The Final Expense Underwriting Guide

While life can take you in many different directions, there comes a time when you’ll need to think about how to handle care for a loved one or your own end-of-life expenses. But for those that sell final expense insurance, it’s true that you can give your clients a head start and peace of mind knowing that their loved ones are protected and covered for the future. It’s also a great way to bring in extra money if you already perform other underwriting duties, and it’s true that final expense underwriting requirements may be easier than other types of underwriting.

Sure, nobody wants to think about the inevitability of death, but even in death, expenses and other charges can quickly accumulate. Even without a burial, a funeral, cremation and other types of services can run upwards of thousands of dollars — if not tens of thousands in some instances. And what better way to protect against a significant expense and cash outlay than by obtaining a final expense insurance policy.

In this guide to final expense underwriting, we’ll show you how you can help others prepare for the future while also helping to increase the reach and revenue stream of your underwriting business.

Making Sense of Final Expense Insurance

Also known as funeral insurance or burial insurance, final expense insurance is a category of whole life insurance that helps cover the costs accrued following a death, such as a funeral, burial and other end-of-life services. Unlike life insurance, which is more of an income replacement, final expense underwriting policies feature a one-time payout that can range from about $5,000 on the low end all the way up to $100,000 or more.

For consumers, there are no limitations on what the policy can be used for, so families and loved ones can exercise their true end-of-life wishes in whatever way they see fit. Most individuals that obtain final expense insurance are over the age of 50, though even younger individuals can buy a final expense policy if needed.

The good news for those that sell insurance is that final expense underwriting is easy with the right tools, such as a software suite, and the policies themselves have low premiums and low face amounts, as well as straightforward underwriting. Appointments are quick and easy, and just about everyone at some point will need such a service.

Breaking Down Final Expense Insurance

No final expense underwriting guide or cheat sheet would be complete without going into the different types of final expense insurance. There are four main types: guaranteed issue insurance, graded insurance, modified insurance and level insurance.

As its name suggests, guaranteed issue insurance comes with a guaranteed approval, no prolonged waiting periods and a full benefit paid out upon death for accidental deaths. For non-accidental deaths, a short waiting period is standard, and the benefit becomes the sum of the premium plus interest for a specified number of years. The underwriting process itself is nonessential as no underwriting is needed.

The next type of final expense insurance is known as a graded policy. For accidental deaths, there’s no waiting period and the full death benefit is paid out. On the other hand, for non-accidental deaths, there is a waiting period and the death benefit is equal to a percentage of the total benefit. Underwriting is also simplified.

The third type in this final expense underwriting guide is known as a modified policy. Modified policies have no waiting period and a full death benefit under accidental death, though non-accidental deaths include a waiting period and a benefit that is equal to the premium paid and an interest percentage. Again, underwriting is simplified.

The last type of final expense insurance is known as a level policy, which includes standard and preferred ratings. For both accidental and non-accidental deaths, there’s no waiting period and the full death benefit is paid out with simplified issue underwriting.

How Does Final Expense Insurance Work?

Generally, final expense insurance works just like other types of life insurance. Policies must be applied for and approved ahead of time, and qualifying factors include the health of the insured, such as whether they smoke, have pre-existing conditions or are significantly older (85+). Clients will also have to name at least one beneficiary, who are the ones that will be paid out upon the death of the client.

As for the all-important premiums, here’s what your clients can expect. Note that this final expense underwriting guide does not cover every situation and particularity, so some further research may be needed to determine the right policies and premiums for your clients. To be sure, the state, carrier and plan all matter, but so does the client’s health, gender and age. All of those inputs factor into the premium, which means higher premiums for those that are older, have poor health or engage in activities such as smoking.

To make matters easier, there are three additional types of premiums for most final expense underwriting policies. They’re known as single-pay, limited-pay and lifetime-pay, which refers to how the policies are funded. Single-pay policies are paid in full up front, while limited-pay gives the clients a number of years — typically 20 years or less — to cover the cost of the policy. Lifetime-pay instead requires a policyholder to make payments either monthly or annually until their death or the coverage is terminated.

The good thing about final expense policies is that once the policy has been purchased, rates will never increase due to the fixed premiums. The policy itself will also remain as long as the premiums are paid.

More About Underwriting Final Expense Policies

Instead of requiring complicated and obtrusive medical exams, physician statements and other hoops to jump through, final expense underwriting is much easier than other types of insurance underwriting. Beyond a simple health form or a phone interview, there’s actually not much underwriting needed at all.

However, there is still some underwriting needed for simplified issue and guaranteed issue plans. Simplified policies require some medical questions to be answered, and the policy itself is weighed against the answers to the questions. Guaranteed issue plans don’t require the answering of any questions, and the policy is valid for as long as the premiums are paid and certain qualifications are met. Some clients may be a better fit for one or the other, but it’s also the case that some clients may want a mix of both, such as if the client has pre-existing conditions.

That said, while the final expense underwriting process is less demanding than other types of life insurance, agents will do well to discuss health, medications and other concerns with their clients during the application process. Based on the information provided, an agent may recommend a certain type of insurance over another, or help match the client to a more compatible premium or payout.

If you’re ready to get started as a final expense underwriter, check out Best Plan Pro, our underwriting software platform and toolset. Our underwriting calculator is easy to integrate into your existing workflow without disrupting your sales process. We can even help you get a quick FEX quote. Get started today!