Mom, Dad, you need to sit down. We need to talk. You probably remember when the tables were turned, when your parents sat you down as you were growing up. As your parents age however there are some important financial conversations that you need to have with them. Although it can be uncomfortable, having family financial meetings can lead to less stress in the future. You need to know if your parents have planned out their estate plan and will, where they have bank accounts and investment, and if they have enough money to pay for final burial expenses. If your parents have not set up these things, the burden could fall on you and your siblings.
A week doesn’t go by when I get a phone call from a son or daughter telling me “my mother is 76 and was just diagnosed with cancer and we didn’t know that she doesn’t have any life insurance and may only have months to live. How much would a $10,000 policy cost?”
Unfortunately I have to tell the person on the other line that no insurance company is going to insure someone with cancer that may have only months to live. They realize at that point that the burden is going to be on them to pay for their parents final expenses. In this blog post I’m going to cover options for final expense life insurance. If your parents are in their 70s and you haven’t had a family financial meeting to make sure they either have savings to cover final expenses or have a life insurance policy in place, I urge you to have a discussion with them. At the same time if you are a senior and are reading this, I urge you to share this information with your kids.
When you discuss life insurance with your parents there are some things you should know so that you can be informed to make the best decisions. If your parents tell you that they do have life insurance, don’t stop there. Ask them to take a look at the policy. Are the proper beneficiaries on the policy? What type of policy is it? Is it a term, whole life, or final expense policy? If you can’t make sense of it, seek out an life insurance agent (like us) to review the policy for you. If your parents have a term policy, when does it expire? Will it be around to pay for final expenses?
Final expense life insurance policies are life insurance policies that range from $5,000 to $50,000 and are bought to pay for final expenses such as burial or cremation. They are Guaranteed Universal Life or Whole Life policies meant to last for an entire lifetime. Typically individuals 55 to 80 are the ones that purchase final expense life insurance.
There are various type of final expense life insurance policies. Medical exams are usually not required, although if you are buying a policy for more than $25,000 and in good health, you can qualify for a better rate by considering a no-lapse guaranteed universal life policy. Policies that don’t require exams have health questions that you need to answer to qualify for coverage.
If you are not in good health you may still qualify for final expense life insurance. In these cases you could qualify for Graded Benefit Life Insurance. This type of life insurance has a 2 or 3 year initial waiting period. In the first few years of the policy, the death benefit would be a return of all premiums paid, plus additional interest. After the initial waiting period, 100% of the death benefit is in effect. During the initial waiting period if death is a result of an accident, the waiting period is waived and the death benefit is paid out.
As an example of pricing, let’s take a look at a 70 year old female who is relatively healthy, but does have type 2 diabetes. Pricing for a $10,000 final expense policy would be $55.38 per month. A high risk senior - for example a 70 year old female who had a stroke 1 year ago, would qualify for a graded policy up to $25,000. $5,000 would cost $59.51 per month.
If you’re reading this blog post and haven’t had the conversation with your parents I encourage you to have it. You can request a quote by filling out our quote form.