The world of final expense insurance seems to revolve on a different axis from the real world of life insurance, and that slight tilt away from the real world is not in the client’s favor. I’ve discussed this at length with Rich Fuller at Special Risk Services, the down sides to guaranteed issue, or simplified issue no exam life insurance for seniors.
Part of it is a psychological ploy on the part of the final expense companies. They offer guaranteed issue and no exam life insurance, not because you need, but because they hope you will buy into the idea life insurance after age 60 is barely attainable. They want customers to believe they can’t call up a regular independent life insurance agency and get what they need. In my opinion the final expense companies want you to be scared to try traditional companies. If that wasn’t true there would be no reason for them not to carry traditional products as part of their portfolio.
But the truth is that we’ve all got clients in their 50’s, 60’s, 70’s and older that are certainly worthy of a fully underwritten preferred or preferred plus rate. You have to understand the products your competition is selling a ton of in this market. They sell small whole life policies and tout the cash value as additional retirement funding or they sell 5-7 year term products that have to be converted to whole life before the average mortality. And, because they don’t do exams or don’t underwrite at all, the prices are over the top outrageous.
At my age 59 the leading final expense company would sell me a $50,000 5 year renewable term life policy for $72 a month. Keep in mind they don’t mean 5 years from the time it was taken out. The price goes up incrementally every 5 years so when I turn 60 next year the premium goes up to $108 and goes up every 5 years until I reach 75. At that time I either have to drop it or convert it to whole life. At that age the whole life has a monthly price tag of $350 per month.
Or, even if I got a standard rate I could apply for a $50,000 no lapse guarantee UL, which even at a standard rate would be $88 a month and guaranteed to never increase. If you run the numbers out with the final expense company, by age 100 you could have paid in 3 times the death benefit and with a traditional product at a standard rate you would still be well short of the death benefit.
If you have any questions about the products available to compete with final expense companies, call Rich or Tim Fuller 800-933-5491 or rfuller@srsinc.com and tjfuller@srsinc.com. They know the right companies and the right products and can put you on the winning end of the final expense life insurance competition.
-By Ed Hinerman, manager of Risk Life Insurance and Hinerman Group.