When seniors shop for life insurance, they most often will not be looking for fully underwritten (complete medical exam) term life insurance. Term insurance only covers a certain period (5, 10, 20 years), and most seniors will want permanent coverage. Also, they will be searching for a “simplified issue” policy that only asks a few medical questions rather than a complete medical exam with lab work. The solution for seniors is a simplified whole life (permanent) policy. These policies are sometimes called final expense benefit policies or funeral policies because that is often the primary need. Here are the Top 5 Reasons that affect your rate of a simplified issue policy.
- Age. It is probably not surprising that age is a primary factor that affects life insurance rates. It is a factor whether the person is a senior or younger. As we age, we get closer to that day when we will pass and, therefore, a higher likelihood that our life insurance will pay. Most insurance carriers look at the “closest age” for rate calculations, so if you are six months past your birthday, the insurance carrier will calculate the premium based on your next birthday age.
- Gender. Sorry guys, but on average, women live longer. A female will have a lower rate than a man.
- Tobacco Use. Rates for smokers are higher than non-smokers. Insurance carriers have calculated the likelihood of a smoker developing a health problem that would accelerate death. On the other hand, some policies have non-smoker rates as long as the person plans to quit within three years.
- Location. Although where you live does not affect your rate, not all policies and insurance carriers are available everywhere, so the best price might not be available in your area.
- General Health Classification. Again, a simplified issue policy will not have a medical exam or labs, but there will be medical questions. An applicant will have a health classification. Standard, preferred, preferred plus, and standard plus are the most common classifications. Each carrier has different criteria for each. We like to think that we are in good health, but most folks are standard. If you use an online quote and are unsure of your classification, use standard.
With a simplified policy application, you will give your height and weight. This information can affect rates but more likely is a determinant of your eligibility. Some carriers are more lenient, but you might be “knocked out” of eligibility.
Other common “knock out” medical questions include terminal illnesses, certain cancers, ALS, some forms of diabetes, and kidney disease.
Although not included in this Top 5 list for rates of a specific type of policy, the type of simplified policy will affect what you pay. The three main types of simplified issue policies are,
- Level. A level, or “Day 1” policy, would pay the death benefit from the day the policy is issued.
- Graded/Modified. With this category of coverage, in the first 2-3 years, the full death benefit would not be paid, but a return of all premiums plus interest would be paid. It is still a good deal because it is similar to a guaranteed savings plan with interest. Having the modified payout keeps the premium low, and it acts like any level policy after a few years.
- Guaranteed Issue. These policies are a type of graded policy where the application questions are minimal, and almost anyone can get this type of policy. It is for folks who would not otherwise qualify for another policy. It costs more but gives an option.
All these policies described are permanent whole life coverage which means the premium never goes up and the death benefit never decreases. For this reason, it most often is the correct solution for seniors.