Mike’s Life Insurance Advice

Hi Oscar,

I’m sorry that you had to cash in your insurance policy. But isn’t it good that you had it protecting you through the years and that the cash value was there to help you when you needed it?

Now, to answer your question, yes there is burial insurance available. And the good news is that it’s an insurance policy that you are guaranteed to get.

Sometimes called “final expense” insurance, it’s a type of insurance policy that you could custom design to take care of all of the expenses involved when the end comes. I guess because of the economy that this alternative type of insurance has become very popular in recent years. More and more people are finding themselves in similar situations to yourself.

People who purchase burial insurance can pre-select whatever they want at their funeral. They can decide on the type of casket, the number of cars, any service accessories, and more. Once you have made your selections the funeral director will add up all the costs. And you will often get a guarantee that the costs will not go beyond the face value of your policy.

When you purchase the policy, it won’t be necessary to get a medical, health, or physical exam. Then, when the insurance is in place, it will take care of your final expenses so that your family will not have to deal with them. They won’t even have to deal with the paperwork because the benefits will go directly to the funeral home as well.

Another type of burial insurance is also available. If you choose to buy this type of policy you will simply choose a face value for your funeral. This would be a cost that you do not want exceeded. Then, when you pass on, the benefit first goes to the funeral director. However, if the face value is greater than the cost of the funeral, any money that is left over will go to a contingent beneficiary.

If you would like this type of policy you make sure to ask for the policy to include a provision that excess funds will go to your beneficiary. That’s because most funeral directors will assume that they will get the entire face amount regardless of the cost. In order to have the option of a beneficiary receiving any excess funds you will have to have that option written into your policy.

The reason burial insurance is usually easy to get is because the underwriting guidelines are considerably more lenient than for term insurance or whole life insurance policies. None-the-less, you will still be asked some questions.

Then, if your health will not permit you to get whole life burial insurance then you will still be able to get a graded benefit life policy. However, with the graded benefit you will have to live at least two years before the total of the face amount would be paid.

If you should pass away within those two years then your beneficiary will receive the premium you paid plus interest – unless you have died as a result of an accident. If that’s the case your beneficiary will receive the entire face value of the policy.

Graded benefit policies are “guaranteed issue” insurance policies. You cannot be turned down. Although they are a bit more expensive than a regular final expense insurance policy they are still less expensive than traditional life insurance policies.

Mike

Hi Mike,

I guess that once you reach a certain age you start realizing that you have a limited time on earth. Well, I’m at that age and I could use your help.

What with the recent economic situation I’ve had to cash in my whole life insurance policy. I no longer have any burial insurance and I’d like to get some. Can please make some suggestions?

Thanks.

Oscar J.

Hi John,

Great question. On the surface it would seem to make sense to get the cheapest insurance product available. Then you could have more money for other things. But things aren’t always as they appear to be.

Sometimes the cheapest policy is definitely not the best policy. That’s when it isn’t being offered by a reputable life insurance company.

You definitely will want to make sure that the company you bought your insurance from will be around when you die. So it would be a very good idea to only do purchase your policy from a company that has been in business for a substantial amount of time. And the company should also have received a high rating from the AM Best Company.

With that being said, let’s take a look at term life insurance. One of the most appealing factors about this type of insurance is that you can protect the ones you love in the event of your death at a very reasonable cost, often just pennies on the dollar.

As a rule of thumb, the younger you are the less you will pay for your policy.

Even though term life insurance policies are the cheapest life insurance policies available, a number of options are available that have a effect on their cost. Here are the major types of term policies that are being sold today: yearly renewable term life insurance, decreasing term life insurance, as well as life insurance that’s available for either a 5 year, 10 year, 15 year, 20 year, 25 year, or 30 year term.

Yearly Renewable Term Life Insurance

This policy is for one year and has an option to renew it for a specific number of years. Anticipate that the premiums will increase every year. These policies are best for people who need life insurance coverage for a very short term because the costs can get astronomical as you get older.

Decreasing Term Life Insurance

The reference to decreasing applies to the face amount of your policy. These policies were originally designed to cover the amount owed on a mortgage if the family breadwinner passed on. This is very cheap life insurance because when the mortgage balance goes down the face amount of the policy goes down with it.

Five to Thirty Year Term Life Insurance

Because the cost of renewing a term life insurance policy will be higher than the original premiums it is generally a good idea to purchase a policy with the longest term available, provided that it fits within your budget.

Hope that helps.

Mike

Hey Mike,

I just ran across a life insurance offer on the Internet and the prices were a lot lower than any other quotes I’ve seen.

Does it make sense to go with the cheapest life insurance quotes I can find?

Thanks,
John “Confused in Seattle” Bingham

Hi Larry,

It’s probably never a good time to spend money unnecessarily. But sometimes, if you look at the big picture you might change your mind about what is necessary and what isn’t.

Your outlook reminds me about two friends who were born within months of each other and became very close throughout their life. They grew up in a middle class neighborhood. Their parents had houses near each other and had even managed to got pretty good rates on their thirty year mortgages.

Their families were neither small nor large. Each of the friends had two younger siblings. And even though both their parents worked, they were managed to have the weekends off.

Once the friends reached their mid-teens they became responsible for the well being of their younger brothers and sisters while their parents were at work.

When the weather was warm the families used to go on picnics together. They would barbeque in their backyards, and even go on an occasional vacation with each other. Since they lived in the northeast, when the weather turned cold they sometimes even went skiing together.

One day a new neighbor moved in. Turns out he was a life insurance agent. Being good neighbors, they invited their new neighbor and his family to one of their barbecues.

As you could imagine, one thing led to another, soon everyone agreed to meet with their new neighbor to talk about insurance.

And this is where their stories take different paths. One of the families bought life insurance. The other, for whatever reason, did not.

Life continued to be good for awhile.

But life is not always kind. And one thing is certain and that is that things change.

One terrible night one of their dad’s, who was in seemingly good health, had a heart attack while he was driving home from work. He skidded off the road and ran into a tree. By the time the ambulance arrived it was too late.

Both families were grief stricken.

And two weeks later the other dad’s appendix burst. And, even in this day and age, he passed away.

Both of the widows and their three kids walked around in a daze for months.

None-the-less, the family that bought life insurance was able to pay their mortgage. The kids all eventually went to college and raised families of their own.

The family that didn’t own any life insurance lost their house. They moved to a different neighborhood where the rent was very low. Even then, life was very tough.

Their savings ran out. The eldest child had to quit school and go to work to try to help support their mom and their younger siblings.

Sometimes the two childhood friends lie awake at night and wonder how things might have been if both of their families had invested in life insurance.

Life gives us all twists and turns that we have to deal with. With that in mind, I think you’ll agree that you should at least reconsider your point of view – for the sake of your family.

Mike