e., 30-45), then your rates should be comparable to whole life insurance. However, after 60, you’ll be paying more in premiums than you would with other plans. Depending on your health, the cost could be significantly higher.
As we’ll discuss later, the primary concern is how your benefits will be paid out. Ideally, you can qualify for immediate coverage so that your loved ones can get the full payout from day one.
Level vs. Graded vs. Modified Benefits
When comparing different burial insurance plans, you’ll notice that many of them come with three options. Level benefits are the best, as they’ll cover you immediately and they cost the least. Graded benefits will deliver partial payments within the first two years, and modified benefits will have a full two-year waiting period.
Usually, modified benefits are a last resort, such as if you have a debilitating disease like cancer, or if you’re a smoker. The only reason to get a modified plan is if you can’t get coverage otherwise. However, be prepared to pay a lot more for the privilege.
Here is a breakdown of each tier and how it works.
If you can qualify for level benefits, you should take them immediately. Each insurance company will have different requirements for this type of plan, so be sure to compare all of them in detail before making a final decision. However, if you’re in excellent health and don’t have any history of debilitating illness (i.e., diabetes or cancer), you should be okay.
Although you don’t have to submit to a medical exam, you do have to answer a variety of questions. You must answer honestly – lying could cause the insurer to cancel your coverage.
Keep in mind that the insurance company will do its own due diligence, including checking your records with the Medical Insurance Bureau. For example, if they discover that you’re taking heart medication and you didn’t list it on the form, you can get denied coverage.
As a general rule, most insurers will ask about the health conditions that they care about. So, if you have something that isn’t listed on the questionnaire, you should be okay.
Each list will have what’s called “knockout” questions. That means if you answer yes to any of them, you can’t qualify for level benefits. However, if you can still get a graded plan, that’s the next best thing.
Knockout Conditions for Level Benefits
All insurance companies have slightly different conditions that can disqualify you for level benefits, so don’t rely on this list as an absolute. Again, check and compare multiple plans to see what options are available.
- Congestive Heart Failure (CHF) – Most serious heart conditions will prevent you from getting level benefits.
- Oxygen Use – If you have sleep apnea, be sure to list it. However, it doesn’t qualify as oxygen usage, so keep that in mind.
- Drug or Alcohol Abuse Within the Last Two Years – If you were treated or incarcerated for drugs and alcohol, the insurance company will find out about it.
- Cancer Within the Last Two Years – Some companies will require you to be cancer-free for more than two years. Overall, the insurer wants to make sure you won’t go into remission soon.
- Amputation Due to Diabetes – Realistically, any severe side effect of diabetes will disqualify you from level benefits. Some insurers may offer this rating if you have your diabetes under control. However, you will have to pay higher premiums.
As we mentioned, if you can’t get level benefits, this is the next best option. In this case, you have a partial waiting period.
Again, each company is different, but most of them will offer your beneficiaries 40-percent of the death benefit within the first year, 75-percent within the second, and 100-percent after two years.
Also, most of these plans will cover accidental death and dismemberment, which pays out 100-percent from day one. That being said, check with your insurance agent to make sure that AD&D is part of your coverage. In some cases, you have to add it yourself, as it’s not already included.
Knockout Conditions for Graded Benefits
If you have any of these health problems, the best you’ll likely be able to do is a modified plan. However, don’t assume the worst if you get declined by several companies. There are many different insurance providers out there, and some of them might have the right plan for your needs.
- HIV or AIDS
- Cancer – Either currently diagnosed or diagnosed within the last two years.
- Kidney Dialysis
- Currently in the Hospital, Hospice, or Nursing Care
- Organ Transplant – Some carriers may allow graded benefits if your transplant occurred more than two years ago.
- Alzheimer’s or Dementia
- Diabetic Coma – Within the last two years.
- Current Smoker
- Any Terminal Illness – You’ve been given less than two years to live.
If any of these conditions occurred within the last year, you could only get modified benefits:
- Heart Attack
- Heart Surgery
- Circulatory Surgery
As you can see, some of these disqualifiers have a time limit on them. So, if you’re not in a rush to get coverage, you can benefit from waiting.
In many cases, by giving yourself a two-year window after a serious health problem (i.e., heart attack), you can get graded benefits. While level benefits are likely off the table, you don’t have to pay the extra-high premiums of a modified plan.
If you have any of the conditions listed above, then you will have to go for a modified insurance policy. This coverage is also called guaranteed acceptance, which is just what it sounds like.
No matter your condition, you can get burial insurance. Also, if you’re at an advanced age, like over 80, then this could be your only option.
Because modified plans will cover anyone, the insurance company has to make sure that the coverage is financially viable. In most cases, you can expect to pay up to three times what you would for level benefits. Also, you will have a full two-year waiting period before your beneficiaries receive the total amount of your policy.
However, if you die within those two years, your loved ones will receive a return of your premiums, plus 10-percent interest. So, even though you can’t provide as much money, it might still be worth getting a plan. Most investment accounts won’t have that kind of yield within such a short period, so it can be better than merely stashing money in a savings account or CD.
Tips for Getting Burial Insurance With No Waiting Period
If you really want to qualify for level benefits, follow our suggestions.
- Wait before getting coverage. If you have one of the knockout conditions listed above, you can typically get better rates if you wait at least two years. This is because the insurance company wants to make sure that you won’t relapse.
- Buy a policy at a younger age. On the flip side, if you’re currently in good health, getting coverage now is the best option. Even if you’re in your mid-30’s, burial insurance is a smart move. In some cases, you can finish paying off the plan before you die, which means that your death benefit is locked in without having to continue paying premiums.
- Shop around with NextGen Life Insurance. We can make it easy to compare plans and rates. Don’t settle for second-best. Call us today to find out how we can help you get burial insurance with no waiting period.