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Simplified Issue Whole Life Insurance

The concept of life insurance can be dated back to the early 1800s, and since that day, policies and companies have evolved greatly with many creative products. One of the most popular policy types that we’ve seen come out is known as whole life insurance. This policy is very simple in nature. The insured is responsible for paying a monthly payment depending on the death benefit they choose, and once the individual passes away, the insurance company pays out the death benefit specified.

This policy does not regulate age of passing, as it covers the individual for the rest of their lives. The policy an individual is eligible for is determined at the time of application. It has been common with this type of policy that a medical exam would be required, and also a strict view of medical history would be done. Some companies would even request income verification depending on the size of the policy.

Though these underwriting policies still exist, there is a new variation of whole life insurance that has been created. It is commonly known as simplified issue whole life insurance. In order to better understand this policy, we are going to look at what it is, what are the most common uses, and what questions should a buyer ask when purchasing this type of policy. First, let’s investigate what simplified issue whole life insurance is, also
known as a burial insurance policy.

Looking at the name, you can see that this type of policy differs from traditional whole life insurance primarily in the way it’s underwritten. This policy typically does not require a paramedical exam and also will not pry too deep into an individual’s health history. These policies are largely seeking to rule out many of the more substantial health issues within a recent history. They do so by asking a series of questions, most of which pertain to the last 24 or 36 months. If an individual can answer these questions accordingly, some companies will go a step further by looking into a person’s prescription history. This is not done to dig up additional health complications. It’s simply to confirm that an individual’s prescription history lines up with their answers on the health questions.

Companies have been able to simplify the requirements on these policies due to the fact that most policies are smaller in nature. They can range from $3,000 to $50,000. However, the most common face amount we see is around $10,000. Because insurance companies are taking a smaller financial risk should an insured pass away, they’re able to pry less than would be needed on much larger policies.

Now that we have a basic understanding of what simplified issue whole life insurance is, let’s now explore the common uses for this type of insurance. Within our agency, we find that the most common prospect is either a child seeking insurance for an elderly parent or an individual seeking a senior life insurance policy. The most common objective for this type of policy is generally to cover an individual’s final expenses or burial costs. They want to ensure that those they leave behind will not be burdened with their final expenses.

The average funeral cost nationally is in the range of $7,000 to $8,000. However, the average policy sized purchase is in the range of $10,000. Most individuals opt for a little more coverage to counterbalance inflation or to potentially cover outstanding medical bills or credit cards, etc. No matter the desired use for the future death benefit, this policy is a great fit for this specific situation because it’s much easier to obtain than traditional whole life insurance. It’s not uncommon for a policy like this to be approved the same day the application is submitted.

When searching for simplified issue whole life insurance, the last area to investigate would be the policy variations from company to company. To assist in this process, we like to give prospective clients three main questions to ask when comparing policies.

First, always ask if the policy has a waiting period. A policy with a waiting period will not pay out the full death benefit until the policy has been in place for traditionally two to three years. If the insured passes away in that first two to three year period of time, the insurance company would simply return the monthly premiums paid in plus interest. Not all policies require a waiting period, so it’s good to understand if it exists.

Secondly, an individual shopping for simplified issue whole life insurance should always confirm that the monthly premium is fixed for the life of the policy. Though this may seem like common sense, not all companies have fixed monthly premiums. Some policies may vary their premium every 12 months or so depending on how they were set up. This can be a problem as people age because income seems to get tighter, and the lack of predictability with their monthly premium can cause undue stress.

The last thing to ensure is that the policy does not have a cutoff point. What we mean by this is that the policy does not terminate at a certain age. A few of the more popular companies offering this type of policy have a termination age of 80 or 85. This is a problem, as the average American lives beyond that age. Oftentimes finding a new policy at that point is either unaffordable or unattainable based off health conditions.

Hopefully, this information has served as a good overview in the process of understanding simplified issue whole life insurance. After reviewing this information, you may find that this type of policy is exactly what you’re looking for. If you would like to explore your options in further detail, feel free to call one of our licensed insurance professionals at 866-699-1884. We are licensed in most states and would be glad to answer any questions or concerns that you may have.